After stepping back from expansion for an extended stretch, strong retailers are returning to the negotiating table and looking for deals.
Many attendees at the ICSC RECon 2010 taking place in Las Vegas are saying that they have full dance cards this year after a fairly lackluster 2009 show. That’s helped elevate the mood and given confidence to industry pros that the retail real estate sector is on the mend even if it is still facing some economic headwinds.
“Deals are coming back,” said John Crossman, president of Orlando-based Crossman & Co. The Orlando-based firm has 265 appointments at the conference and about 240 of those are with retailers or tenant brokers. Crossman says it’s the most appointments his firm has ever had. “A fair amount of retailers are here doing deals and it’s across the board.”
But that’s not to say that the industry is returning to the boom years. Retailers that are expanding know they are a valuable commodity at a time when vacancy rates at retail centers remain at the highest levels in more than a decade. As a result, retailers are negotiating for shorter lease terms with multiple extension options. In addition, some are asking for kick-out and exclusivity clauses and are able to get them when they know they have a lot of leverage. But retailers are also eager to reach deals and get back to opening new stores again after a prolonged lull. As a result, they are willing to work with landlords and often arriving at fair deals, according to Tara Scanlon, a partner with Washington D.C.-based law firm Holland & Knight.
“Tenant and landlord relations have gotten better,” Scanlon said. “Landlords have to make the deals work and been very collaborative.”
Leasing discussions are taking place at a revamped RECon show. The conference has been shortened by one day compared with past years. As a result, many events that used to take place Sunday afternoon or Monday morning started Sunday morning instead. The Leasing Mall and Trade Expo opened at 2 pm. Overall, attendees reported that traffic was somewhat light. Most firms scheduled the bulk of their meetings for Monday and Tuesday.
ICSC has not yet released an estimate for how many attendees it expects to be at the show. But unofficially the association thinks total registrations could exceed 35,000.
Westchester, Ill.-based Tri-Land Properties is another firm that has a lot of appointments with retailers and brokers at this year’s conference. President Richard Dube said that weeks ago he thought he might only bring two of his leasing pros to the conference because he wasn’t sure how many meetings his firm would have. Instead he ended up bringing all four and they each have between 18 and 20 appointments during the three day conference.
In fact, the overall mood has improved enough that Tri-Land is moving ahead with a redevelopment project in Smyrna, Ga., that Dube recently thought might be stalled. Instead, the firm was able to line up development financing with a bank that it’s had a relationship with for 25 years to fund the project. The center, which will be anchored by a 96,000-square-foot Kroger, is indicative of the kinds of development that can get done in the current economic environment. Tri-Land, in fact, has deals in place with six supermarkets in all on projects it is currently working on.
“Net occupancy incomes are still falling, but the declines have slowed down considerably,” Dube said. “I believe the trough has past. Concession requests are down.”
Dube said some requests are still coming in, but he gets the sense it’s from retailers that are realizing that they missed a chance to get concessions 12 to 18 months ago when their competitors received them. But now, landlords are in a better position to hold the line on lease terms.