The second day of the ICSC New York National Conference and Dealmaking offered many of the same themes that played out at the beginning of the show. The mood of the attendees seemed noticeably more upbeat than in the past two years and everybody walked around the show floor with a sense of purpose, ready to close and drum up new business. Some industry insiders even brought up the word “development”—nothing scheduled for next year, certainly, but there was some expectation that new projects would start popping up within 24 months.
“This show has been a lot better [than previous ones]. We didn’t anticipate it being as busy as it has been,” said Greg Maloney, CEO of Jones Lang LaSalle Retail, an Atlanta-based third party property manager.
At the same time, it seemed like most of the attendees had either completed all of their business on Monday or were wrapping up appointments by Tuesday morning. The hallways were a lot less crowded and many people were planning to take mid-afternoon flights back home.
Overall, people had a positive outlook on the industry’s growth prospects in 2011, but Maloney cautioned that some of those expectations might be a bit too optimistic. He predicts that the industry will likely have a strong holiday season, but momentum on both retailer sales and retailsales might slow down in the first half of 2011 (investment sales should pick up considerably in the second half of next year, he says). In other words, 2011 will look a lot like 2010—a sentiment expressed by a few seasoned industry professionals.
The main thing worrying retail real estate professionals right now is consumer confidence. Though the holiday sales season got off to a strong start, it looks like the middle-market consumer feels only marginally better about his financial security in 2010 compared to 2009. Many conference participants noted that the retailers with the best sales performance right now are discounters and luxury stores. When it comes to mid-market shoppers, the sky is no longer falling, but it’s not clear whether those customers will continue to buy discretionary goods after the holidays are over.
That’s partly what’s driving a lot of retailers to invest in what has become widely known as “portfolio optimization.”
“In today’s world, mitigating risk from a retailer’s perspective is the most important thing,” says Lew Kornberg, managing director of corporate retail services with Jones Lang LaSalle.
That means a lot more attention to lease administration, in addition to much more stringent requirements for new store openings. On the plus side, retailers are beginning to invest more money into store remodels than they have in the past several years, seeing remodels as a cost-effective strategy to promote their brand.
“A lot of what we are seeing is an attempt to enhance customer experience,” notes Kornberg.
Jones Lang LaSalle’s retail outsourcing services, for instance, is working with Family Dollar to remodel 4,000 of their stores.
Another chain retailer that is looking at multiple store remodels over the next few years is Lord & Taylor. The department store chain used the ICSC New York National Conference to give a presentation on the recent remodel of its New York flagship store. That remodel focused on making the shopping experience more comfortable and interactive for its customers. Lord & Taylor plans to use some of the ideas incorporated into its New York remodel to freshen up other locations around the country.