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For months, a yawning gap between buyers’ and sellers’ expectations combined with a drop in available financing for highly-leveraged buyers has led to a massive drop in investment sales volume on retail real estate properties. In early months of this year, year-over-year volume dropped by as much as 85 percent.

Many in the industry had been looking to ICSC’s RECon as possibly easing that impasse. The logic? With more than 40,000 pros getting a chance to sit face-to-face for the first time since the credit crisis broke, perhaps buyers and sellers would come to a better understanding of fair valuations. But based on the sorts of conversations and dealmaking occurring, it doesn’t seem that the convention will ultimately serve as that panacea. Anecdotally, full service brokerage firms like CBRE and Jones Lang LaSalle are reporting that while leasing activity remained robust at the conference, there wasn’t nearly as much activity on the investment side. more…

Here’s just a taste of some of the interesting commentary the Retail Traffic staff heard on the floor of ICSC’s RECon show.

“With the way the economy is going right now, I’ve noticed retailers are more aggressive about negotiating their exit strategies,” says an attorney with Cox Castle Nicholson, a Los Angeles-based commercial real estate law firm. “They don’t want to get stuck if the economy continues to slide. In that case, something that’s a good compromise situation for the landlord is if a retailer has sales below a specific amount for a given period of time, then the retailer can get out of the lease. They can’t just leave their space without good cause.”… “Most retailers are now looking at that bottom 5 percent to 7 percent of their real estate portfolio to see if they can [cut costs],” says Al Williams, of Excess Space Retail Services, Inc., a Lake Success, N.Y.-based consulting firm. “Wall Street is not going to look down on that right now, so they think it’s a good time.”… Retail developers in search of replacement tenants can now turn to Creme de la Creme, Inc., a Greenwood Village, Colo.-based developer and operator of early childhood development centers. The firm is currently looking for out parcel sites at high-end lifestyle centers in the suburbs of major cities. Most of its buildings measure approximately 21,000 square feet. “We are attracting 600 people to the center every day, twice a day,” says Bruce T. Karpas, Creme de la Creme’s president and CEO. “Plus, we are not looking to be right in the middle of the property, so we are not taking away the land a retailer would want.” The company, which operates 20 centers at present, will open three additional properties in 2008, followed by eight to 10 centers in 2010….Glimcher Ventures Southwest, a Scottsdale, Ariz.-based developer, is rolling out a new concept called “The Boulevard,” which will combine retail offerings with a wide mix of restaurants and entertainment venues in an open-air, pedestrian-friendly setting. The first of the projects, a 250,000 square foot center in Surprise Point, Ariz. scheduled for completion later this year, will be followed by three similar developments in the Phoenix area and, eventually, locations in California, Nevada and New Mexico. David J. Glimcher describes the concept as a “Disneyesque experience.” more…

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Spotted over at That Mall’s Sick and That Store’s Dead!

Standard & Poor’s announced the February results of its S&P/GRA Commercial Real Estate Indices. Retail was up 0.8 percent from January to February while every other property type dropped.

The latest readings:

Previous posts on the S&P/GRA Indices can be found from April 22, March 18, January 22, January 2, November 28, September 18 and August 21.

Stephen M. Ross, chief executive of Related Companies, signed an agreement Sunday night with the Metropolitan Transportation Authority to develop 12 million square feet of office towers, apartment buildings and parks over the 26-acre railyards, which sit on both sides of 11th Avenue, between 30th and 33rd Streets.

It was a welcome turnabout for the authority, which is counting on the railyards deal to provide hundreds of millions of dollars for new trains, stations and rail work. The speed of the new agreement, occurring 10 days after the collapse of the authority’s earlier deal with Tishman Speyer Properties, is also a measure of how much Mr. Ross, one of the city’s most prolific developers, wants control over the railyards.

Mr. Ross, who had bid on the yards before and clearly suffered loser’s remorse, essentially agreed to the same tentative $1.054 billion deal that Tishman had signed in March. The deal requires the approval of the authority’s board, which will vote on the agreement at a special meeting on Thursday. The two sides will take the next four months to complete a contract to buy the development rights.

Link.

NREI editor-in-chief Matt Valley had a bit of an adventure last night. Tony Wilbert has the scoop.

Matt Valley, editor of National Real Estate Investor magazine, and Rachel Ramos, retailer reporter at The Atlanta Journal-Constitution, are both in Las Vegas to cover ICSC’s Recon 2008. While here, they expect to cover some of the hottest stories in retail real estate, meet with key real estate magnates and eat at some of the city’s best restaurants. But on Monday night, they ended up seeing the seedier side of Vegas - an area better suited for an episode of “Cops - Sin City.”

Matt, Rachel and I were heading to dinner in a taxi – Western Cab No. 165 – when our driver decided to try to drive past an older-model Cadillac Eldorado veering on a four-lane shortcut off the Strip. Just after the cab accelerated, the Eldorado’s driver tried to turn into our lane, and bam! The cars collided and Rachel bounced off Matt in the back seat.

It’s been a rocky nine months with the credit crunch having deep impacts on investment and development and pressures on consumers cutting into retail sales. Yet industry executives at ICSC’s RECon remain optimistic about the sector’s future. Few have taken a bearish stance to the conference. Developers, managers and owners are reporting healthy dealmaking volume. And many will leave Las Vegas confident of the industry’s prospects.

Overall, attendance at the show is close to last year’s levels, according to ICSC. There were nearly 43,000 pre-registrations–almost the same as last year. Overall, nearly 48,000 attended in 2007. ICSC will report final numbers for this year’s conference in a few weeks. However, anecdotally many attendees have said they are coming in for shorter trips this year. Many arrived Monday morning and are planning on leaving Tuesday evening or Wednesday morning rather than staying for the full four days of the conference. As a result, most attendees estimate there’s been a drop in foot traffic this year, although it’s not as bad as some had feared coming into the conference.

“We’re in a correction, not a recession,” says Greg Maloney, CEO and president of Atlanta-based Jones Lang LaSalle retail. “Retailers are doing deals. Maybe it’s not as many as a year ago and they are being more selective. But they are active.” That’s kept Jones Lang LaSalle busy and Maloney says he’s been happy with the way things have played out, especially since there was a lot of uncertainty and pessimism heading into the show.

Other attendees are expressing similar sentiments. more…

Retail developers have become a bit more cautious in pursuing ground-up development in light of the economic slowdown and concerns about consumer spending. While few projects are being scrapped altogether, firms are pushing back projects in some instances to time the openings with what they hope will be a more auspicious economic climate.

Still, there are plenty of developments in the works this year, as evidenced by all the projects on display at ICSC’s RECon show in Las Vegas. Overall, according to CoStar Group, the retail market has added 450 new projects already in 2008 bringing the total number of shopping centers to 98,791 with a total leasable area of 6.8 billion square feet of space. The majority of the projects coming on line are smaller centers. There are, however, a few notable exceptions. For example, Meadowlands Xanadu, a 2.3-million-square-foot retail and entertainment project outside New York City being developed by Colony Capital Acquisitions, Dune Real Estate Funds and KanAm USA is on pace to open next summer. Meanwhile, Westfield is working on host of projects, including a pair of 1-million-square-foot centers opening in London. One will come online this year and the other in 2011, in time to operate for the 2012 Summer Olympics.

“To bookend the east and west ends of London is a once in a lifetime opportunity,” says Randall Smith, executive vice president of business development for Westfield.

That’s a common refrain among the big projects moving ahead. Developers with unique opportunities in strong markets are the ones most likely to succeed in this climate. more…

Things kicked into gear in earnest Monday at ICSC’s RECon with the opening of the Leasing Mall. For the most part, people I talked to remained cautiously optimistic about the industry’s prospects. At the same time, attendance did seem noticeably down from last year in spite of ICSC maintaining that pre-registration levels matched last year’s figures. I heard a lot of people saying that they had truncated their trip this year–perhaps cramming their meetings into one or two days rather than staying here for all four. Others told me they knew of some people that registered, but then ultimately decided not to make the trek.

Still, despite the apparent drop in attendance, there is plenty of dealmaking occurring. Developers Diversified Realty, for example, had 1,400 meetings set up. Other major owners and developers remained equally busy.

And there are clear signs for optimism. While retailer closings are at their highest levels in several years, there have not been a ton of bankruptcies. Further, there do remain a healthy number of new concepts out looking for space. Owners of top-tier properties especially seem in a good position having experienced very little erosion of their tenant base or of their property values in the past 18 months.

Lastly, there’s some definite good news on the debt front. While the commercial mortgage-backed securities market remains locked up, several REITs in recent weeks have been able to tap the credit markets with new bond offerings. Westfield and Simon Property Group, for example, have both issued new bonds and found healthy demand from bond investors for the offerings. That’s a sign that perhaps the credit crunch is beginning to pass.

NREI’s Matt Valley reports on the state of investment sales.

The velocity of U.S. retail property sales across the industry plunged 40 percent in the first quarter of 2008 on a year-over-year basis, according to brokerage firm Marcus & Millichap, reflecting a major pricing gap between buyers and sellers. What’s more, a bifurcated sales market has emerged. Among properties valued above $10 million, deal volume nationally dropped a whopping 60 percent compared with a 20 percent drop for properties under $10 million.

“If you are taking an offering to market north of $10 million, from a strategic point of view you better establish the pricing to get buyers’ attention quickly or sit on the property,” says Bernie Haddigan, managing director of the National Retail Group for Encino-Calif.-based Marcus & Millichap. Haddigan’s comments came at the Las Vegas Hilton on Monday during a one-hour program, “Bulls or Bears: Which Will Drive Your Real Estate Strategy?” hosted by Marcus & Millichap.

One reason for the dip in property sales above $10 million is that up until recently many buyers relied heavily on commercial mortgage-backed securities (CMBS) as their principal source of financing. But with CMBS debt capital drying up due to the credit crunch, buyers have been forced to pursue other financing alternatives. more…