RECON RECAP

Last month we made our annual trip to Las Vegas for the International Council of Shopping Center’s RECON show. Attendance was notably lighter this year. The event was still busy, but compared to years past the lack of energy, crowds, and lines was obvious. The good news is this gave us the chance to talk with more lenders, investors, developers, and clients.

Here are our takeaways from RECON -

“Greening Up” — In anticipation of higher retail investment yields than seen in recent years, many firms are raising capital for acquisitions.

Culling the Weak Assets — Expect the institutional players to continue to sell off the weaker assets in their portfolio.

More Diligent Due Diligence — Both buyers and lenders are requiring more robust review of rent rolls, tenancy, rollover risk, market rents, and possible replacement tenants.

Changing debt market — Debt is available but not as much — Lenders will make loans on retail but its not getting easier. Expect LTVs to decrease and rates to increase.

Experience vs Shopping — “Experiential Retail” continues to be the buzzword and the hope for replacing traditional brick and mortar tenants who’ve gone dark in box stores. Fitness, restaurants, and food halls will backfill.

Shrinkage — In a response to Amazon and online retailing, retailers are seeking to right size their physical locations. Nordstrom will open 3,000 square foot stores without clothes. Target announced new 30,000 square foot small format store designed for neighborhoods in Ballard, U-District and Bellevue. More retailers will follow suit.

Convenience and Service — Demand remains high for the internet resistant retail centers (hair, nails, coffee, fast food and doc-in-a-box).

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