Conference discussions paint a strong picture for end of year and early 2025, but never without its share of hurdles.
By Matt Hammond
If you have accumulated enough years of experience in this ever-changing industry, you are likely to agree that it was nice to be back in Palm Springs for ICSC@Western!
With an attendance of nearly 3,000 from all disciplines of retail, last month’s ICSC conference was a great opportunity to connect face-to-face. Almost two days of discussions, presentations, praise and gripes, the Palm Springs Convention Center turned out to be better than we remembered — an easy venue to navigate and intimate setting with plenty of room to network.
The general environment has changed over the years. You won’t find as much “dealmaking” as in the past, given that ZOOM and TEAMS are great alternatives for meeting ‘face-to-face’ and finalizing a deal. Instead of having to focus on deal points on the convention floor, today’s conversations are more strategic, and just as important.
“How can we find opportunities together?” “How can we help you move a deal forward?” “Who can I help connect you with?” “Have you thought of considering this?” These are the building blocks of our industry. Taking time to listen, consider, and evaluate is what always generates the next deal.
As an overview, the following were consistent themes in discussions:
- Developers sharing that the days of speculative shopping center development are gone, and today’s focus is tenant-specific and smaller in scale.
- All agreeing that it’s time to get off the sidelines. The conservative, defensive posture of the last year is starting to subside, leading to more expected activity in early 2025.
- Leasing brokers working through the fact that there are limited quality vacancies across Southern California. Those that came available following the pandemic have been leased. The focus is on generating opportunities and ways to create value by sourcing stronger deals as weaker tenant leases expire.
- While quality spaces are being absorbed quickly, and often with competing offers, obsolete spaces present challenges that not all owners can address. Strategic owners are positioning themselves to take advantage with expertise and capital.
- Tenant health being watched closely by owners and managers. Rent collections remain strong, but increasing NNNs due to higher insurance and security needs demand creative solutions to keep centers secure.
- Deal length structures are increasingly (and unnecessarily!) complex due to planning departments and inspections, thus brokers are focusing on setting realistic expectations upfront, and working with cities to better prepare.
With all that said, the Southern California retail market remains one of the strongest in the country. It’s difficult for retailer to avoid entering or expanding within the market given our growing population, strong workforce, and ideal weather. Challenges change but opportunities remain.
Coreland Companies has the expertise and resources to successfully navigate the challenges and identify opportunities that create value for ownership teams.