Strolling the Agora column from the September 29th, 2009 issue of Shopping Center Digest “The Locations Newsletter”
To many dealmakers on the Eastern Seaboard, the ICSC Philadelphia meeting serves as a landmark, the first official session after Labor Day and a formal statement that summer is over and with fall comes the full-court press to get some leases signed.
So it was that some 1,200 landlords, tenants and brokers involved in New Jersey, Pennsylvania, and Delaware – with quite a bit of leakage into Ohio, New York and Maryland– converged on the City of Brotherly Love for two days of meeting, greeting, and the drive to fill vacant space.
Many tried to maintain a cheerful, optimistic outlook. But… … .
“We're working a lot harder for a lot less.”
“It's what we do – keep plugging away with the anticipation that a few of the deals we're working on will come through. I used to have pending deals up to here [signaling up to his brow] and now they're only up to here [signaling knee high].”
“There are a lot of hungry people out there looking for jobs, but very few openings available.”
“We're treading water and hope we don't sink.”
And, “It's getting nasty and a little more vicious, especially amongst brokers in the same office. Though it has always been a problem, there is a lot more poaching of clients, trying to steal deals, attempting to horn in and share commissions that are undeserved.”
Said one veteran dealmaker, “This is not unique for just this market. I've been hearing similar stories over the last few months from friends around the country.”
Higher Concentration Of Brokers
As far as the quality of those in attendance, a substantial majority of mostly local brokers – which is always the case for these ICSC events covering a localized region – representing landlords and tenants involved in small, strip centers. However, there was almost no representation from large mall operators or national tenants, even those who have a substantial presence in the market.
As for national chains, it was pointed out that many of them are farming out a lot of the drudge work to willing brokers in the immediate area.
Beyond just the areas involved in leasing, there was also a lot of speculation about the increasing number of new funds being created daily for potential acquisition of distressed shopping centers that may soon be going into default. However, there are few large portfolios or sales taking place. The sellers are holding on for a better price, and the potential buyers are in no hurry to buy at current values, which they expect to drop even more.
“The owner still has a price in mind that conflicts with reality,” said one veteran who acknowledged he has several large investors, a good number of them with financing coming in from Israel, China, and various European countries, and is waiting for a better deal.
“We're eye to eye, waiting to see who blinks first, and there's no pressure on us to blink at all.”
Growing Numbers Of Vacancies
One owner: “We have a good center and have been paying our monthly mortgage all along. But we lost a couple of key tenants and technically, therefore, we're in default. We look at the situation, are leasing a lot of available to offices, and see we can pay it off in four years.
“Mortgage lender sees this, too, and tells us he's going to foreclose. Luckily, we can come up with the cash and pay off the loan. Now, we're looking for similar landlords who are being foreclosed on who cannot come up with the cash.”
The problems of growing vacancies has made many landlords eager to negotiate and strike deals to fill space they never would have considered before. We've remarked on this in numerous columns over the past year. And it's the reason why medical and dental offices are becoming a greater presence in major malls. They always wanted the visibility and the access to the affluent customers, but could never meet the rental demands; now they can as rents have dropped many dollars below last year's asking price.
It has even affected retailers whose customers are blue collar, low-income ethnics, and whose main locations are small strips and storefronts in the inner cores.
Said one leasing director for a major apparel chain, “We now have so much more to choose from. No way, are we going into malls; but because there are so many more opportunities coming to us out there, and the rents are so low, we're able to expand at a much greater rate than we anticipated. We're locking in those low rents now, and will be in a much better position in one or two years when the industry gets back to normal.”
The main purpose of the two-day session was dealmaking, with several hundred booths set up mainly by landlords, brokers, and tenants for the Thursday session. The day before, though, there were a number of workshops and panels on various topics of interest to early arrivals. The best attended and popular was the called Speed Dating, where some 19 retailers held court at individual tables, explained who they were, the demographics of their markets, size of stores, and what they were looking for in new locations, handed out fact sheets and exchanged business cards. Among those were Chipotle, Great Clips, Ikea, Subway, Panda Express, and a number of local supermarkets.
After a few minutes, the presenters stayed in place and the landlords went on to another table and took some more notes.
It was something, said owner-developers and brokers who participated, and certainly “better than nothing. But it was still,” said one hungry landlord, “like having a nibble at a banquet. Still it gives us something to work with. And, we're dealmakers, which means we have to always look on the positive.”
P.S.—One sad note, which brought back so many memories to us old farts in Philly: the passing of Mel Simon, one of the stalwarts in the industry, a hard-driving, fun guy, and with Herb and Fred built a great company. Here's to ya!
More information on the twice-monthly SHOPPING CENTER DIGEST and our associate publications, EXPANDING RETAILERS and DIRECTORY OF MAJOR MALLS, may be obtained from our website, www.shoppingcenters.com.
Strolling the Agora was a twice-monthly column discussing trends, issues of importance, and commentary on the leasing/development aspects of the shopping center/retail chain industry in the US and Canada. Called Strolling the Agora, it was a part of Shopping Center Digest, a newsletter founded in 1973 published until September 2010. The column provided expert insight into various retail focused topics. It was primarily authored by Murray Shor, Editor & Publisher as well as industry and veteran retail experts. A smattering of archived columns are presented here for your reading “pleasure”. It's an interesting “look back” at what were current hot topics at the time with regard to shopping center/retail industry focus, development and leasing expansions and processes, retail mix, opinions and more.
About Murray Shor:
Reporting and writing on the shopping center/retail industry since the late ’60s. Began as editor at Chain Store Age, founded Shopping Center World (now Retail Traffic), Shopping Center Digest “The Locations Newsletter” in 1973, and the Directory of Major Malls in 1979. Each issue of Shopping Center Digest contained a column called Strolling the Agora which provides commentary on trends, activity, issues of concern to development and leasing in the shopping center/retail industry.