Real Estate Newsletter Fall 2018
Recap from ICSC Western Conference
On October 8-10, I attended the ICSC Western Conference event. ICSC is the world’s largest organization that governs the retail shopping industry. Each year, as a committed retail real estate professional, I attend the three local ICSC Events: Anaheim in February, Las Vegas in May, and Los Angeles in October.
My managing broker, Brad Umansky, wrote an excellent blog post about his thoughts about the conference, which I will include as a part of this newsletter. Rather than repeat his content, I will summarize my thoughts on a panel discussion that focused on “The Future of Retail.”
The two biggest themes from this discussion were convenience and experiential shopping.
The panelists envisioned a future shopping experience where lines would no longer exist. Time is at a premium, and our future shopping experience would have no lines in the parking lot, and no lines to check out to pay for merchandise. Amazon is experimenting with this in their Amazon Go stores. You just pick up an item and walk out the store with it. Technology takes care of scanning the item and charging your credit card.
The term “omnichannel” came up frequently, and refers to a shopping experience that combines the online and in-person shopping. For example:
- Most bricks-and-mortar stores have now caught on to having online shopping web sites.
- Many stores are now allowing you to shop online but pick up (or return) your goods at the store.
- If you are shopping in a store and the item is out of stock, the retailer should be able to ship it to your home in the next day or two.
In order to offer an omnichannel experience, retailers need to tie their in-store inventory together in real-time with their warehouse and web site inventory.
Experiential shopping – bark parks at Walmart?
Walmart believes that the customer of the future will choose where to shop based on experience, not on price. As an experiment, Walmart has been putting dog parks inside their stores so people can shop with their pets. Walmart has seen that their veterinary and pharmacy sales have increased dramatically in these stores.
Retail Leasing and Sale Trends in the Inland Empire
Below are graphs of some key indicators related to leasing and sale trends on retail properties in the “Core Inland Empire” over the past 12 years. Cities in this survey are: Chino, Chino Hills, Claremont, Colton, Corona, Eastvale, Fontana, La Verne, Montclair, Norco, Ontario, Pomona, Rancho Cucamonga, Rialto, Riverside, and Upland.
While the leasing market, in terms of vacancy and asking rents, has not approached 2007 levels, the sale market data (sales volume and cap rates) have exceeded the peak years. As an investment sales broker, I’m particularly looking at cap rates, which have trended up in 2018 (see red circle below). Brokers and others in the industry are proceeding with caution to see how 2019 will shape up.
I specialize in representing sellers of retail investment properties, focusing primarily on the Western Inland Empire, encompassing the cities of Corona, Norco, Eastvale, Ontario, Chino, Chino Hills, Montclair, and Pomona. Prior to commercial real estate brokerage, I worked as a residential real estate investor, flipping houses in Orange County.
I grew up in New Jersey, and have worked for corporations such as Nestle PowerBar, Prudential, and Computer Sciences Corporation. I have a degree in Biomedical Engineering from Johns Hopkins University and an MBA from Duke University.
From Brad’s Blog: Recap of ICSC Western Conference and the Top Takeaways – written by Brad Umansky
The Progressive Real Estate Partners team just returned from the 2018 ICSC Western Conference in downtown Los Angeles. A total of 3,906 people registered but when you add in those in the “shadow economy” (aka people that hung out in the coffee bar lobby but didn’t register) there were easily over 4,000 people in attendance. The PREP team had 14 retail brokers intensely working the show meeting with clients, networking and visiting exhibitors. Here are some of my and our team’s top takeaways:
Strong “Retailer” Presence: We counted over 200 “retailers” (represented by over 800 registrants – 20% of the total registration!) on the registration list and our team met with most of them. Retailers is in quotes because just about all of these “users” are not truly “retailers”, but instead “users” of retail space ie restaurants, fitness, services, entertainment, health care and others. Many of the “users” chose not to exhibit and I believe there are two main reasons. First, many are represented by brokers and those brokers provide a place for them to meet. Second, and more importantly, most users are much more targeted in their site selection. They know where they want to be located and focus on finding that spot on the map instead of being bombarded by submittals for locations that aren’t a good fit for their concept. These users were clearly looking to make deals and procure sites, but on a more selective basis.
Embracing Hispanic Communities: We had conversations with developers, cities, and tenants in which they viewed that the key to a particular project was a focus on attracting the Hispanic demographic. Over the past 20 years, I have observed many existing projects that have become oriented to the Hispanic community. But there seemed to be an even greater focus on developing new ground-up projects targeting the Hispanic customer.
Technology – The Good, The Bad & The Ugly: I personally had a number of conversations that revolved around technology, including the use of tech to improve site selection, track customers, run our various businesses, and improve the retail experience. There is little doubt that we are all fighting to keep up to speed with the technology that will enhance our respective businesses, while also trying to keep some semblance of sanity in our lives. Although most of what I heard was positive, I was definitely a bit creeped out by the story one person told me about going into an Amazon book store, picking up a book, NOT buying it, and then getting offers for this book on his cell phone the next day. Big Brother is watching.
Cautious Optimism – Ahhh, yes the good old economy. Across the board, attendees were appreciative of the strong economy. BUT everyone was also waiting for an “economic spirit” to descend from the rafters to tell them what will happen over the next few years. Increases in interest rates, lease rates, triple net charges, hourly wages, gas prices, and construction costs certainly raise vulnerability, but they don’t have to cause a downturn. As a matter of fact it is possible that all of these factors will temper economic enthusiasm and allow moderate growth to continue.
Congratulations to ICSC – We would be remiss if we didn’t mention what a great job ICSC did on the show including a smooth registration process, plenty of seating throughout the venue for deal making, adding food trucks as an alternative to box lunches, great signage for the retailer runway and an excellent cocktail reception Tuesday afternoon. Our only recommendation is that the deal making event start at noon on Monday, go all day Tuesday and then skip Wednesday. Congrats to the ICSC staff and equally important all the hard working volunteers that put together a great event.
Overall, the ICSC Western Conference was a big success for our team and it was great to connect with so many of our CRE friends “in person” and especially in a day and age when so much of the interaction is via technology.
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