Strolling the Agora column from the October 26th, 2009 Issue of Shopping Center Digest.
So I'm in the Atlanta Convention Center heading for the ICSC Southeast Conference and I hear this steady hum– that increases in volume, like a rushing rapids, and then a louder waterfall, and bounces and echoes off the concrete pillars and massive halls until it becomes almost deafening. It's the roar of dealmaking.
And it's such a contrast to last year's “Retailers Meet and Greet” (See SCD, Agora, J227) when a large number of the tables were empty and we graded the entire conference as a D.
Not the case this time, as all the tables were occupied and landlords and brokers eagerly lined up to chat with prospective tenants, trade business cards, and try to schedule appointments for more in-depth discussions and negotiations.
This is not to say that the 2-day event set any records for attendance and overflowing optimism. Far from it. However, the majority of the 2,200 or so dealmakers conceded the fact that due to the economy they had to work harder and longer to make the deal – here and back at the office – and they were not going to get everything they wanted or needed.
But, as one veteran cheerfully said, “It's something, which is always better than nothing. And this is what we do: 'Smile and dial' and a few of those leases will get signed.”
The most common complaint from owners was that “too many retailers were insisting on straight percentage deals. Ask about $1 or $2 added to the gross, and they don't want to hear from it; straight percentage or forget it, there's another landlord willing to fill the vacancy.”
One retailer I spoke to admitted his company was taking advantage of the fact that there weren't that many chains aggressively expanding. “We're looking for straight percentage leases for three years, if we can get it, and will agree to using the higher payments as the basis for a rent renewal.. If we're really serious on the location, we'll drop it to a year or two-year deal.”
Owner-developers generally came in two categories. Either it was “I understand their (the tenant) position and I don't blame them. I'd do the same thing if I were in their shoes.”
Or “I concede the leverage is overwhelmingly on their side but I don't like the attitude of their putting a gun to my head. We'll make the hard deals because we have to, and each party should not be completely satisfied. That's fair. But we should be left with our dignity.”
Another landlord appraised the current economy which has dampened – to say the least –
dealmaking in the industry and said “Don't quote me now, but in the long run, it's probably better for the industry. There'll be a shakeup and we'll get rid of a lot of the deadwood and poor projects that should never have been built in the first place.” He added that there may still be some vacant W.T. Grant sites around the country. [Those too young to recall recessions of years past should look it up.]
One strip developer I spoke to said he was getting no action at several vacant stores, except from a Mom and Pop restaurant, who was underfunded. “So, I thought, isn't it better to put in an operator who will provide good food, and enhance the center? If he makes it, I've incubated a good tenant who may remain as a long-time tenant or even expand in the future. And if he doesn't make it, what have I lost? I couldn't rent the space to anyway.”
Regarding mergers and acquisitions, one leading owner of smaller centers remarked that “last year we were getting offers of available vacant land. This year, it's existing shopping centers. But we can't do anything about these projects because the banks are still overly cautious about lending money.”
Though some private investors and REITs have said they have money in place to acquire centers, many others complained about the lack, at this time, of the availability of adequate financing, which they say is impacting on expansion and new development in areas that may be under-stored.
The consensus: Tenants and landlords both said they had productive meetings, pointed to positive signs in the economy, but warned that a full recovery is still “quite a ways down the road” and much of what happens in 2010 “will depend on how successful the coming
holiday season will be.”
More information on the twice-monthly SHOPPING CENTER DIGEST and our associate publications, the weekly Eflash, 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.