At the recent International Council of Shopping Centers (ICSC) conference in Las Vegas, approximately 25,000 retail experts converged to share their perspectives on the retail industry’s current state and future direction. Brimming with ideas, insights, and innovations, this dynamic event provided a comprehensive look at how the sector is evolving. From examining retail real estate trends to exploring new consumer behaviors, the conference offered invaluable takeaways highlighting the forces driving transformation and growth in retail today.
Ben Haverty of the Colliers Furniture Industry Service Team shared his retail expertise and enthusiasm, and provided the top 10 insights from the leading minds in the retail industry:
- Minimal space availability was top of mind, as professionals stated that retail’s main issue is not excess vacant space but a shortage of desirable space. Demand is outstripping supply due to much of the new construction already being pre-leased.
- The tight retail space conditions are expected to continue due to declining construction starts and tenants holding onto space at higher rates. This creates a favorable situation for landlords but a more competitive leasing environment for retail tenants.
- The lack of new supply is driving up the value of retail real estate.
- Higher wages will help buoy America’s consumer spending throughout 2024 and propel retail sales growth to slightly outpace last year.
- The U.S. retail sector has seen increased leasing demand in food services, discount, fitness, grocery, and healthcare segments. These segments account for nearly 60% of new leasing activity, with food services leading at 19%.
- However, grocery stores, fitness centers, and furniture stores saw declines in leasing activity.
- Net lease retail is performing well despite interest rate pressures, with investors focusing on best-in-class credit tenants and well-located assets. Transactional activity will increase in 2024 as the market stabilizes on rates and valuations.
- The end of easy financing and a decline in venture funding have forced retail brands to abandon aggressive expansion strategies, focus on profitability, and close underperforming stores. Yet retail demand remains strong, with healthy competition for available spaces, leading brands to carefully balance digital and physical growth.
- Credit spreads have narrowed, but the financing market remains volatile, mainly for malls. Interest rates significantly impact consumer behavior, with luxury retail thriving but middle to lower-income spending decreasing. Inflation has mixed effects, benefiting off-price retailers but straining tenants’ financial health.
- Despite ample investor demand and abundant capital, volatility in the capital markets and the cost of capital create a bid-ask spread impasse. High-performing assets and rent growth mean owners don’t need to sell unless they achieve the desired pricing, while demand for quality retail assets remains high. Successful financing deals today require best-in-class sponsorship, as lenders with limited capital prefer operators with solid tenant relationships and extensive experience. Deals must also be well thought out, underwritten, and leveraged.
The insights gathered from this year’s ICSC conference offered a compelling snapshot of the retail industry’s trajectory. As the landscape evolves, these top 10 retail real estate takeaways underscore the importance of adaptability, innovation, and strategic planning. By staying informed about the latest retail real estate trends and challenges, retail professionals can better navigate the complexities of the market and seize new growth opportunities. Whether you’re a retailer, landlord, or investor, these expert perspectives provide a valuable roadmap for success in the ever-changing world of retail.
