Exhibitors and attendees (6,000 visited the show) crammed themselves into the New York Hilton this week for the International Council of Shopping Centers' New York Idea Exchange. There wasn't enough space for all the exhibitors, many of whom had sent deposits last spring, only to learn at the last minute that they had no booth. Fire marshals were called in to open up some out-of-the-way spaces to squeeze in a few more exhibitors. But the inconvenience didn't get in the way of the schmoozing and dealmaking and the overall tenor of the event was upbeat -- most attendees say 2005 will be another big year in retail real estate.
Developers interviewed at the dealmaking conference said most of the malls that have opened in the last year are performing well. "Most are fully leased," said Michael Cohn, senior managing director of Southeast Retail Development for Charlotte, N.C.-based Faison Enterprises Inc., which is expanding in Atlanta and surrounding areas. "You might see some back-fill Wal-Marts and a few empty department stores, but, in our area, business never stopped," Cohn said.
The headlines have been about a tepid Christmas, Wal-Mart's Thanksgiving stumble and the continuing drop in consumer confidence. ICSC economist Michael P. Niemira now projects November/December sales to increase 2.5 percent to 3 percent from last year, less than 2003's holiday growth rate of 4 percent. But you wouldn't know it from the show's buzz.
What are the hot new retail concepts? Owners are excited about the new sub-chain that preppie clothier Abercrombie & Fitch is testing. Concept Four stores, which premiered last month, are geared to older clientele than the teens and college-age patrons of the Abercrombie brand.
Perhaps the most intriguing new retail concept being talked up at the show are the eBay drop-off consignment stores. Developers and leasing agents expect to see a proliferation of stores in the iSold It and Quick Drop chains, which are now rolling out nationally. Both chains are consignment stores for consumers who want to sell their wares on eBay, but don't want to go through the effort to create their own store and handle fulfillment. Quick Drop has 25 stores -- in California, Texas, Florida, Illinois and New York. Nine more Quick Drops are planned. More than 300 iSold It franchise stores are under contract, says the Pasadena, Calif.-based firm.
- The Kmart/Sears story continues to stir debate. Jeff Green, president of California-based retail consulting firm Jeff Green Partners, believes both brands are on the path to oblivion as the new holding company sells off the valuable real estate. He gives Kmart three years and Sears five. Other industry watchers say the chains are sending signals that they intend to stay in business. Ron Pompei, president of the Pompei AD LLC design firm, said he has developed two test designs for Kmart recently. He hasn't heard a final verdict.
- Build rather than buy is the rallying cry of many New England developers, who say that at today's prices it's cheaper to develop than buy existing properties. With buildings trading at above replacement cost, some owners reckon it makes more sense to start from scratch, says William Beckeman, president and CEO of Linear Retail. The region continues to attract development, even though the demographics don't seem to point to a huge swell in demand. But, on the other hand, none of the projects under way are spec deals.
- The Richard E. Jacobs Group, which sold off most of its portfolio as part of the company's founder's estate planning in 2001, has two intriguing Florida projects in the works. The centers -- the 1.4 million-square-foot Gulf Coast Town Center near Ft. Myers and the 1.6 million-square-foot Cypress Creek Town Center in Tampa -- will be what you might call multi-modal projects, with power center, enclosed mall and lifestyle center components. The company has already opened one hybrid center, the 1.4-million-square-foot Triangle Town Center in Raleigh, N.C.
- Fueled in part by a capital infusion from the Australian Macquarie Bank and Coventry Real Estate Partners, Developers Diversified Realty Corp. is hunting for new properties to acquire and develop. With a large treasure chest, Developers Diversified's aggressive search will continue into the new year.