It started tentatively. The first conversations between the attendees of the ICSC RECon 2010 were marked by a cautious optimism—almost as if people didn’t want to jinx it.
One attendee put it like this: In the weeks leading up to the show he hoped he might have a full calendar of appointments. As he called retailers he found, unexpectedly, that many were in fact eager to sit down. And it wasn’t just to talk about how bad they were doing or to plead for more concessions. Instead, they were interested in talking about honest to goodness.
The attendee thought he was lucky. Or he hoped that perhaps his hard work meant he was getting meetings where others weren’t. But as he got to the show he found he wasn’t alone. It was common to hear attendees talk about their number of meetings increasing over last year by 20 percent or more. As a result, larger firms with lots of attendees ended up with hundreds more meetings than in 2009.
Everyone found a strikingly optimistic tone gripping the convention floor. The mood appeared to feed upon itself and by Tuesday afternoon, the end of the three-day conference, attendees were walking around with bemused smirks on their faces—expressions that seemed to be equal parts exhaustion and satisfaction. An attendee that has been coming to the show for 25 years went so far as to say it was the best and most productive conference he had ever had.
William Taubman, COO of Bloomfield Hills, Mich.-based Taubman Centers and the 2010 ICSC Chairman was not quite that effusive, but did say that the improvement in the industry was real and significant.
“Our first quarter was much better and that strength continued right through April,” Taubman said. “I believe we still could see a pullback and get some more normalized sales later this year. But there are real reasons why consumers are coming back.”
Taubman said one of the key indicators his firm monitors is average household net worth—a metric that has bounced back surprisingly strongly in the past 12 months. One reason for that has been appreciation in the stock market off lows it hit in March 2009. But perhaps even more significant is that the writedowns of consumer and mortgage debt in the last 24 months have removed liabilities from some consumers, enabling them to increase spending. “Luxury is back. Tourism is bouncing back,” Taubman said. “That has led to improved performance at our centers.”
Anthony Buono, CBRE executive managing director of retail services—Americas, pointed to another reason for optimism. Thefirm recently conducted a survey of tenants that found that 90 percent are planning to expand in some form. “Tenants are driving our business,” Buono said. They are focused on class-A and class-B sites. “Cs are not a focus,” Buono added.
Greg Maloney, president and CEO of Jones Lang LaSalle Retail, agreed with the notion that retailers are feeling better and out looking for deals. “They feel good about where they are,” he said. “They are picking and choosing their spots. We’ve had lots of meeting with retailers and that is going to mean that transactional revenue will come back.”
That’s not to say that the industry’s recovery will be up, up and away. In fact, the turmoil gripping Europe has caused jitters in capital. And the oil spill in the Gulf of Mexico could end up wreaking much more havoc on the economy than many are talking about today. Lastly, the passage of legislation changing how carried interest is taxed would be a huge blow for real estate investors.
“It would change everything for this industry and fundamentally alter the way real estate is structured,” said Harvey Green, president and CEO of Marcus & Millichap Real EstateServices.
Maloney agreed, saying that “we’re not out of the woods yet.” He expects sales gains to recede in the coming months and perhaps even turn negative again. And that’s leaving aside whether the economy suffers major tremors that could dampen consumer confidence. “But if we can get into 2011 stabilized that will be a great victory.”