Editor’s Note: ICSC Las Vegas, a two-to three-day gathering and marketplace held annually in May, is the premier event for the International Council of Shopping Centers (ICSC). The event attracts 30,000 dealmakers and industry experts including retailers, real estate service providers, owners/developers, and business services within the industry.
ICSC Las Vegas, held May 19-21 at the Las Vegas Convention Center, was abuzz with activity last week with the top brokerages, lenders, developers, tenants, retailers, and vendors all in attendance. This vibrant and energetic conference, themed “Where Businesses Come Together,” is an anticipated event every year for the commercial real estate (CRE) industry, and this year was no different.
The sentiment at the conference was varied. Most brokers discussed a significant uptick in recent activity and expressed hope that this will translate into closings. While many were optimistic, lenders in attendance predicted a quiet remainder of the year, with everyone closely watching the upcoming election’s impact on interest rates and the CRE market.
Retail Sector: Healthiest in Years
The sentiment at the conference was notably upbeat and hopeful, with many attendees expressing their optimism without mentioning the word ‘caution.’ Many believe that the retail sector is the healthiest it has been in over 10 years. Retail foot traffic is anticipated to fully recover later this year, with retail sales projected to surpass pre-pandemic levels. In Q1 2024, retail property listings brought to market on the LightBox RCM platform were second only to the multifamily sector in terms of total volume (accounting for 16%). Additionally, there is a rise in retail assets below $50 million, with nearly a quarter of property listings on the LightBox RCM platform falling within this subset.
Lively discussions centered around the potential resurgence of brick-and-mortar stores and a shift away from e-commerce for many consumers. Most anticipate a healthier balance between online and in-person consumer experiences, likely fueling the expansion of store footprints and continuing to excite retail brokers. This trend, coupled with the strong retail market fundamentals, are spurring a large resurgence in investor demand for retail as an asset type.
Moreover, financing remains available for the right investors and deals. While banks are withholding most lending activities, deals are primarily being funded by life insurance companies.
Not Out of the Woods Yet
Despite the optimism, there are some challenges in the retail space, such as steadily increasing rents and inflation’s significant impact on retailer costs, which are being passed onto the consumer. The uptick in rental income for retail owners has improved sellers’ positions and is undoubtedly pushing some of the hesitation to make a change, given the high-interest-rate environment for repositioning capital.
Two years after reaching its peak, the Consumer Price Index (CPI) shows signs of a slowdown in consumer spending, with some evidence already indicating this trend, although some retail brands are reporting strong earnings like Abercrombie & Fitch and Dick’s Sporting Goods.
Looking Ahead
While key fundamentals are strong for investors to capitalize on, the uncertainty surrounding the timing of potential interest rate cuts by the Federal Reserve is keeping growth muted. While some experts speculate that the Fed may cut interest rates towards the end of the year to align with the presidential election, others predict no cuts will occur this year. This outlook contrasts sharply with the beginning of the year when expectations were for five or six rate cuts.
Overall, the sentiment at ICSC Las Vegas leaned positive, with most expressing optimism for the retail outlook in the second half of the year.
About the Author:
With over two decades of industry experience and sales strategy, Greg Kaiser serves as the Director of Strategic Accounts for the Capital Markets segment at LightBox. His successes with leading CRE firms like Marcus & Millichap and KW Commercial gained him extensive knowledge and the ability to solve the problems facing our most important accounts and the top-producing teams across the country. He consistently drives growth by offering actionable and working solutions to help our customers gain a competitive advantage.
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