It was déjà vu time again in Las Vegas, where there seems to be a permanent Rat Pack soundtrack playing — you couldn't enter an elevator or almost any indoor space without hearing Frank or Deano or another 1950s swinger on the Muzak. The sprawling Las Vegas Convention Center might also have been playing those tunes, but you couldn't hear them over what the ICSC said was a record crowd of 46,000. There was a familiar feeling about the show itself: As in the past three years, everyone was celebrating the industry's great fortune in the preceding 12 months, and then quickly pointing out that this can't last much longer.

Investment brokerage Marcus & Millichap presented its annual ICSC update, during which Hessam Nadji, the firm's managing director of research services, sounded a “note of caution.” While macroeconomic trends remain healthy and retailers have continued to rack up gains, Nadji said that slowing GDP growth, starting in the back half of this year or in 2007, and the end of the housing bubble signal the beginning of the end of the cycle.

The slowdown in housing — measured by inventories of condos and existing homes that are up as much as 86 percent over last year and a nearly 50 percent deceleration in appreciation rates — is particularly significant. With interest rates rising, the refinancing party is finally over. Nadji says the volume of refinancing will fall from about $260 billion in 2006 to as little as $150 billion this year, which would translate into something like $70 billion less in consumer spending.

The message to retail real estate owners is that cap rates will follow. Nadji's advice is to diversify assets and work hard on improving NOI, rather than falling values, which drive the increase in cap rates. He stressed that when it comes to improving NOI, there are other factors besides increased operating efficiency that owners can rely on — including a balance of supply and demand and rising rents.