The U.S. retail industry is no stranger to hard times. In recent memory, it's weathered the Great Recession, the pandemic, a surge in bankruptcies and store closings, skyrocketing inflation and the black cloud of the war in Ukraine. Now, there's the threat of high tariffs and economic tumult.
But landlords, real estate brokers and retailers say they have been resilient and adaptive and dealt with headwinds before — and this year will be no different. Some told CoStar News they are not paralyzed by the challenges. They are still looking for tenants for their redeveloped malls or for the spaces left vacant by bankrupt retailers. Others are on the hunt for acquisitions or looking to shed properties. Investors with dry powder skittish about office and multifamily properties can turn to open-air shopping centers, which have performed well. Chains that promised Wall Street they're expanding must find store locations, even if retail space is tight, driving leasing activity.
That's why about 25,000 people have made their way to Las Vegas this week: to do deals despite the choppy waters. The annual national ICSC conference is the largest U.S. gathering for retail real estate. Some companies have hundreds of meetings scheduled for the show, which officially kicked off this weekend and ends Tuesday.
Various brokers and landlords, including a number of real estate investment trusts, said they haven't yet experienced a slowdown or retailers putting the brakes on their plans to open more stores. But in Las Vegas, among their peers, some said they will likely get a better sense of the mood of the industry. The challenges posed by the macro economy — new higher tariffs on imported goods, uncertainty about where interest rates are headed and a possible recession — may prove to be a bigger threat to the retail industry than some expect.
Strains are starting to show, with home goods seller Kirkland's recently reporting it may not be able to continue operating because it so heavily depends on imports from China, and some retailers have lowered their revenue and profit guidance for the year. Walmart said it plans to raise prices on some items.
ICSC attendees such as Bryn Feller, managing director at Northmarq’s Chicago office, said she expects to get a good sense of the industry's outlook in Las Vegas, because that's where the big players will be.
"This is the fundamental conference where everyone who's truly active in the investment sale and the retail development business is going to be," said Feller, who handles investment sales.
Meeting face-to-face with clients and tenants this week is crucial to the retail real estate business, according to Feller. Over the course of her career so far, the executive has completed deals totaling about $6.5 billion for the sales and acquisitions of net-leased properties — an investor favorite because the tenant pays building costs, including taxes, insurance and maintenance.
"This is where we identify about 60% of what we're going to work on over the next 12 months," she said. "So it's a very good conference for us to get together with 70% of existing clients, 30% of new potential clients, and really be able to share — from our seat — a market overview. ... This is where clients who we're interacting with really tell us what's in their pipeline, what they're thinking, what the pressure points they're facing are."
Sense of optimism
Several executives who are attending the conference are optimistic. James Taylor, CEO of retail landlord Brixmor Property Group, said his company has over 500 meetings set for this year's gathering "against the backdrop of tariff threats and concern about a potential slowdown" in consumer spending.
"The nature of our asset class is pretty resilient," Taylor said, referring to open-air shopping centers. "It's pretty defensive. It's cycle-tested, and I think retailers that want to do business recognize that."
He's attended about 30 of the ICSC confabs during his career. Discussions at this one will be about the future, but not about 2025, according to Taylor.
"A lot of the business that we're going to be talking about at this conference is really for '26 and '27," he said. "For most of us retail landlords, we're kind of done with the activity we expect to deliver in '25. So you have these retailers that are looking through potential near-term volatility and making long-term commitments to physical stores that remain their most profitable channel of reaching the customer."
Still, there's been concern that tariffs may lead to empty store shelves down the road, and one supplier has already warned of a possible shortage of toilet paper. But it hasn't come to that yet. In part, that's because some retailers stockpiled imported goods before the new fees went into effect. Other chains have reduced their dependence on merchandise from China. Walmart said Thursday it has been carefully managing its inventory to avoid problems, but the retail giant still expects to raise some prices to offset the tariffs.
Last week, the CEO of the nation's biggest mall owner said that except for one European retailer deciding not to take four outlet leases, there hasn't been a slowdown in activity.
"We haven’t seen across the board by any stretch of imagination a reduction in leasing demand. ... It’s business as usual," David Simon, head of Simon Property Group, said on a first-quarter earnings call. "The supply is still very much constrained. Demand is still strong."
In a note, Truist Securities wrote that Simon Property "continued strong leasing demand/momentum for store openings, despite macro uncertainty, a theme repeated from most other retail" real estate investment trusts.
No pullback yet
Matthew Harding is CEO of New Jersey-based Levin Management, which oversees a portfolio of 16.5 million square feet of retail space at shopping centers. Despite economic volatility, he hasn't seen a slowdown in leasing, either.
"I think economic uncertainty driven by tariffs and other things will be a headliner" at the ICSC conference," Harding said. "However, in our day-to-day business of interacting with tenants and negotiating and signing leases, we have seen little to none in the way of tenants pulling back the reins as of yet. So deals that are underway are continuing. We have a good pipeline of pending leases and started out the year with some great executions of leases, lease signings and also store openings."
In some ways, retail landlords are in the driver's seat today. The industry has survived, but evolved, in the face of a one-time glut of retail space, e-commerce, changing consumer habits and the impact of the pandemic. Outdated malls have been razed or are being redeveloped, retail construction is at a virtual standstill and weaker chains have been weeded out. That leaves the U.S. retail vacancy rate at a low 4.2%, according to CoStar data, and has chains that want to expand competing for space, according to some landlords.
Vacancies by bankrupt legacy retailers such as Forever 21 are freeing up space for landlords to lease at much higher rents to tenants who really drive traffic, which is actually a boon to owners, according to Harding and others. Simon Property has new tenants for 50 of the 100 Forever 21 vacancies it has paying twice the rent, CEO Simon said.
"The bankrupt tenant boxes is really the only new supply that's out there," Taylor said. "And in many cases, you see tenants competing for those boxes in the bankruptcy proceedings themselves."
Los Angeles-based Pacific Retail Capital Partners will be looking, in part, to line up more new tenants for a mall in New Jersey it acquired in May 2023, Bridgewater Commons. It is repositioning that property to improve its tenant roster, to be a "middle-market" alternative to The Mall at Short Hills, which has become increasingly upscale and out of reach for the budgets of some shoppers, according to Steve Cassella, executive vice president of leasing at Pacific Retail.
The Bridgewater mall already has 19 new tenants lined up, such as fitness apparel seller Alo Yoga and the Brazilian steakhouse Fogo de Chão, to open this year, he said. Now the company is looking for new tenants for 2026, according to Cassella. Pacific Retail is in the process of refreshing the mall, home to a vacant Lord & Taylor anchor, and planning a more extensive redevelopment of it.
Landlords in their sit-downs with current tenants at ICSC will try to determine if their needs and goals are being met or if change is necessary.
Portfolio check-ins
"It's a really valuable opportunity to come in and do portfolio reviews where you match up what the retailer's white space and demands are from a growth perspective against the space that you have available," Taylor said.
The retail real estate business isn't just about leasing, it's about companies and investors looking to acquire, sell properties or spend to redevelop properties.
Dallas-based Centennial last summer got an investment from Lincoln Property, which has given it the financial wherewithal to expand its portfolio and pursue acquisitions and mall redevelopments. Looking for purchases is part of what will keep Paul Kurzawa, Centennial's president, busy in Las Vegas.
"The partnership that we have with Lincoln now gives us access to a broader array of capital markets and capital partners," he said. "And so that has already proved to be really quite beneficial to us in terms of our acquisition strategy, and pipeline that we're working on. We are very much well positioned and very much in an acquisition mindset, that we started this year and we'll continue to do so."
That includes looking at regional shopping centers "that are primed for some new capital to come in with a remerchandising strategy, perhaps with the densification opportunity," according to Kurzawa.
"We still see a lot of opportunities in that space, and we'll continue to pursue those opportunities across the United States for the rest of this year and beyond," he said.
Centennial has over 200 meetings booked at the conference, according to Kurzawa, with about half of them on his schedule.
Banking on investment activity
There are several factors driving retail investment activity, according to Northmarq's Feller. Currently, an estimated $26 billion of net-leased retail properties are on the market — because of loans coming due, for example — compared with $9 billion three and a half years ago, she said. In addition, a number of public REITs have capital and continue to raise funds, according to Feller.
"They have to put that capital out the door," she said. "So all of these factors are drivers for things needing to happen, but the connecting the dots of what needs to happen versus what will happen is complicated by the shroud of uncertainty in all these different areas."
Pacific Retail, which is involved in several mall redevelopments beyond Bridgewater Commons, has recently sold as well as acquired retail properties.
"We do have another raft of transactions that we're working on now, three or four, maybe five transactions that we're working on, but this whole volatility in the market has made it honestly more difficult," Oscar Parra, Pacific Retail's chief financial officer, said. "And because it's hard to predict, and so although it's a bright spot and has been a bright spot and it's viewed as a bright spot, this volatility has not been helpful. So it's not for the faint of heart."
Parra said he believes retail real estate nowadays poses a better investment opportunity than a troubled sector, such as office.
"We think there's capital that needs to be invested or that wants to be invested, and this [retail] is probably a good spot for them to park that capital," he said.
That said, some investors have been taking advantage of weakness in the office market to pick up office properties at steep discounts.
Brixmor has about 30 redevelopments in progress, including one at Barn Plaza in Doylestown, Pennsylvania, according to Taylor. And Simon Property plans to kick off $500 million in projects this year, including redeveloping and adding residential space to the Brea Mall in Orange County, California. David Simon was asked if the REIT planned to cut back on its capital expenditures this year.
"So I think caution is the word of order, but that doesn’t mean we won’t buy something or that we won’t continue to do our pipeline," he said.