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United Commercial Realty

Retail players find the silver lining in cloudy economy

Sometimes bigger is not better.

Last week, New York-based industry organization the International Council of Shopping Centers (ICSC) held its annual conference at the Convention Center in Las Vegas. It is an event that draws thousands of developers, retailers and brokers from all over the world, for four days of hand-shaking and deal making.

Although this year, there weren’t as many thousands who were Vegas bound.

The 2009 Global Real Estate Convention, or RECon as it is better known, netted 30,000 attendees, according to Malachy Kavanagh, staff vice president of communications and external relations, for ICSC. That figure is down considerably from the 48,000 attendees for RECon 2008.
But what the conference lacked in size, it made up for in substance, according to many local industry sources who attended this year’s conference.

“All in all, I received great value of my time and money invested into the conference,” says Jerry A. Williams Jr., a vice president in the local office of Grubb & Ellis Co.
Fewer participants meant less pressure to move at break neck speed — shaking hands and doing deals, insiders say.
In fact, this time around, the focus was not necessarily on doing deals for this year — but on setting the groundwork for the years to come, adds Michael N. Jersin, president and principal for United Commercial Realty (UCR) San Antonio.

“I found it to be a better situation,” says Valerie Hunter, a senior associate with Grubb & Ellis. “Since the attendance was down, you could spend more time with retailers.”

All things considered

Not that anyone was surprised at this year’s lower turnout. Indeed, even ICSC went into the event knowing that the attendance numbers were going to be down, Kavanagh says.
One place where the lower turnout was apparent, the leasing mall. This mall spans about one million square feet, and consists of a sea of booths by retailers, developers and others looking to do business in Sin City.

This year, there were some noted empty spaces where booths used to be, attendants say.

“It was surreal seeing curtains in areas where you typically see booths,” notes Grubb & Ellis Senior Vice President Cynthia Ellison. But for Ellison, who remembers the dark days of the 1980s, adds that this year’s turnout in the leasing mall was still “very big compared to the old days.”

She adds: “Spirits were high and all went well, especially compared to the downturn in the ’80s when Texas was red-lined — no one wanted to talk to a Texas broker.
On the contrary, Texas — and San Antonio — were the so-called belles of the ball at this year’s REcon.
“Texas is definitely a priority for a lot of retailers,” Jersin says. “In that same breath, San Antonio is getting a lot of publicity — good things are happening here.”

Participants were “talking very bullish about Texas, and San Antonio,” concurs Rick Carduner, founder of local retail/brokerage firm Carduner Commercial LLC and the Texas state director for ICSC. “In San Antonio, (retailers) are still looking, and still doing deals.”

The tough economic times have caused a shake out in various real estate sectors — as businesses and brokers looking for an easy buck have gone by the wayside.

The 2009 RECon was reflective of that trend.
“Those that were there were serious about doing business, about doing deals,” Kavanagh says. “Those who came out looking for deals — most found them.”

Local retail vet Tom Rohde describes the overall mood of the conference as “very upbeat.” There were fewer people, but those who were there were the “seasoned pros,” adds Rohde, who is the vice president of Rohde Ottmers Siegel Commercial & Investment Realtors.
Show me the money!

Upbeat outlooks aside, there was no denying the pall brought on by the lack of capital that is plaguing the real estate markets these days.

Consider the financial court that has been a tradition of RECon, Carduner says. This year’s court was noticeably empty — with park benches taking the place of the booths that lenders once displayed.

The court looked more like a cityscape at a park — “all you needed was the pigeons,” Carduner adds.

That there is less money priming the pump means that many in the industry — including owners of shopping centers — could find themselves in dire straits when debt comes due.
It’s a situation that others are waiting for.

“There are a lot of investors on the sidelines — waiting to pounce,” Carduner continues.

“I’ve noticed more interest from the investor segment,” adds “They are at least calling and asking questions about properties. For a while, I did not hear from them at all.”
As for those owners who have the wherewithal to hold on to their centers, the future is still pretty bright.

Sums up Craig Garansuay, a vice president and partner in UCR: “The strong centers become stronger.”

Bad times, like good times, never last forever.

While uncertainty is still running high in the retail industry, there are those who think the market may be on its way back up — albeit slowly.

“It’s all about consumer confidence,” Garansuay says.
“Consumers are going to have to start spending again,” says Carduner, who points out that monthly sales of the country’s retail chains — as tracked by ICSC — have been inconsistent at best. “Some months (sales) are up, some months are down. Which means we’re probably near the bottom or on our way back up.”