Commercial Real Estate Blog

Westfield Valley Fair, the 1.5 million square feet mall on the border of Santa Clara and San Jose will break ground on a 500,000 square foot expansion in January. At $809 per square foot excluding anchors, the mall is one of the best performing shopping centers in the United States ringing up sales almost twice as high as the national average. The project, which was acquired in the late nineties by Westfield is looking to make the following improvements over the next few years:

• New Safeway and Long’s Drugs (replacing the current older structures) at Winchester and Stevens Creek
• New Washington Mutual and Bank of America (replacing existing structures) at Winchester and Stevens Creek
• Existing parking on Stevens Creek Blvd. will be demolished and make room for new anchors, shop space, and an additional 3,000 spaces (some of hwich will be on Monroe Street).

The Mercury News is reporting rumours that Bloomingdale’s and Neiman Marcus will be new anchors to the center. I’m not sure about Neiman Marcus, but about two years ago I heard that Bloomingdale’s was not interested in renewing its lease at Stanford Shopping Center, giving credence to the rumour. Neiman Marcus just signed a lease for a 100,000 square foot store at Broadway Plaza in Walnut Creek.

The sub-prime woes plaguing Wall Street firms is undoubtedly likely to continue. Citibank is expected to report approximately $11-12B in write-downs. Taking a quick sample of what has happened to the stock prices of companies such as Washington Mutual and Citigroup, it is without a doubt the case that those firms with large amounts of commercial paper on their books are keeping a close eye on the market.

The increasing difficulty with which commercial paper can be re-traded, coupled with the fallout in the residential market is unlikely to lead very many lender’s to relax the tightened standards anytime soon. While defaults in the commercial sector have remained relatively static, the fear alone of what might lurk around the corner is enough to keep lenders in their current state of hibernation.