Malls, Capital, Retail Growth – it’s All Good

LAS VEGAS-The innovations and perseverance of retailers, and the landlords that love (rent to) them, were part of the reason the economy has turned around from the economic struggle, said outgoing ICSC Chairman William Taubman during his last public address Monday during RECon 2011 here. The COO of Bloomfield Hills, MI-based Taubman Centers told a crowd of thousands that the retail industry “weathered the storm, and provided the momentum that opened the clouds of the Great Recession” during Monday’s luncheon.

“I believe that the regional shopping center, with the jobs, services, consumer choices and public revenue that it provides, is a powerful force for societal good around the world,” Taubman said. “We need to continue to make our centers the social center of the communities.”

He also weighed in on the concern that retailers have been facing for the past 15 years, that the technology, mainly Web and smartphone shopping, will replace the need for physical storefronts. “It’s not online vs. bricks-and-mortar,” Taubman said. “It’s about how the two will work together. Real stores will remain the dominant shopping venue, especially for the fashion industry, there’s no substitute for the social experience of shopping.”

He didn’t discuss, however, how his firm has embraced the outlet model, turning centers such as its 1.4-million-square-foot Great Lakes Crossing in Auburn Hills  into an outlet-only mall. Taubman has served a year as ICSC chairmain, traveling the globe for the organization and creating a 9,000-member survey of the industry. He was succeeded Monday by David Henry, CEO of New Hyde Park, NY-based Kimco Realty Corp.

From the reports from most retailers attending the convention, this year and 2012 will be a definite comeback from the economic drop-off of 2008-09. Just about every retailer is looking to grow in the next two years, in some cases doubling or tripling the amount of new store openings. Daniel Porter, VP of real estate and new store development for Dallas-based 7-Eleven Inc. tells GlobeSt.com that his company plans a super-growth push of about 800 new stores in the next two years. Associates with Jacksonville, FL-based Firehouse Subs, with 433 locations across most of the United States, say they are adding up to 100 new locations by the end of the year.

About 20 retailers detailed their new store strategies and requirements to a large room Monday for the RECon Retailer Runway, where each company was given about four minutes to make their pitch to landlords and owners. As opposed to the 2009-2010 tales about closing stores, these firms made it clear that stagnation and holding-pattern thinking is no longer an option. James Dewey with Greensboro, NC-based Fresh Market, with 101 stores total, said he sees the potential for 500 stores. The small Yogurtland franchise, with 138 locations, will boost up to 202 stores by December, said Director of Real Estate Development Cesar Shih. Energy Kitchen, a new fast-food concept based on “nothing more than 500 calories” servings, says it has a goal of 1,000 locations in 10 years, said President and CEO Anthony Leone.

Not one retailer said it plans less store growth in 2012 than its 2011 opening projections. While some plan the same amount of growth, 30-40 new locations on average, many said they are going for even more aggressive store growth in 2012 and beyond.

The capital markets seem to be ready to support this trend, with a massive flood of investment that has shown itself to the retail marketplace this year, according to Leslie Lundin, president and managing partner with Los Angeles-based LBG Realty Advisors LLC. She moderated a session on the financial community during Monday’s events. Panelist William Markey, director for MetLife, compared the recent economic troubles to the Star Wars movies – at least the original series. “You could say that 2005-06 was the "Empire Strikes Back," and now we’re at "Return of the Jedi," where investment firms have returned. Capital is available and it’s a much more stabilized market, and should remain so for the next five years or so,” he said.

Jeff Friedman, principal at Los Angeles-based Mesa West Capital, said while the “haves” of the past few years, such as core, well-placed properties, were able to garner capital attention regardless of the meltdown, the market is now turning where many of the second-tier “have-nots” are now getting some respect. “While it’s true that value has gotten ahead of fundamentals, I think you’ll start to see fundamentals start to slowly trend upward,” Friedman said.

Today’s sessions appear to be just as interested as Monday. Among a few session today, a panel of grocer experts will discuss the renewed popularity of their stores as center anchors during the session “Papa’s Got a Brand New Bag,” and Howard Schultz, chairman, president and CEO of Starbucks Coffee Co. will talk about how the company managed to grow, then shrink, its footprint in the United States.

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