LAS VEGAS, NV -- The member organization for industry advancement, ICSC, held its premier event in Las Vegas last week. According to many of the 22,000 attendees, the marketplaces industry is in recovery mode but still bears some scars from the pandemic. ICSC promotes and elevates the marketplaces and spaces where people shop, dine, work, play and gather as foundational and vital ingredients of communities and economies.
In Summary
Consumers continue to shop despite inflation and supply chain disruption, pushing well-capitalized retailers to add stores and prompting investors seeking big returns to put their money into the marketplaces industry.
New retailers are growing, new tenant classes are emerging and existing tenants are finding their physical stores more important to growing profits and sales than ever.
But many landlords came to ICSC 2022 Las Vegas with vacant space to lease after the pandemic closed their weakest tenants, some of which operated large stores.
One of the industry’s biggest challenges will be reviving and retrofitting second-generation space to accommodate today’s growing tenants. Government officials are often the best collaborators on such projects, a source of tax breaks and other incentives that can motivate retailers and other end users to choose second-gen space.
Growing Retailers Demand Space
Don’t expect to see many more store closures this year. Retailers have learned how to manage their portfolios better and already shed many unwanted units during the pandemic.
New entertainment concepts abound, too.
The only thing slowing growing tenants down is a supply chain that’s keeping stores from opening on time.
Retailers also want to own more of their own industrial assets, and they’re even considering bringing manufacturing back to North America from Asia to have more control of the supply chain. Additionally, they’re stocking fewer seasonal items.
Interest Rates Won’t Slow the Market for Top Retail Properties
Meanwhile, investors are becoming increasingly fond of top retail properties, particularly those anchored by supermarkets and freestanding fast-food and drugstore properties, even though rising interest rates are making retail properties more expensive. A 10-year Treasury rate of 10% or higher is here to stay for a while, and it’s going to change how retail properties trade.
The average cap rate on retail property deals in May was 6%, according to CoStar Group. Even as prices rise, the income of the properties being purchased is growing fast enough to justify the higher prices, according to CoStar.
ICSC’s 2022 State of the Industry Report analyzes key indicators and data that point to the strength of the industry, the core challenges facing retailers, the state of consumer confidence and emerging trends and innovations that will help marketplaces continue to invigorate communities. See full report here.
PHOTOS: A special thanks to Nancy McClure with CBRE Tucson who sent us the photos from ICSC.