As real estate professionals and retailers from around the country catch their flights out of Las Vegas, having wrapped up another year of the International Council of Shopping Centers’ RECon, Commercial Observer reflects on the annual conference.
We reported on a slew of new and potential deals: Ripped Fitness’ entrance into the Big Apple, Under Armour eyeing FAO Schwarz’s old space at 767 Fifth Avenue, Superdry‘s three-floor sublease of Esprit‘s 21-25 West 34th Street space and a new fast-casual concept by Philippe Chow. On Monday, we learned that Canada-based Saje Natural Wellness was planning to make a foray into New York City and Los Angeles, as company executives talked to brokers from RKF (see a roundup of day one tweets here).
Throughout our time there, we also heard more about how the market is shifting to favor tenants. Retail rents are softening and tenants have a bit more leverage when it comes to getting concessions in a new space.
“It’s a tenant’s market,” said Hal Shapiro of Winick Realty Group. “Landlords are having problems accepting that rents have not increased in keeping with inflation and the proportionate tax rate the tenant had to pay in their lease.”
His colleague, Kenneth Hochhauser, said deals are taking longer to do and economic fundamentals aren’t supporting the high asking rents in the market.
“In most of the elastic markets, there is a disconnect between asking and taking rents,” he said. “An equilibrium price is still to be found. That paralyzes retail leasing velocity.”
Over the week, CO also caught up with Fred Posniak of Empire State Realty Trust at The Palazzo who was wearing one of his 100 pairs of TOMS shoes. He told us that tenants are increasingly asking for concessions in retail deals.
Faith Hope Consolo, the head of the retail group at Douglas Elliman, told us over lunch at Jardin at Encore that tenants are finding it easier to bend their landlords ears and “are listening, they are learning. They learned from the last downturn that they have to be like the shopping center developers.”
Robert Knakal, Cushman & Wakefield’s chairman of New York investment sales, opined poolside at the Wynn: “The fundamentals are changing. Retail rents are dropping. Residential rents are dropping. That’s not a good thing when cap rates are rising.”
Tenant improvement allowances have been increasing, which is “indicative of the market,” said Robert K. Futterman, the founder and chief executive officer of RKF, at his booth. Landlords of restaurants, for instance, have to set aside hundreds of dollars for tenant improvements.
And a trip to Vegas for ICSC wouldn’t be complete without making the rounds to the parties. CO stopped at parties hosted by Bank of America Merrill Lynch, Newmark Grubb Knight Frank, C&W and Eastern Consolidated (which had a table at XS club in Encore).
One of the first stops on Monday night was Bank of America’s party at the Omnia at Caesars Palace.
Then we made our way to NGKF’s party at the Marquee Nightclub & Dayclub at The Cosmopolitan of Las Vegas.
The night before, CO went to Nobu Villa at Caesars Palace for Related Companies and Oxford Properties Group’s Hudson Yards party to celebrate chef partners Thomas Keller, José Andrés and Costas Spiliadis, who will all be opening restaurants at the Shops & Restaurants at Hudson Yards. (Bonus: There was food from Shake Shake and Bouchon Bakery.)
Real estate pros stopped talking business by the time they got to XS, where they partied into the wee hours of the morning.
Speaking of retail, CO also took advantage of restaurants that have yet to make their way into the five boroughs before heading back to the Big Apple last night. We had our cab driver take us on a detour to In-and-Out Burger on the way to the airport. (Nothing to report on if or when the West Coast burger joint is coming here.)