ICSC Mid-Atlantic Conference & Deal Making Recap
With seemingly all of the country’s attention focused on Washington DC lately, we snuck out of the District and across the Potomac River to National Harbor last week for ICSC's 2017 Mid-Atlantic Conference and Deal Making. The conference was very well attended, and the mood among attendees and presenters was generally upbeat. Anecdotally, the sentiment seemed to be that for, retail real estate in this region, the sun is still shining—for the moment.
Restaurants Are Leading the Charge . . .
Restaurants, particularly unique, local and slightly funky concepts (such as food halls) are generally regarded as increasingly being responsible for driving traffic to shopping centers. Seemingly every demographic that carries a smart phone—millennials, boomers, tourists, etc.—is seeking the next trendy dining-out experience, presumably to actually eat a meal, but definitely to fill up their Instagram, Snapchat, Twitter, and other social media accounts. The social media cycle is seemingly a positive force for brick-and-mortars: consumers have become crowd-marketers to their friends and followers.
Landlords hoping to capitalize on the burgeoning restaurant scene are crafting a tenant mix that makes it easy and enjoyable to mix dining and shopping. Food courts, once features designed to maximize convenience, are being turned around into restaurants that maximize experience and emphasize quality foods. Among the restaurants and regional fast casual chains generating buzz were Taylor Gourmet, La Colombe, Honeygrow, and First Watch Café.
. . . Discount and Value Retailers Are Also Doing Well
While some high-end anchors were creating major ripples or capturing the president’s attention for reasons most retailers strenuously avoid, discount and value retailers have been building on a hot streak. The consensus we’ve heard on discount retailers is that they have been able to undercut department store competitors on price without sacrificing much by way of style or quality. As a result, consumers seemingly cannot get enough.
But Other Deals Are Getting Harder and Taking Longer
The ICSC conference highlighted restaurants and discounters as the clear leaders of the retail sector. However, we heard that for other categories of retailers, deals are not coming together as quickly. Both landlord and tenants may be experiencing some trepidation—whether about possible changes to tax laws, a recession that many predict should be coming soon, general uncertainty as a new administration finds its way, or some combination of these reasons and others—deal velocity seems slightly down relative to recent hot years.
Recent news that Whole Foods is closing several stores, pulling back from a number of high profile deals and otherwise scaling back new store development, was at the forefront of many conversations. It is clear that other large format retailers are also possibly scaling back expansion plans, or at the very least, taking a pause to re-examine the relationship between their online and brick and mortar presence.
Rising Interest Rates: Will Landlord’s Be Able to Keep Up?
One of foremost macro concerns for nearly every landlord is the near term interest rate climate. The past several quarters have been a steady stream of speculation that interest rates are due to hike again. Landlords may face a situation in the near future where deal velocities stay low and depress rents while debt costs rise.