This “Strolling the Agora” Column Is From The November 23rd, 2009 Issue Of Shopping Center Digest Being Distributed At The ICSC Conference In New York
Though there are universals present in each ICSC regional conference around the country focusing on leasing and development, there are also distinct differences in themes and outlooks expressed by these real estate professionals. So it was in Chicago last month and–I expect– it will be in New York at the National Conference and Deal Making in the next few weeks; the ultimate connector being a resilience and positive attitude:”We're working harder than ever for a lot less, but we're still vertical and will get through this (the recession).”
A side issue, but strongly expressed by a number of landlords and tenants was anger at ICSC for “losing touch with the needs of its members” and “operating as a business rather than a trade association.” More on this later.
Even before the beginning of brisk, official dealmaking, many were already expressing optimism on the rising economy, basing much of it on rising retail figures just released by a number of leading chains. However, these should be taken with a touch of reality, stressed one top department store executive.
“In retailing,” he pointed out, “we're zooming down the highway at 100 miles per hour looking backward through our rearview mirror and competing against last year's figures. It's great if our same store sales are up 3 or 4% – but last year they were down 15, 16 or 17%. You must consider what we're competing against.”
Said another retailer: “In that context, we're still behind where we were two years ago.”
More Time For Recovery
Though some of the national sales figures being released indicate the recession is over, industry observers contend that it hasn't convinced the average consumers who are still being very cautious on spending for non-essential goods. “Unemployment is still rising around the country and the average shoppers are still fearful of losing their jobs,” said another chain VP. “It's going to take a lot more time for a full recovery.”
For landlords with troubled properties difficult to rent, it may be worthwhile to “give the space away,” said one strip operator. “We've made deals with free rent for some Mom and Pops, with the tenant paying only operating costs for a couple of months,” he said. “It keeps the center active, stops the domino effect of other stores leaving. But,” he stressed, “the jury is still out as to whether it is effective. It depends on whether he can start paying the rent after the free period expires.”
One retail consultant was exuberant about the number of deals he had made recently. “Last year was awful and I really thought we could go belly-up. I was forced to lay off some people; then we increased our marketing, worked harder and longer than I ever have before, and it's beginning to pay off. It's re-vitalized me and our entire operation.”
Another agreed, and pointed out that with computers and the internet, “it's a lot easier to operate and connect. It doesn't completely replace face-to-face, but it does enable us to cut travel expenses and still negotiate with major landlords, get answers, and satisfy the needs of our retail clients.”
One broker pointed out that she and others “were re-tooling their business plan and dumping the unproductive stuff.”
“Part of the problem of poor retail locations that exist today,” said one veteran dealmaker, “is that many national chains had all these real estate people at the home office signing store leases who never even looked at the site. There are too many coffee or pizza shops on the wrong side of the street, or restaurants in odd-shaped parcels with inadequate parking that are difficult or unable to provide for drive-up windows.”
Wandering In The Exhibit Area
Wandering through the exhibit area, I see it's crowded with rushing, intense dealmakers networking or heading for appointments, and was struck by several rented but unoccupied booths. On the upper level, where historically six much larger dealmaking rooms were occupied previously by some heavy-hitters, only three were occupied: CBL, Developers Diversified, Jones Lang LaSalle. And these landlords brought a substantially fewer number of leasing professionals than last year, 6 compared with 13 in 2008, said one owner-developer.
Another aspect setting this Midwest meeting apart from other recent ICSC regional meetings was the heavy concentration of booths operated by small cities, villages and counties that were actively seeking retail tenants to help revitalize downtown business districts. Represented by local economic development officials, they highlighted the marketing potential of these communities, and stressed how public moneys, stimulus funds and special tax incentives were earmarked to restore once vital centers that had been deteriorating for years; they pointed to improved lighting, roads, signage, public utilities, transportation, parking, and the like.
“If,” said one planning director, “we can attract a few solid retailers, it would add substantially to our tax base and help us to stop a slide caused by such factors as the admitted local neglect, poor management of past administrations, and the national economic crisis.”
Second Day A Disaster
Though the level of dealmaking opening day in Chicago was impressive and ongoing until the reception that evening, the second day was a disaster. A substantial number of dealmaking booths were left unmanned that morning as many budget-conscious real estate professionals flew or drove home the night before to avoid the extra cost of high hotel rates; many of these neglected booths did not have even token amounts of company literature. Company representatives who were at their booths outnumbered those dealmakers wandering around still trying to connect.
One retail consultant from Atlanta who operates only in the Southeast said he was in Chicago due to a new client of his interested also in expanding into the Midwest market. “I can connect him to a few good sources and contacts and be a hero.”
A number of tenants, landlords, and brokers were outspoken in criticizing ICSC for maintaining high prices and “gouging” its members.
“In these hard times, ICSC should lower its ridiculously high registration fees to only cover the costs,” said one retailer. “They have $90 million sitting in a slush fund for a rainy day. Don't they know it's raining out there?”
Another said he hadn't registered because of budgetary cutbacks forced by national headquarters, and visited the landlords upstairs – where a badge was not required for admission – and did meet with a few others in the lobby to look at leasing plans and talk deals. “In New York [the upcoming conference Dec 7-9] Simon told me to call them when I'm at the Sheraton and they'll send someone out with a badge to bring me in.”
It was understood, one dealmaker confided, that several major owner-developers have already cancelled plans for exhibit space “at the Hilton and Sheraton hotels, and others may be wavering.”
One landlord accused the trade association of arbitrarily making decisions on schedule changes without consulting its membership. “In Las Vegas next year,” he said, “they've already changed the convention dates so we have to come in on the weekend. Don't they know that's when hotel and travel costs are at the highest, and how short of cash many companies are?”
One VP of real estate and construction with a national chain told me he normally did not attend these regional meetings but sent area leasing reps. “I'm here only because of a retail committee meeting, but ICSC seems to have lost touch with reality and is functioning with no regard to the needs or wants of its members,” he said.
Overall, registrants felt attendance and the number of exhibitors were down from that experienced over previous years. But the overall sentiment was still a strong, positive outlook throughout the conference.
Especially for the seasoned brokers and consultants, who have been through past market downturns and are using the lessons learned from their past experiences to help weather the current storms and control the existing crisis. “Look,” said one, “I've cut back before and operated out of my home when necessary. I did it before, I can do it again. We're survivors. It's the younger people who have never faced such rough times before who are the most terrified.”
Further information on Shopping Center Digest, our weekly Eflash, Expanding Retailers, and the annual 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.