This year’s ICSC Western Conference held in Los Angeles October 2-4, covered all things retail across the Western States. The three-day event brought together over 4,500 attendees including retailers, brokers, owners, developers, municipalities and service providers.
Similar themes prevailed: the expansion and contraction of traditional retailers; the omnichannel marketing experience; today’s restaurant- and service-centric tenant mix; and the repositioning of retail centers to meet the needs of changing consumer demands.
ICSC President Tom McGee addressed attendees during Tuesday’s luncheon, touching on many of these themes and providing a strong statistical overview of the state of retail.
Retail real estate is consumer real estate. Per ICSC and US Census data, in 2016 total retail sales accounted for 81% of the industry’s sales, with the remaining attributed to fitness, entertainment and services. Of the 81%, 87.3% occurred in store. Over the last three years, brick-and-mortar retail has grown by 7%, food & beverage by 22% and pure-play ecommerce by 65%.
We cannot underestimate the impact of demographics on retail. Today’s economy has lost 21M consumers in their most active spending years. Generation X, currently in its prime spending years, makes up only 19% of the population, in comparison to the 25% of Baby Boomers and 27% of Millennials. Median Household Income is flat and GDP has only grown by 2%, but the key is to be prepared for what Millennials will be looking for when they reach the spending years.
ICSC’s Dealmaking floor was active throughout the conference. Despite concerns often expressed regarding the impact of online retail, the brick-and-mortar retail industry is thriving and deals are getting done. Retail vacancy is down specifically across Southern California and within neighborhood and community shopping centers. Most conference attendees were actively looking to uncover value-add opportunities.
“We can’t spend all of our time focusing on store closings as they are a very natural part of the retail and restaurant business,” shared Coreland Senior Vice President Matt Hammond. “From a leasing perspective, transitions offer great opportunity. Opportunities to backfill spaces with new, fresher concepts, or change uses completely if a site hasn’t proven to be a best fit for food, service or soft goods, as examples.”
“The key to understanding today’s retail is to ignore the traditional tenant mix formulas,” shared Vice President Ben Terry. “Take a step back and look at each shopping center within the context of the broader community. What are the economic drivers in the region and where is the demand? Well-located retail will always do well, but the key is to take a more creative approach to uncover nontraditional opportunities.”