After nearly three years of outstanding performance by the retail real estate business, executives at the annual ICSC convention in Las Vegas were talking almost wistfully about the end of the good old days. Someday soon, they say, this cycle has to wind down.

“We're due for a downturn,” says Greg Maloney, CEO of Jones Lang LaSalle Retail. Nobody is talking about a catastrophic collapse, but there is a clear sense that money is beginning to cycle out of retail projects and into other sectors of commercial real estate.

Harvey Green, CEO and president of Marcus & Millichap Real Estate Investment Brokerage Co. says he subscribes to the theory that the Federal Reserve's tightening is now directed specifically at easing the real estate bubble — especially in residential housing. And just as low interest rates helped retailers and retail real estate over the past two or three years, higher rates will hit them hard on the way down. Homeowners will no longer be able to refinance and take money to the mall and that will hit the stores and the centers where they pay rent.

Green says he sees investors moving money into other real estate assets and suggests that multi-family might be a target. As the interest rate environment changes and purchasing homes becomes harder, rental demand should grow, he figures. In retail, he sees the action shifting to B and C properties.

Mike Myatt, executive managing director of Pacific Security Capital, a Beaverton, Ore.-based real estate investment bank, says he sees the shift in sentiment away from retail as well. “You're going to see some asset class rotation at this point,” he says. “And, quite candidly, it's probably good news.” Myatt says it will help relieve the feeding frenzy, reduce upward pressure on prices and help cap rates move back to a more sustainable level.

Heard On The Floor:

CoStar Group Inc. is taking a deliberate approach in ramping up its retail database. The company is aiming to add 600,000 retail properties by the end of next year to the 40,000 it has now — much of which came in its recent acquisition of the National Research Bureau from Claritas. The company's aim is to be the preeminent data source for market rents, vacancy rates and other industry metrics. … Simon Property Group announced the opening of an Asian office that will be headquartered in Hong Kong. That added to the show's international feel. Australian limited property trust Centro Watt had a big presence thanks to its acquistion of Kramont Realty Trust. And Tokyo developer Diamond City had four projects opening in the next two years on display … The tenant-in-common structure is making its presence felt in retail. Passco Real Estate Enterprises Inc. will soon close on a $110 million deal for the Promenade at Howard Hughes Center in Los Angeles. SCI Real Estate was also at the show, hunting for retail deals. But lenders are still wary of the structure. One major player on the finance side told us that they are financing TIC deals, but still don't feel all that comfortable with the inherent risk of the structure. … The city of Phoenix is expected to double in size in the next 15 years, and Westcor has positioned itself to take advantage of that. As part of what it is calling the Phoenix 20/20 plan, Westcor will be involved in commercial development on 2,000 acres at several sites. The most ambitious piece is the Prasada master-planned community project, which will eventually include 4 million square feet of retail to go along with office and residential space. Related Urban Development and Thomas J. Klutznick Co. plan a 5 million-square-foot mixed-use development, City North. … Though Quizno's is still dwarfed in size by Subway — it has just over 4,000 locations compared with 22,000 for Subway — it clearly is posing a challenge. Subway has recently added toasted subs to its menu to challenge the upstart. Quizno's, for its part, plans to open 1,300 new stores this year and has 2,000 franchisees in its system that have already paid their fees and are just waiting for sites. “In our mind, Subway's move validates what we're doing,” says Dominick Voso, executive vice president of development and operations for Quizno's. “But we think we do it better.” … Taubman Centers Inc. has an ambitious slate of new malls in its development pipeline. The projects range from its traditional upscale mall base to its joint venture with The Gordon Group on the Pier in Atlantic City to a mixed-use urban redevelopment in Salt Lake City. The Utah project will feature office, multi-family, hotel and retail all on one site. … One of the more creative concepts that a handful of developers are floating is home furnishing centers. California-based Birtcher Development LLC is hunting for opportunities to build centers that would be dominated by chains like Ethan Allen. The demand for furnishings is being generated by the single-family housing boom, which still shows few signs of slowing. In early June, the National Association of Realtors reported a new record for existing home sales in April. … General Growth Properties Inc. has unveiled a new program — GGP Platinum — aimed at the luxury segment. Not unlike Macerich's Luminati initiative, GGP is putting 19 top properties, such as the Fashion Show Mall and The Grand Canal Shoppes in Las Vegas, into the program. It hopes to use the program to build better relationships with luxury tenants. … Casto, one of the largest remaining private developers, has 5 million square feet in its development pipeline, much of it focused in the Southeast through its lifestyle center division. One of its more intriguing projects will be the Speedplex, which will be built at the Daytona Speedway and be the new home office of NASCAR in addition to having themed retail. … Construction is under way for The District at Howell Mill (above), a 600,000-square-foot project developed by Selig Enterprises Inc. on the site of the former Castlegate Hotel in Atlanta. The project includes 300,000 square feet of retail space adjacent to a 280-unit luxury, apartment complex. About 150,000 square feet of retail will sit atop a 150,000-square-foot Wal-Mart. … Woodbine Southwest Corp. has broken ground on its Main Street Commons in Gilbert, Ariz., part of a new upscale, mixed-use development that will resemble its successful Kierland Commons in Phoenix. … Elle magazine and Entertainment Weekly have signed on as sponsors of the fashion and entertainment areas, respectively, of Mills Corp.'s Meadowlands Xanadu. Displays promoting the magazines and their advertisers will be featured throughout the space, and they will also provide entertainment such as fashion shows and concerts. … For Hire: Director of Redevelopment/Construction. Paul Lewis of Specialty Consultants in Pittsburgh says the boon in retail redevelopment has made experienced individuals in that field hot. In fact, some redevelopment specialists are getting salaries of $250,000 or more; that's up from $125,000 to $150,000 three years ago, he says. … On the subject of personnel, Little Diversified Architectural Consulting in Charlotte, N.C. promoted Raleigh Cline to the new position of head of the architectural firm's mixed use/marketplaces unit. This represents Little's commitment to more mixed-use projects, says Bruce Barteldt Jr., national studio principal. … Erwin J. Greenberg Commercial Corp. has hired three former Rouse employees: Kim Potember, director of development and John Hess, who will be responsible for leasing. Also from Rouse is Gustavo Arango who will assist Potember and attorney Donna Sills. … Epicenter, an affiliate of the Gordon Group, announced its new concept for bringing online shopping to the mall. It proposes to take dead mall anchor space and provide a place for consumers to see the wares of e-tailers in the flesh so to speak. They can then order merchandise on the spot. Working with Glimcher Realty Trust, Epicenter hopes to convert a soon-to-be dark anchor space at the Polaris Fashion Mall in Columbus, Ohio, into a 180,000- square-foot marketplace of about 70 Internet retailers. “It's like a three-dimensional Web site,” says Jay Valgora, a principal with Walker Group, designer of the Epicenter site. … “B”-malls don't need band-aids, they need a total makeover, according to Barry Rosenberg, president of Steiner + Associates. With almost 600 “B” malls across the country, that presents a lot of redevelopment opportunities for developers. “A lot of people really just try to put a band-aid on those properties, like add a new anchor, but what we are doing is creating a town center,” says Rosenberg. Putting its money where its mouth is, Steiner is working with current owner Mall Properties Inc., to turn the 35-year-old Coliseum Mall in Hampton, Va., into the $200 million Peninsula mixed-use center. it will include retail, residential and office space and public green centers. The only thing remaining from the old mall will be its original anchor: Hecht's. … Continental Real Estate Cos. is opening the final store on its 27,000-square-foot Cap at Union Station (above, right), which covers both sides of an overpass spanning Insterstate 670 in Columbus, Ohio. Designed by Meleca Architects, the project allows traffic over the bridge, but hides the interstate from view with a lifestyle center featuring local retailers. … After failing last year to build a Supercenter in south Chicago, Wal-Mart has begun construction on a 150,000-square-foot store on the West Side. It will be the first Wal-Mart in city limits. … Look for more LEDs and other video signage at mall properties. Lighting vendors were everywhere and use of the technology showed up on renderings. … One of the most surprising exhibitors at the show was Google, which was hawking its aerial photography capabilities.

WYNN'S WILEY WAYS

Las Vegas wheeler-and-dealer Steve Wynn drew parallels between retail and casino development at a party sponsored by Active International, Retail Traffic and National Real Estate Investor. “We are all pretty much in the same boat,” he said at the event at his new resort hotel, the Wynn Las Vegas. “We are all trying to create structures that are unique; something that is better than the other guy's stuff.”

Like shopping centers, casinos have become more luxurious and entertainment-oriented, he said.

“Many times, it [building a casino] was a way to see if we could eclipse what we have done before,” said Wynn, who knows a thing or two about eclipsing.

It certainly is true of retail in Vegas, where shopping and gambling are entwined and developers are trying to outdo each other. High-class retail on the Strip first began with the Forum Shops at Caesar's Palace in the early ‘90s. Since then, it has exploded with ambitious projects like the Grand Canal Shoppes at the Venetian and the Desert Passage at the Aladdin.

Editor-in-Chief Beth Karlin also spoke.

LIGHT SHOW

The brightly lit, plastic model of Peterson Cos.' National Harbor project in Prince George's County, Md., was a big hit. The Harbor will have 1 million square feet of retail and entertainment space.

COWBOY STORY

Probably the most unusual development team we ran into was the Fain brothers. These fellas wear two hats: one of which is a cowboy hat.

Ron and Brad, cattle ranchers turned developers, moseyed around the show floor looking for discount big-box retailers for a power center they are planning on a portion of their 130-year-old family ranch in Prescott Valley, Ariz.

Their company, the Fain Signature Group, already is constructing an entertainment center that will include at least six restaurants; a Chili's just broke ground.

Cowboys for five generations, the family started ranching in the then remote area in 1874. Now, the suburbs are encroaching and the brothers think the demographics are right for a center. But make no mistake. They don't plan to get out of the beef business. Ron, ranch manager, says they still run 600 head of cattle.

WHEN THE LEVEE BREAKS

Mayor Betty Burch stood out among the many mayors at this year's show. This 72-year-old from Riverside, Mo., is looking for retail development on a grand scale so her town can pay off $80 million it spent on a levee to protect it from the tempermental Mississippi River.

The great flood of 1993 virtually wiped out the town-but building the levee helped to create about 900 acres of land for development. “We don't have any property taxes so sales tax is how we are going to pay it back,” says Mayor Burch. “And retail is the only way to go.” She has led the town for 26 years.