The Retail Traffic staff has spent the past two days at ICSC’s New York National Conference and Dealmaking–the second largest event ICSC holds in the U.S. after the big Las Vegas show. We’ve spent most of the time really trying to get a read of the mood and of what kinds of deals are happening. For the most part, the mood is right in line with our December cover story, The Lost Year.
Attendance is down. I’m not sure by how much. Estimates are that attendance is down somewhere between 15 and 30 percent from last year. That still means there’s several thousand retail real estate pros. Most firms have cut back on how many team members made the trek in. So the corridors are noticeably less jammed. The Hilton had grown notorious for how hard it was to maneuver between the various exhibition halls to see all the booths. There has been a lot more breathing room this year.
By and large, everyone expects 2009 to be quiet as various issues get resolved. On the leasing front, retailers have become incredibly cautious. Even retailers that are looking to expand–and I’ve been assured there are many of those that still exist–are doing so very conservatively. Most do not want to open many (or any) stores in 2009. Instead, they are looking at 2010 in the hopes that the economic malaise lifts by the end of 2009 and positions 2010 for growth. As a result, the developments being pitched are largely projected to open in 2010 or 2011. In short, the new projects will be few and far between for the next 12 months.
At the same time, retailers are being aggressive in the kinds of concessions they’re asking for on new leases and renewals. In some cases, we’ve heard that retailers are asking for up to two years of free rent and just paying CAM fees in the interim. Rental rates are flat or dropping, but it’s hard to tell by how much. And retailers don’t want to open stores based on projected population or income growth. They want to know how many bodies are in place now and what current incomes are. They want real, existing customers, not projected customers.
On the investment sales side, prices are falling, but are not low enough for buyers to come back in. A lot of companies have cash are or lowly leveraged. So there are firms that will buy when the price is right. The big question, though, is what is the right price? No one has a clue yet. All anyone knows is that current prices are too high and current cap rates are too low. So there will need to be more movement before deal volume picks up. Also, many are waiting for increased defaults and, delinquencies or waiting for buyers coming up for refinance. Everyone expects distressed deals to pick up markedly in 2010. When they do, many of these cash-rich buyers will pounce.
An interesting show for sure. Attendance was definitely down and the mood was somber. That said, most seemed to agree that the question of a rebound was not if but when. So when is when? Estimates seemed to be sometime between this time next year and mid-2010. My take.
Attendance was down, and yes… there are a number of retailers who won’t be doing deals… or many next year so it was prudent thinking on their part to abstain. But the “Trick or Treaters” (those seeking mainly convention GAK handouts) were gone too…leaving mostly serious deal makers and those of us who are incurable optimists at that. Where would this industry be without optimism??
That’s true. Everyone that was at the show was there to do deals. I heard of a lot of companies saying that if people at their companies didn’t have a certain number of meetings set up beforehand, they weren’t going to the show. That’s another factor in the lower attendance, but makes sense in the current environment.
I was at the show. I was very productive and pleased with it. I guess my expectation was the doom & gloom scene so I am probably more optimistic than is warranted when I didn’t get that vibe. In any event, we are not in the business of negative vibes. We all must eat regardless of conditions that we have no control over. I guess, based on your comments, I am happy that I didn’t attend any round table discussions and did nothing but meet with people at the Dealmaking sessions. I did find a lot of retailers that said they are all finished with 2009 deals and are working on 2010. Not a great scenario but it is what it is. As I always say, there is always more business than I could ever handle in the market so it is up to me to find enough.