Retailers Seek New Horizons Amid Redevelopment, Investment Buzz
- May 20, 2014
As thousands of real estate professionals swarmed the vast exhibition halls of the Las Vegas Convention Center for RECon on Monday, executives paused briefly from the hectic activity to take stock of the show and the retail sector as a whole.
“’Upbeat’ is very overused, but I don’t know how (else) to describe it,” James Cory, senior vice president for West Coast retail leasing with Forest City Enterprises, said of the International Council of Shopping Center’s annual spring event, which is expected to draw upwards of 30,000 attendees before concluding today. In a sign the firm’s own robust renovation program, all five of the properties Cory represents in California are getting significant upgrades, he noted.
When it comes to development, much of the conversation at this year’s RECon seems to be revolving around redeveloping existing properties. Yet there are noteworthy exceptions. “Outlet centers is probably the one growth vehicle from a growth standpoint in the retail industry,” explained Stepehn Coslik, CEO of the Woodmont Co. The firm’s development pipeline includes the Outlets at Alliance-Fort Worth, a 350,000-square-foot project outlet center that is scheduled to open in the fall of 2015.
Coslik also confirmed a new willingness among retailers to venture into markets beyond the major metropolitan areas. “TJ Maxx is going into markets in Oklahoma that they never would have gone into before because they’re too small,” he said. But demand from consumers in smaller markets, coupled with smaller formats that make it practical to open stores in smaller formats, is drawing retailers into new locations, he explained.
Regarding the hot net lease retail sector, Stan Johnson Co. executive managing director & national sales manager Harold Briggs commented, “There is an insatiable appetite for product. There’s not a lot of product out there.” That hunt for product is prompting investors to seek out some relatively unconventional retail assets, such as auto dealerships, movie theaters and specialty grocers, Briggs noted. A surge in 1031 exchanges is sending capital into the market, and competition is particularly keen for properties valued between about $1 million to $3 million, the most affordable range for many individual investors.
Amid the buzz of countless potential deals, industry veterans detected an underlying note of caution. “If you peeled away the onion, I think people are still trying to figure out where we’re going,” said Coslik. The question, he says, is “Is it a real sustained recovery?”