> FINANCE AND CAPITAL MANAGEMENT
The New Retail Renaissance
MALLS AND NEIGHBORHOOD SHOPPING CENTERS ARE GOING TO LOOK AND FEEL A LOT DIFFERENT IN THE FUTURE AS THEY MAKE THE SHIFT TO BECOME CONSUMER ENGAGEMENT SPACES. > By Mike Troy
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The spike in store closings and retail entertainment coming together to create bankruptcies that gave rise to the phrase places for people to gather. “retail apocalypse” never sat well with “That’s the story that is really hapTom McGhee, President and CEO of the pening,” McGhee said. International Council of Shopping Centers The shift was evident at ICSC’s largest (ICSC). For an organization focused on the event of the year known as RECon. The retail real estate industry that even has the events attracts more than 35,000 attendwords “shopping center” in its name, such ees — more than the National Retail talk was absurd given the vitality evident Federation’s Big Show — and occupies at the organization’s event and among its nearly all of the space in the Las Vegas membership base. Convention Center. On hand are those Tom McGhee, President and CEO, International Council of Shopping Centers. connected to the massive ecosystem of To shift perceptions, McGhee met with editorial boards, appeared on every major the retail real estate world including television network and the organization went so far last mall owners, property developers, brokers, investors, retailers year to fund a set-the-record-straight style advertising and professional services firms. For three days every May, the campaign called, “Shopping for the Truth.” Las Vegas Convention Center is a hive of activity and the show, “We spent a lot of time talking to the press and sharbilled as a deal-making event, has gained interest in recent years ing with them the real facts,” McGhee said. “There was a due to heightened interest in retail’s transformation. narrative out there, that is becoming less pervasive, that “Retail is the most dynamic and debated segment in comonline retail was killing physical retail and there was a mercial real estate,” said Alan Pontius, Senior Vice President retail apocalypse and that’s just ridiculous.” and National Director overseeing investment advisory firm One of the biggest misperceptions is an often cited Marcus and Millichap’s 16 specialty divisions, including retail. government statistic that non-store sales currently acMuch of the debate centers around gloom and doom, but count for roughly 13% of total retail sales. However, Marcus and Millichap President and CEO Hassem Nadji when that figure is broken down, 3% of the figure is mail believes retail is in the midst of an adaptation cycle, and that order, 2% is shipping and handling and 4% is online equals opportunity. For starters, he sees continued expansion sales from physical retail, according to McGhee. of the current economic cycle thanks to a host of favorable “The online-only sales in this country are only 5%,” economic factors such as wage growth, low unemployment and McGhee said. tax reform. Whatever the figure is today or may become in the “There are a lot of reasons to believe the expansion can last,” future, McGhee contends the consumer driven changes Nadji said. And even though interest rates are headed high, affecting the industry are part of a retail renaissance that “The good news in this industry is we haven’t overleveraged.” is leading to new types of shopping center development That doesn’t mean there won’t be more store and mall cloand redevelopment and new types of uses. Retailers born sures amid the adaptation cycle or retail renaissance. Garrick online are recognizing in increasing numbers the value Brown, head of retail research with Cushman & Wakefield, of having a physical presence and then there are new a global commercial real estate services firm, is among those uses such as food and beverage, health and wellness and who believes the notion of a retail apocalypse is overblown,
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Retail Leader.com SUMMER 2018