The retail real estate industry is far from its high-flying days of 2007 and before, but most executives we spoke with at ICSC’s RECon show weren’t about doom and gloom. Things are looking up…kind of.
“We’re seeing more demand for retail space,” said Scott Schroeder, vice president of marketing at Developers Diversified Realty. “It’s good. We’re not completely back, but we’re headed in the right direction.”
William Taubman, chief operating officer of Taubman Centers, echoed those thoughts. He said that he expects retail sales growth to increase moderately throughout the year. And his firm, which mostly owns high-end malls, is seeing more foreign retailers enter the United States and take space in its assets. “Tourism and luxury have both returned,” he remarked.
However, landlords are seeing some pressure, admitted Michael Longmore, an executive vice president at Jones Lang LaSalle. In some cases, they’re getting $9 per square foot in rent instead of $17, but good space is getting absorbed. He is also seeing more shopping centers go back to lenders. At the same time, though, rents aren’t sliding as much as last year. “The rent reductions are pretty much done,” Longmore said.
In the opinion of Sandy Sigal, president and CEO of Newmark Merrill Companies, things are improving, but doesn’t expect a dramatic bounce back any time soon. “Everyone wishes that the market is going back to where it was,” he said. But Sigal was hopeful about some concepts taking up space, including Tesco’s Fresh & Easy, CVS, Children’s Dental Care and innovative cinemas.
D. Scott McLain, a broker at Coldwell Banker Commercial, was optimistic. “The shopper is shopping,” he said. “The diner is dining.”
But it could take a while before the landlord sees the benefits of that reality, said Greg Schuster, senior vice president of corporate services at Cassidy Turley. Due to store closures by Circuit City, Linens ‘n Things and other retailers, rents are down to attract tenants. It’s better to have a retailer pay less rent than have an empty space. “Real estate executives are under a lot of pressure,” Schuster conceded.