Retail: Things are Looking Up

DALLAS-Mention "retail" to anyone these days and you're likely to be greeted with a roll of the eyes and the response that this is a real estate sector that continues to struggle. At the National Association of Real Estate Investment Trust's annual convention REITWorld 2011, a different picture of retail was created.

During the Retail Sector Spotlight session which took place Nov. 15 at the Hilton Anatole, two things emerged. First, consumer spending us on the rise once again for a variety of reasons – not the least of which is a hesitant confidence and the fact that consumers are tired of being afraid. And second, the Americas are the ideal place for retail development growth.

"Spending and retail sales are definitely holding up," commented Kimco Realty Corp. President and CEO David Henry. "A good holiday season is anticipated as well."

Sandeep Mathrani, CEO with General Growth Properties Inc. echoed the sentiment, pointing out the apparent oxymoron involved with high unemployment of around 9% and an increase in spending dollars. But when that unemployment figure is dissected, he continued, the dichotomy between jobless numbers and consumer spending makes a little more sense.

"Unemployment among educated consumers with bachelors' degrees is about 4.2%," he said. "Those are the people who are shopping in our centers." Furthermore, he added, luxury items are continuing to move well.

The panelists also wrestled with issues such as national brands versus mom and pop stores - Henry pointed out that it's more difficult these days for the truly local business to expand because of a lack of lending. Another reason why the mom-and-pops are struggling is because of competition within their particular category. Home Depots are effectively closing down the local hardware stores, for example.

And all the panelists were emphatic that their expansion efforts would remain in the US, Canada and Latin America. Tanger Factory Outlet Centers Inc. President and CEO Steven Tanger pointed out repeatedly throughout the session that his company's developments follow the tenants' desires. The tenants, he went on to say, are content in the US so far.

Still, one trend that came to light during the discussion is the rush of retailers to Canada - both Henry and Mathrani acknowledged that the nation to the north is underserved as it pertains to retail, though RioCan has a pretty good lock on retail development and acquisitions. Both also like Latin America for growth, but here there were differences; though Mathrani was adamant that any GGP Latin American investment would be focused in Brazil, Henry commented that Kimco prefers Chile and Peru. "Both these countries have stable governments and a shortage of retail of all types," he added.

Interestingly enough, the panelists weren't quite as enamored with Asia, at least not as much as other industries seem to be. Tanger allowed that his company was monitoring Asia and is exploring joint ventures in China. However, "we decided to focus on this country," he remarked. “There are still opportunities here we haven’t explored.” "For us," Henry added, "It's a bridge too far."

The global discussion also focused on developments of ethnic retail in the United States. "We're trying to figure out the ethnic retail," Henry said, adding that putting a Hispanic-oriented business into a center isn't enough. Rather, it’s necessary to have whole centers and assets devoted to specific ethnic groups.

Mathrani pointed out that, with US shoppers becoming more diverse, this is happening. More ethnic retail centers are coming online, mainly through conversion of already existing centers. It's fantastic to watch," he added.