National Retail Outlook Buoyed by Strong Black Friday, Optimistic Holiday Forecasts and New Tenants
Retailers, real estate brokers and landlords are gathering in New York City this week. Many of them are eager to do deals for brick-and-mortar locations, despite a year that’s seen the announcement of more than 9,000 store closings so far.
While by most measures it’s been a difficult time for retail, brokers in that sector of the commercial real estate industry said the mood is nonetheless optimistic going into the International Council of Shopping Center’s annual New York Deal Making conference.
The three-day event, which kicks off Tuesday at the Javits Center in Manhattan, had more than 10,000 attendees last year, and this year’s registration is ahead of that pace, according to ICSC. The New York event is ICSC’s second-biggest event every year, behind only the trade group’s ReCon conference in Las Vegas in May.In New York, executives from around the nation will be gathered under one roof, able to learn what’s new in the retail world and to get insight into what’s trending. The nightly parties after the conference floor closes adds to the meetings, the booth displays and networking, all with one goal: retailers and brokers negotiating store leases or arranging property sales.
Dean Tselepis, Newmark Knight Frank managing director in Rutherford, New Jersey, said this year’s conference will be the 17th he’s attended.
“Wednesday and Thursday is the deal making, and that’s when you see the most people there,” Tselepis said. “From the retailers to the brokers to the landlords and then everybody in between, mortgage people, attorneys, engineers.”
The ICSC event is taking place during a critical time for the retail industry, as holiday sales this season may make or break some struggling companies, many of them hurt by online competitors. This could lead to even more brick-and-mortar stores closing. But new retail tenant classes, such as wellness and digital-native brands, have emerged to fill vacancies, which is why some brokers are upbeat. The ICSC conference floor has sections dedicated to those up-and-coming tenant categories.
Black Friday Boost
The retail real estate industry argues there is more reason for cheer given the outlook for holiday spending is upbeat. The National Retail Federation is forecasting holiday retail sales will rise between 3.8% and 4.2% over last year, totaling between $727.9 billion and $730.7 billion. And this past Thanksgiving weekend, an estimated 160 million people visited stores, according to ICSC.
“We just came off of a very strong Thanksgiving weekend,” Stephanie Cegielski, a spokeswoman for ICSC, said in an email. “The industry is thriving, and we expect a positive, productive event.”
The retail environment and consumer confidence reflect each other and play off each other, according to Naveen Jaggi, president of JLL’s retail advisory services.
“The consumers’ mood right now is pretty strong,” he said.
As of last Friday, U.S. retailers announced 9,271 store closings in 2019, which exceeds the total from last year, according to Coresight Research, a data firm that tracks the retail industry. But this year’s store shutterings don’t really represent as glum a picture as they might seem at first glance, according to Naggi.
“All the retail closings we have seen have been anticipated for years,” he said. “Nothing has surprised us on the closings … which means the smart retailers got ahead of the game, they’re primed for having a successful run right now.”
David Townes, senior director in retail services at Cushman & Wakefield in East Rutherford, New Jersey, has been attending the New York ICSC conference for about a decade.
“There’s an excitement and there’s an optimism heading into this show, especially since it’s close to home here in New York City. It’s in our stomping ground, and there’s exciting things happening in retail today, a lot of things changing,” Townes said. “We’re seeing an influx of new retail operators and concepts that are filling the void of the vacancies.”
He works with Alana Friedman, a Cushman & Wakefield senior associate. As a broker, she likes talking to retailers at ICSC in expansion mode, such as online sellers opening brick-and-mortar outlets.
“It gives a different insight from the tenants’ perspective,” Friedman said.
New Retail Tenants
Malls and shopping centers are diversifying. Tenants that offer activities that can’t be duplicated online can create foot traffic at many different times of the day. Those tenant categories include healthcare, fitness, entertainment, and food and beverage. These types of tenants are reflected in the ICSC’s panel sessions and exhibitors.
The New York conference floor for the first time will have a “Food & Fun” center. A “Health & Wellness” center, which debuted at this year’s ReCon, will also be in New York. And a “Retail in Focus” destination, which bowed at last year’s New York Deal Making event, is expanding this year. It features emerging brands and specialty retailers, including digital native companies that are opening up stores. These are massive changes, according to Tselepis.
“Even as recently as 10 years ago, retail owners didn’t want gyms in their property,” Tselepis said. “They were shy of restaurants and movie theaters because they were afraid they were going to eat up the parking. Medical was unheard of, because it would eat up parking because people would just go into the doctor’s [office] and just come out and leave and not shop. That has just changed tremendously over the last 10 years when now they’re an integral part of shopping centers.”
There’s been a pivot, according to Jaggi, in that leasing in retail locations has expanded from beyond traditional medical users to wellness tenants, from yoga places to spin studios, coming to shopping venues.
While at the conference, ICSC attendees from out of town will also have the opportunity to see firsthand some of the new retail offerings in the Big Apple and neighboring northern New Jersey.
They won’t have to look far. The Javits Center is just a few blocks away from Hudson Yards, the mega development whose retail component debuted in March. The Shops at Hudson Yards, at 1 million square feet, is anchored by New York’s first Neiman Marcus.And an ICSC off-site tour of American Dream, the 3 million-square-foot entertainment and shopping complex in East Rutherford, New Jersey, is totally booked. That project’s developer is Triple Five, which created the West Edmonton Mall in Alberta and Mall of America in Minnesota.
“You can create value for your visit by spending time in retail concepts that are unique to New York,” Jaggi said. “So there’s actually a double value beyond just deal making. … You’re learning and seeing what works in New York, and what could also work in Middle America?”
Evolving Manhattan Landscape
The New York retail scene has a number of changes since the last ICSC Deal Making show. In addition to Hudson Yards and its retail space opening, Manhattan also got its first flagship Nordstrom store in October.
Newcomers Neiman Marcus and Nordstrom are “putting a pressure on existing department stores and other retailers in New York,” said Rachel Johnson, associate director of market analytics for CoStar in New York. There’s continued weakness with “middle of the road” retailers like Macy’s. Additionally, Hudson Yards is attracting luxury stores to Manhattan’s West Side, according to Johnson.
“Everyone’s very sad about Barneys’ bankruptcy, and we haven’t heard yet what’s going to happen to that store on Madison Avenue,” Johnson said. “But that vacancy is going to add more pain to Madison Avenue and the other retailers on that corridor.”
Jaggi also cited the changing scene that ICSC attendees will see. Retailers in Manhattan are changing the sizes of their stores to adjust to shifting online retail buying patterns. Discounters such as Five Below now have a presence on Fifth Avenue, once a sole bastion of upscale retailers.
“It’s a sign that the city is recognizing what drives retail, which is value more than luxury today,” Jaggi said. “Most often when you go to ICSC the city reflects the mood of retailers, because many retailers are based in New York or have a very large commitment to that market. And New York right now is in better shape than it was a couple of years ago.”
As for the conference, perhaps Friedman summed up it up best.
“It’s good face time with the landlords we are doing deals with or should be doing deals with,” she said.