Retail real estate professionals are starting this year’s RECon conference with a sense of optimism, as retailers have finally began looking at expansion and investment sales markets have loosened up.
The 2012 RECon promises to be the most upbeat conference in several years, with real estate services firms across the spectrum reporting an increase in new hires, an appreciable uptick in leasing and investment sales deals and fully booked appointment calendars for the show. In fact, most firms are bringing more people to Las Vegas this year than in 2011, with individual firm representation up from 20 to 30 percent.
“I think probably more so than in any year pre-recession there is a combination of fairly robust deal activity in the first quarter of this year, combined with a tremendous amount of enthusiasm,” says Steve Yenser, executive vice president with Jones Lang LaSalle Retail. “Even though the economy still seems to be choppy, from our perspective, we’ve seen a very strong leasing transaction deal flow in the first few months of this year and retailers seem to be a lot more bullish in terms of store expansion. I think all of that creates a pretty decent momentum going into Vegas.”
Retailers’ growing appetite for expansion is among the most encouraging signs for real estate brokers and developers going to RECon. While activity is still nowhere near the peak levels of 2006 and 2007, when compared to the past few years, the leasing environment today is like “night and day,” according to Alvin Williams, of Excess Space Retail Services Inc., a consulting and advisory firm. “There is no doubt that things are better than they were. I think it will be a very active conference.”
And with Starwood Capital Group’s recent acquisition of a stake in Westfield Group’s U.S. assets, investment sales activity no longer appears limited to class-A centers and centers in gateway cities, according to Matt Winn, U.S. retail services leader with Cushman & Wakefield. That should give a boost of confidence to owners of class-B properties and those in secondary markets.
“There is a tangible transaction for them to point to that they didn’t have a year ago,” Winn notes.
Increasing globalization of retail will also be evident at this year’s RECon, with many international firms bringing retail real estate professionals from around the world. Jones Lang LaSalle, for instance, will have delegations from its offices in Asia and EMEA. Cushman & Wakefield, which recently launched an international retailer group, is bringing representatives from Great Britain, Korea, China and Japan.
“All of those people will be in attendance this year because of the activity we saw with [companies] going across borders,” says Winn.
Caution remains
All that said, industry insiders still remember what happened in 2011, when the first half of the year started off on an great note, then the financial crisis in Europe brought CMBS deals and investment sales transactions to a halt in the second half, notes Mark Keschl, national director of the retail services group with Colliers International.
“There will be optimism, but I wouldn’t call it unbridled optimism,” he says. “Everyone’s focused on business and on specific deals.”
In fact, to gauge the mood for the year ahead, everyone will be watching the one aspect of the business that hasn’t shown significant improvement yet—new development. Keschl, along with other retail real estate professionals, expects there will be more new projects announced at the 2012 RECon than in the past, but the increase will be modest.
Most of the development activity will be focused on outlet centers and on centers that were planned pre-recession and were put on hold.
“There are projects that are starting to get pre-leased and obviously going into the ground,” says Andrew Goldberg, executive vice president of brokerage services with CBRE. “[We] are seeing more expansions of existing projects, and more new projects. As more of that goes on, we’ll start to have more discussions” about new business.