Shawn Massey, CCIM, SCLS

A Broker’s Perspective / 2012 ICSC RECON

If I had to choose one term to describe this year’s ICSC conference in Las Vegas this week I would say “Cautious Optimism.”  We are on our 4th quarter of economic growth (depending who you follow), more people have jobs and retail sales are positive.  Early figures for ICSC RECON show attendance was up from 2011 at roughly 32,000+ attendees that were looking to make deals.  I think that number will grow when the final numbers are tallied. By all appearances 2012 will be significantly better than 2011 and 2013 is expected to be better than 2012.  Therefore, the future of our industry looks bright whether you are leasing, selling or buying.

Traveling in on Saturday my first observation was that many people who traditionally have come into Las Vegas on Saturday four to five years ago have opted to save money and come into town on Sunday.  This is better than the last 3-4 years where many opted to skip Las Vegas.

Sunday was a completely different vibe altogether as the parties and dinners with clients were in full swing.   Our company party Sunday night at the Four Seasons was very upbeat.  You could hear a roar of guests talking as you entered the main ballroom.  Most of our industry friends were looking forward to the next couple of days with the prospect of many deals coming to fruition.

I will add my disclaimer that my further observations were based simply on my presence in the very active and crowded South Hall.  I never had the opportunity to visit the central or north halls.  Our booth as well as most of the other company booths was beaming with steady activity throughout both Monday and Tuesday.  I probably would have venture to the other halls had I not lost my name tag and feared that the diligent security guards on each door would not let me back in or even worse make me go all the way to the North Hall to replace my badge.  The ICSC really needs to put registration booths in each of the hall entrances.  If the ICSC was a retailer they would probably go out of business based on making their customers work so hard to get into their store.  My only other rant from the show is that the show opened at 9 AM each day and the ICSC did not require Starbucks or the Aces Café to be open prior to 8:30 AM.  I know many of the participants including myself would appreciate the extra hour to have more meetings. 

Some of the key dozen observations from the show include:

  1. 1.    Many retailers are looking to expand but very little quality retail supply is currently available.
  2. 2.    The buyers for core assets in prime markets are in abundance, but the competition for the little product for acquisition is ultra competitive.  Cap rates will continue to compress as money is still very cheap.
  3. 3.    The retailers who are asking for rent concessions are way down.
  4. 4.    Retail vacancies have either leveled out or have actually gone down in many markets.  If Co-Star, Xcelligent and LoopNet would classify retail like they do office and industrial the vacancy rate for B+ or better retail centers would be 3% or less.
  5. 5.    Landlords in the better markets actually have some leverage!
  6. 6.    New retail projects will need to be at least 70-80% preleased prior to start of construction.  Way up prior to the 50% needed in 2007. 
  7. 7.    We will see considerably more developments in 2013 and 2014, but the remainder of 2012 will be relatively slow.
  8. 8.    The time is now for retailers to lock in lower rental rates and long term occupancy costs.  Retail rental rates will rise in the near future due to continue lack of supply and potential inflation that is expected.  
  9. 9.    The NNN lease market is red hot and the gold is chasing the better assets in this investment category.
  10. 10.  Developers our having to put 30-40% equity into deals based upon LTV’s.
  11. 11.  The basic fundamentals of leasing and investments are back in play.
  12. 12.  Money is coming off the sidelines!

From the crowd at the Las Vegas airport Wednesday morning I suspect that the convention was relatively quiet on Wednesday as many attendees had opted to shorten their stay to again reign in the expense of the show during another tight year in our industry.  I am not Mr. Las Vegas and typically do not run from party to party late into the night.  Although, I did miss not having the acclaimed Hendon party Tuesday night.  From talking to my many friends at the airport when departing the other developer parties and night life of Vegas remain intact.

In conclusion, I had a very good show, but the two highlights of convention week did not come at the convention center.  My company affiliation is with the Chainlinks organization.  On Sunday afternoon they invited Louis Zamperini; An American Hero who was an POW in World War II and prior to that time an Olympic Athlete who competed in the 1936 Olympic Games in Berlin to speak to our group.  His inspirational story outlined in the book “Unbroken” is a testimony of endurance and faith that we should all hear about.  It makes the tough times we have faced in our industry these past few years a mere drop in the bucket of reality.  The second highlight was Tuesday morning at the RCN Breakfast when 400+ breakfast attendees heard from David Atchison.  We all know David as the real estate director at Lifeway Christian Bookstores, but he is also an accomplished author of a new book “Reflections on Higher Call” and gave an inspirational talk on looking beneath the bottom line, an inspirational examination of your professional life from inside out.  If you have not attended one of these RCN breakfast meetings I highly encourage you do so in the future  It was these two events that I will remember most from the 2012 convention.

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Cheers,

Shawn

Shawn Massey, CCIM, SCLS is a partner with The Shopping Center Group a 3rd party retail real estate advisory firm in their Memphis office, an adjunct professor in the graduate real estate program at The University of Memphis and a co-founder and Chairman of the Board for the Memphis Business Academy charter schools (K-12th grade) in the Frayser area of Memphis.  

For all your retail real estate needs (tenant representation, landlord representation and property, investment & land sales) I hope that you will choose The Shopping Center Group and me to represent you and your business.  We understand that representation is a privilege and that you have a choice!

The opinions expressed in this post are entirely my own.  They should not be considered the opinion of The Shopping Center Group, LLC in which I am associated.

 

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One comment

  1. Great article. I’ll be there for the first time in 2013 with Storefront (thestorefront.com). Thanks for the insights!

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