ICSC: Retail Investors Optimistic Despite Negative Headlines
ATLANTA — There are still a lot of question marks in the frontier of e-commerce versus brick-and-mortar retail. But investing in strong anchor tenants and delivering to the needs of the end-user are key to maintaining and developing a successful center, according to panelists at International Council of Shopping Centers’ Southeast Conference & Deal Making event.
The comments were made during the “Capital Markets, Retail Disruption, Rates, Maturities, Bankruptcies, Policy and Amazon” panel at the event, which was held Oct. 17-19 at the Cobb Galleria Centre in Atlanta.
Caitlin Griffin, vice president of transactions at Brixmor Property Group, moderated the panel, which included Francine Glandt, senior vice president of REIT Banking Group at SunTrust Bank; Lauren Holden, senior vice president of Clarion Properties; Joel Murphy, CEO and co-founder of New Market Properties LLC; and Jake Nawrocki, CFA, president of Newport US RE.
Although transaction volume is down 23.4 percent year-over-year, according to third-quarter research from JLL, retail demand and development pipelines remain steady.
“The challenge for [buyers] is where to invest the capital that they are able to raise,” said Glandt. “The prices that they want to pay for what they want aren’t necessarily lining up with where the market is yet. A lot of them are looking inward, doing some modest increases in their development pipelines. Those that have the ability to redevelop properties are doing that.”
While investors continue to narrow their focus on primary markets with strong track records, a tight market with little product is leading many companies to consider alternatives.
“We have some clients who are willing to go to a secondary market to get a little more yield, but I would say we are trying to be as creative as we can on deals looking ahead to next year,” said Holden. “We bought 11 freestanding, specialty grocers last year, all across the country. We love mixed-use assets and being able to invest in all asset classes. We are looking to do those types of deals.”
Getting back to downtown
Nawrocki agreed that it is important to find locations that might have once been overlooked. The company is currently underway on a $200 million project to revitalize downtown Atlanta.
“As we look out ahead in the future of where we are going to invest, I think there are a lot of great downtown areas in major metro markets that need to be looked at again,” he said. “We are also tempted to start thinking about at least the inner suburban space.”
When it comes to choosing a market to enter into, communicating with consumers and focusing on their needs is key to staying abreast of today’s changing retail landscape.
“I think urban retail isn’t all glitz and glamour, but daily needs,” said Nawrocki. “It’s things that support an urban lifestyle, which is what our end-user wants.”
When looking at new markets, Nawrocki said his team spends a lot of time on the street, looking at the physicality of the urban space they want to invest in and talking to consumers.
“You can’t just jam things into space or pursue things. You have to be really aware of what your local market wants and needs,” he said. “It’s not so much science as it is listening.”
According to Murphy, a strong urban core is important because it makes for a strong suburb. The Atlanta-based company acquires grocery-anchored centers in suburban Sunbelt markets.
“The fact is, it’s not urban or suburban, it’s both,” he said. “Because if the urban core starts to decay, that decay goes out.”
“Atlanta is adding millions of people and Charlotte is adding millions of people over the next 20 years,” continued Murphy. “They are not all going to live in the urban core, and they are not all going to live in the suburbs. So I am a believer in both, but I’m an investor in the suburbs.”
From generational differences and changes in demographics to technological advances, brick-and-mortar retail disruption is wide and vast. But by communicating with consumers, catering to their needs and learning to adapt, retailers and investors can remain successful.
“Like anything in retail, there is always going to be the right place for the right retailer at the right time,” said Murphy. “These stores that adapt are going to be made better. And then ones that aren’t made better, they will fail.”
— Camren Skelton