NEW YORK CITY—For many retail real estate executives, mixed economic signals, changing shopping methods and related shifts are justification for sleep loss.
But that's not the case for Gazit-Globe chairman Chaim Katzman. Presenting a calm and focused demeanor, the industry veteran sat down with GlobeSt.com late last week for some blunt talk about the state of the market, who's weathering the ecommerce storm and who's headed for headwinds.
The company's 70 million square feet of retail space under management all are within grocery anchored malls—or what Katzman called “necessity driven shopping centers”—spread out across the world.
“When you run a portfolio across 20 countries, two or three of them always are in a recession when you wake up in the morning,” he declared. “That's why our centers are grocery anchored. We've had about 3% annual NOI growth over the last 25 years and the industry norm usually hovers around 2-3%.”
As for conditions in the United States, Katzman adds, “Yes we're in a small correction but what we're seeing—the volatility of the market, declining oil prices and low interest rates—is the new normal. People waiting for the next big run of inflation shouldn't hold their breath. Don't expect double-digit growth. A normal level is 1% to 2%, and that's not bad.”
He's a staunch supporter of Class A properties, in key locations, with much less faith in other sections of retail.
“The market is going to see a bifurcation between Class A and Class B/C properties,” Katzman predicted. “There's growth in Class A due to a resilience in the face of ecommerce because those properties are offering food, entertainment and leisure. Meanwhile, Class B and C locations are doing fine but they will have a tough time maintaining rents and NOI growth because there's a big pipeline of these properties and ecommerce is eating them up.”
He continued, “For companies in major locations, the growth curve is steep, while for Class B and Class C locations, it's flatter.”
Markets Gazit-Globe is favoring these days include Boston, where the company recently purchased the Harvard Collection, a mixed-use retail and office project in Harvard Square; Washington DC, where Gazit-Globe is involved in a “major project in Bethesda, MD,” Katzman said, “we love Miami and Jacksonville,” and on the West Coast, the Bay Area.
Proving his loyalty to major market locations, and to Class A real estate, Katzman noted, “Our portfolio is urban, we sold down our holdings in secondary markets and recycled the capital into Class A because we believe the world belongs to Class A urbanization. People go there not just to shop but to see movies, do their nails and more, and once tourists come in, they will look up the names and shop online when they return home. Those shopping centers are thriving alongside ecommerce because Class A locations get people in the door.”
But that's not the case for Gazit-Globe chairman Chaim Katzman. Presenting a calm and focused demeanor, the industry veteran sat down with GlobeSt.com late last week for some blunt talk about the state of the market, who's weathering the ecommerce storm and who's headed for headwinds.
The company's 70 million square feet of retail space under management all are within grocery anchored malls—or what Katzman called “necessity driven shopping centers”—spread out across the world.
“When you run a portfolio across 20 countries, two or three of them always are in a recession when you wake up in the morning,” he declared. “That's why our centers are grocery anchored. We've had about 3% annual NOI growth over the last 25 years and the industry norm usually hovers around 2-3%.”
As for conditions in the United States, Katzman adds, “Yes we're in a small correction but what we're seeing—the volatility of the market, declining oil prices and low interest rates—is the new normal. People waiting for the next big run of inflation shouldn't hold their breath. Don't expect double-digit growth. A normal level is 1% to 2%, and that's not bad.”
He's a staunch supporter of Class A properties, in key locations, with much less faith in other sections of retail.
“The market is going to see a bifurcation between Class A and Class B/C properties,” Katzman predicted. “There's growth in Class A due to a resilience in the face of ecommerce because those properties are offering food, entertainment and leisure. Meanwhile, Class B and C locations are doing fine but they will have a tough time maintaining rents and NOI growth because there's a big pipeline of these properties and ecommerce is eating them up.”
He continued, “For companies in major locations, the growth curve is steep, while for Class B and Class C locations, it's flatter.”
Markets Gazit-Globe is favoring these days include Boston, where the company recently purchased the Harvard Collection, a mixed-use retail and office project in Harvard Square; Washington DC, where Gazit-Globe is involved in a “major project in Bethesda, MD,” Katzman said, “we love Miami and Jacksonville,” and on the West Coast, the Bay Area.
Proving his loyalty to major market locations, and to Class A real estate, Katzman noted, “Our portfolio is urban, we sold down our holdings in secondary markets and recycled the capital into Class A because we believe the world belongs to Class A urbanization. People go there not just to shop but to see movies, do their nails and more, and once tourists come in, they will look up the names and shop online when they return home. Those shopping centers are thriving alongside ecommerce because Class A locations get people in the door.”
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