It's been a whirlwind couple of days. Altogether, I sat in on 18 retail REIT presentations at NAREIT's REIT Week. (During a few of the time blocks multiple retail REITs were reporting, so there were some I could not get to.)
The major themes were similar to those coming out of ICSC's RECon a couple of weeks ago.
When it comes to leasing, retailers of all types are much more aggressive than they have been since before Lehman Brothers imploded. Occupancy rates tend to be higher for both regional mall REITS and shopping center REITs at their large spaces. There are still gaps to fill when it comes to inline tenants. In part, that is stemming from the fact that mom & pop type retailers are still having a hard time lining up financing. Smaller banks remain troubled. So while Wall Street is lending--which is helping the largest retailers, who have ample lines of credit to fund expansion--the traditional sources of financing for small businesses are still not available.
However, many retailers are also rethinking store sizes and shrinking concepts. In many cases retail REITs seem to be welcoming this development. If they can recapture all or part of a big box that's paying below market rents, it gives them a chance to improve cash flows by finding a replacement or subdividing the space.
On the investment sales side, I heard a few different references to there being an "ocean of capital" that's now chasing retail assets. The competition is most fierce for class-A product. But with a limited supply of that on the market, investors are slowly moving their way down the value chain. The fact that banks, insurance companies and CMBS lenders are also increasing their tolerance for risk will help to fund deals for class-B and class-C product. The competition is such that many retail REITs don't think they'll be able to acquire that much. Many will end up being net sellers since they're finding it's an ideal time to sell non-core assets. Only a few of the REITs that reported seem to be aggressively looking to expand through acquisitions.
When it comes to development, just about the only ground-up development anyone seems excited about is the outlet center space. The figure going around the show was that there is room to build 100 outlet centers in the U.S. So a lot of firms--even those with no track record in outlets--are taking a hard look at how to get in on the business. Much more prevalent was talk of redevelopment and expansion. REIT managers by-and-large agreed that redeveloping or expanding existing properties was the best way to increase NOI and organic growth, given current market conditions.
I'll expand on these thoughts in an analysis piece that I'll post tomorrow morning.
In the meantime, here are links to all the live blogs we posted from REIT Week.
- Kimco Realty Corp.
- Tanger Outlet Centers
- Developers Diversified Realty
- National Retail Properties
- Glimcher Realty Trust
- Simon Property Group
- Pennsylvania REIT
- Excel Trust
- Weingarten Realty Investors
- Taubman Centers
- Federal Realty Investment Trust
- Inland Real Estate Corp.
- Regency Centers
- General Growth Properties
- Vornado Realty Trust
- Acadia Realty Trust
- Westfield Group