print header

# 1 Commercial Real Estate Information Company

  • Find Properties 
  • Market Properties 
  • Analyze Properties 
Products
Commercial Real Estate News

RECon Recap: Change was Main Theme at Retail Confab Where Optimism Persisted Even if Turnout Was Smaller

Brokers Report More Lease Deal Activity, Fewer Investors and Retailers as Industry Tries to Navigate Altered Retail Landscape
May 24, 2018
Dealmakers attending ICSC's RECon conference in Las Vegas this week reported steady activity by food and beverage, home goods and services and value-driven tenants leading stepped-up deal-making activity from a year ago, despite a demand by tenants for lower rents and shorter-term leases.




Thousands of retailers, retail brokers, investors scrambled to catch flights as the International Council of Shopping Center's annual RECon event ended its four-day run in Las Vegas today, with convention goers reporting more activity and higher confidence in having a game plan, if not a detailed strategy, for dealing with the dramatic changes roiling the retail landscape.

Turnout at the Las Vegas Convention Center and adjoining hotels appeared to be somewhat lighter than past years, with registered attendance of 31,195. This year's event fell on Jewish holiday Shavuot, which may have contributed to the smaller turnout. Retailers were also said to have scaled back their presence this year, opting to participate through their brokerage representatives at the annual deal fest.

Some sentiments carried over from last year's conference, namely complaints about the gloomy headlines and dark narrative by mainstream media and analysts regarding store closures and retailer bankruptcies.

However, schedules were packed with meetings as dealmakers reported steady activity by food and beverage, home goods and services and value-driven tenants as well as newer brands leveraging social media and experience-based retail such as Topgolf and KidMania.

Greg Maloney, CEO of retail in the Americas for Jones Lang LaSalle, said his brokers reported stepped-up lease deal-making activity from a year ago, despite a demand by tenants for lower rents and shorter-term leases.

"Last year, people were telling our brokers, 'here's what we want to do, call me,'" Maloney said. "Yesterday and today, we're hearing, let's do this lease deal."

Maloney said he chatted Tuesday with a leasing broker handling a portfolio who gushed about finally being able to send letters of intent.

"While they're not necessarily final, people are doing deals," Maloney added, singling out food, home, value retailers as those most active on the transaction front.

Jay Luchs, vice chairman in the West Los Angeles office of Newmark Knight Frank, agreed that tenants were more willing than last year to make agreements leading to signed deals.

"I've had many meetings over these last two days where I can see going back to L.A., following up, and having 10 to 20 deals," Luchs said.

Luchs reached into his pocket and pulled out a folded paper scrawled on both side with notes, names and numbers.

"It's all here and it’s all real," said the veteran broker focused on high-end fashion and luxury brands as well as entertainment tenants. "These leads will be turned into deals and signed contracts."

While clearly confident in his ability to create new business, Luchs noted that deal talks have taken on a more somber tone than at previous conventions.

"There's not the usual arrogance," he said. "There's more of a 'let's just keep our head down and get through this' mentality, which I think is really needed.

"Tenants are not out there seeking 400 locations, but a few cool brands are doing deals," Luchs added, citing brands such as Eataly, a large-format Italian-style marketplace with food and beverage counters, baked goods and retail. The company, which recently opened an outlet at Century City Mall. Kith, a trendy apparel store, has also expanded on the Westside.

Ryan Imbrie, managing director with SVN Imbrie Realty, said negotiating development deals has become tougher, with a lot more back and forth and posturing amid the uncertainty over pricing and returns on investment.

"There's still enthusiasm but it's more muted than past years," Imbrie said. "People are holding their cards closer to their chest and if they have the magic sauce, they're not out there blabbing about it.

Underlying concerns about rising interest rates, mounting debt and the prospect of inflation contributed to a generally more subdued mood among buyers and sellers at the convention this year in the opinion of Richard Chichester, CEO of Faris Lee Investments.

"I'd say it's still optimistic but more cautious," Chichester said. "Last year's conference was far more energetic, but the quality of the conversations wasn't as deep or as strategic. We're getting more questions about whether clients should sell, hold, reposition or refinance their property."

"News about the demise of retail has created a lot of anxiety and fear -- except among people who really know retail," Chichester said. "Those people see it as extremely vibrant, but going through dramatic changes. And they understand it's just part of the evolution of retail, and it's not happening solely because of Amazon."

While tenant activity remains relatively steady, the number of retail investors has clearly declined, with some regular investors waiting for more clarity in yields and others exiting the space entirely.

"The pool of buyers is much narrower, especially for private 1031 tax exchange buyers, which was dominant 18 month ago," Chichester said. "There are far fewer people bidding on real estate."

Chichester said Faris Lee is fielding many questions from investors about whether they should buy now or wait for values and pricing to stabilize.

"Buyers are seeing a lot of property offers come across their desks, and they're not in a hurry to make a decision unless its real estate they're very familiar with," he said. "But some deals are getting positioned. We met with a group yesterday that has a $200 million fund for single-tenant retail investment. We put together how a proposal on how we would help them execute. I think something will come of that."

"This year there seems to be more clarity in how bricks and mortar will fit in with the evolving e-commerce delivery and fulfillment platform," added Brian Corrigan, senior managing director in Colliers International's Irvine, CA office.



GET IN TOUCH        Contact CoStar News Team:   News@CoStar.com

 Find us on 

Welcome To CoStar's
Industry-Focused,
Award-Winning News

Winner of three Journalism Awards from the National Association of Real Estate Editors (NAREE)

Award-Winning News