LAS VEGAS — In the midst of a particularly tumultuous period for the retail sector, evidenced by waves of store closures, what advice do seasoned shopping center executives have for aspiring young professionals seeking to make their mark in this business?
The question arose Monday during a panel discussion moderated by Marcus & Millichap’s Bill Rose, national director of the brokerage firm’s retail group, at the Renaissance Las Vegas Hotel. The hour-long program, titled “Retail eVolution: A New Beginning, Not the End As We Know It,” analyzed the strengths and weaknesses of today’s retail market.
The panel discussion capped off the first day of events at RECon 2017, the shopping center industry’s biggest deal-making event of the year. This year’s show, which is put on by the International Council of Shopping Centers, included 37,000 registrants, 1,200 exhibitors spread across 853,000 square feet and participants from 58 countries.
The panelists pointed out that the current disruption taking place in the retail real estate sector — driven by a combination of shifting demographics, the growth of online retailing and a U.S. market that is over-retailed in some categories — creates both risk and opportunity.
Hessam Nadji, president and CEO of Marcus & Millichap: “How do you turn the current negative dynamic in the headlines into an opportunity? The major players that I interact with — those on the panel and the major players across the board —are getting out of [Class] B and [Class] C [assets], whether it’s product or markets, and they’re hunkering down on their [Class A assets]. They are building fortress investments in their best locations and their best assets. That makes a lot of sense.”
“What that means to a lot of private investors — the vast majority of people that are sitting here tonight with us — is you take those [Class B and Class C assets] and you think out of the box. You think about reuse. You think about how real estate can be reconditioned, recycled for whatever is in the path of growth in that particular trade area. That to me is the magic. You can look back and say we bought an old, tired mall, but look at what we did with it based on what’s happening in that trade area — whether it’s entertainment or health-related. Look at categories of retailers that are thriving right now. The vast majority are either tied to a big trend like housing or restaurants (the preference to eat out) or personal health, education and medical services, which has to do with the aging of the population. So don’t think retail, think real estate.”
John McNellis, author and co-founder of shopping center development firm McNellis Partners: “I don’t think it matters what you develop, but where you develop matters a ton. For a developer starting out, you need to pick an area, a city a region that has really strong growth. That is my best advice. George Marcus (a Palo Alto, California-based developer) loves to say that the two key words to success in business in real estate are ‘supply constraint.’ There is no supply constraint in Texas. So, I would pick one coast or the other.”
Adam Ifshin, founder and CEO of DLC Management Corp., an owner and operator specializing in value-add properties: “If it’s your own business, the one job you can never give to anybody else is you have to be your own chief risk officer. You have to think about how to mitigate risk, and determine what risk you’re prepared to take in any given situation.”
Stuart Tanz, CEO of Retail Opportunity Investments Corp., an owner of 84 grocery-anchored shopping centers on the West Coast: “The best advice is to be passionate about what you love doing. As it relates to the business that we’re in, it’s that trees don’t grow to the sky. There is risk, and that risk is beginning to become much greater in scope as it relates to the retail business. Be very careful in analyzing that risk as it relates to making money in this business.”
Thomas McGuinness, president and CEO of InvenTrust Properties Corp., an owner of open-air shopping centers: “Millennials get bashed. Maybe it’s warranted, maybe it isn’t. You look toward all of us up here with gray hair, and you assume that we have the answer. Realistically, I think you all are probably in a much better position to drive your own careers going forward and build and mold what each one of your organizations should look like and what shopping centers of the future should look like.”
— Matt Valley