SAN DIEGO—While retail developers are busierthan they were a few years ago, they're still doing moreredevelopment and repositioningof existing shopping centers than ground-upconstruction, said panelists at ICSCWestern Division Conference's general session yesterday.The panel was titled, “Development is Revving Up,” but speakerssaid there's still too much available retail space on the market towarrant new ground-up development.

|

Moderator Kevin MacKenzie, senior managingdirector of HFF LP, said that on the spectrum ofretail centers, outlet centers are the furthest along in thedevelopment cycle, while power centers are seeing the least amountof development nationally. Rick Kuhle, chairmanand CEO of Vestar, noted that an increase inpension fund money going to real estate—a new allotment from 6% to10% among pension funds around the world—which will drive cap ratesdown. But, he added, pension funds “will be the most aggressivebuyers out there.”

|

When asked which markets the panelists were focusing on in theWest Coast and why, Kuhle said his firm targets markets where theycan be the dominant center in that area in their subspecialty. Headded, “Our geographic diversity is that of our partners—those arethe areas in which they want to participate.” BradGeier, managing partner of Merlone GeierPatners, said his firm targets “markets that are supplyconstrained with barriers of entry and infill locations withinthose markets.”

|

Comparing this development cycle to the previous one, thepanelists were cautious. Jeffrey Berkes,president, West Coast, of Federal Realty InvestmentTrust, said, “There's too much retail space in the USright now; it's early on in the cycle, and KemperFreeman, president/partner of Bellevue SquareManagers Inc., added, “We have a conservative standard forgrowth.”

|

Kuhle said, “Redevelopment has taken off over the last twoyears, and it's in full swing,” and other panelists agreed thatredevelopment is strong, but ground-up development has not yet hitits stride because of the amount of space still available.

|

The panelists also agreed that mixed-use space is getting stronger for retailuses and that retail helps pull in apartment, hotel, theater,restaurant and even office users and drives up rents in most ofthose product types. “The synergy of uses makes each of thecomponents run better,” said Geier.

|

Berkes said executing the ground floor of a mixed-usedevelopment correctly is the driver of its success. “Above-retailspace gets a 20% to 25% premium over what you would get down thestreet.” He added since experts in most other property types don'tknow how to execute retail components, retail experts can have aleg up and create value in these developments.

|

In addition, the panelists agreed that today's retailers arefinding a balance between online and bricks-and-mortar sales andusing them in tandem rather than one fighting the other.“Apple is the best retailer in the world,” saidFreeman, adding that on a recent Saturday afternoon at 2:00, henoticed a 1:1 employee-to-customer ratio in his local Apple store,which was hopping with customers.

|

Freeman noted that bricks-and-mortar retailers need to “providethe customer with a great, emotionally fulfilling experience, andBerkes added, “People are still social creatures. You must createsome place people want to go, with ample parking, that's clean,exciting and different. Pick retailers that embrace that. Be adifferentiated shopping experience; you can't be a commodityanymore.”

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.