ICSC Conference Update

October 14, 2015

The retail sector is hot right now, and at the center of it all was the recent ICSC conference held in San Diego, CA. The annual event is one of commercial real estate’s most important gatherings, with industry influencers in attendance to network, negotiate, and get the latest intel on where retail is headed. Barry Slatt COO Michael Kaplan was a featured speaker at the event, here’s what the retail industry’s who’s who had to say about the road ahead.

1) The general vibe at the 2015 ICSC conference in San Diego was positive, but with a sense of tempered optimism. Overall the retail sector continues to be strong and it looks like there is a significant amount of volume being pushed to get done in the last quarter of 2016, but looking forward there are many that feel it will be tough sledding to find enough core product or higher yielding distressed product in the general market.

2)  There is continued buzz surrounding the single tenant NNN space. A darling over the past 18-24 months, the NNN space continues to pull in massive amounts of investment capital from major institutional and larger private investment platforms. It is no longer a mom and pop middle market dominated playground. We expect the NNN sector to continue its run well into 2016.

3)  Back to the fundamentals was also a reoccurring theme, with the focus of many reverting back to location, location, location. As product becomes harder to secure and cap rates continue to compress within the retail space, investors are focusing on fundamentals. In addition to location metrics (rent to sales, market rents, etc), competition from a tenant and landlord standpoint is starting to come into the discussion more than ever.

4)  Timing was also a topic of discussion among buyers and brokers—looks like everything is having to get done faster. On core product in larger markets and on many investment grade single tenant properties nationwide, buyers are seeing many sellers no longer agree to 30-day due diligence periods including financing contingency. If you want to buy, be prepared to commit within 14-21 days and in some cases with no financing contingency. This simple shift in practice among sellers is fueling the all cash or large fund buyer pool, pushing  mom and pop buyers to potentially overpay in order to win bids or move on to inferior assets with less competition.

5)  Discussion of rising interest rates (or lack thereof) was present among many attendees. General consensus is that rates will trade in a narrow range for the balance of 2015 with a little increase over the short term. Not many in attendance felt that a small uptick in rates would impact their business plans going into the new year.