Sunday Summary: Retail, Hospitality, ICSC and a Big Merger

In between poker rooms, trips to The Sphere, and Kwame Onwuachi’s new restaurant at The Sahara, many of us still managed to fit in a little real estate at this year’s ICSC in Las Vegas.

“Listen and ask questions,” Nichole Popovics, the recently named president of TSCG, advised first-timers. “You have to hear what [other attendees are] saying, but don’t be afraid to ask the questions, because I think first-timers get intimidated by the meetings they get to go to.”

While we were not first timers, Commercial Observer heeded her advice and asked queries wherever we could.

We spoke to CBRE’s Ebere Anokute, who is the firm’s head of retail research for the Americas, about the myths and realities of e-commerce.

“The biggest misconception is demand for physical retail,” Anokute said. “I spoke to someone the other day who thought that e-commerce accounted for as much as 30 percent of overall retail sales, and that’s just not true. Retail data is hard to come by across the board. A lot of times, the most accurate data source we can point to is the U.S. government. The Census Bureau produces quarterly e-commerce reports, and, from that, it shows that e-commerce has been around 16 percent for the last two years.”

…Which should make many a retail broker breathe easier.

We asked Axiom Retail Advisors’ Lea Clay Park about shuttered drugstores, quick service restaurants, and $8 strawberries.

“Certainly, gas prices and tariffs are playing into inflation, but there’s a lot of other stuff going on that plays into it as well that I just don’t think gets any coverage,” said Park. “And with the West Coast struggling to figure out how to significantly cut back overusing on the Colorado River — look at all of it. There are going to be huge cuts, and a lot of it to agricultural producers. So, if you’re worried about $8 strawberries, get used to it.”

OK, that didn’t make us feel as good.

Nevertheless, with 4.9 percent availability and three straight quarters of positive absorption, it was difficult not to feel that the market has executed a turnaround.

“The entire landlord community is benefiting right now from a long trend of not constructing a lot of shopping centers, the demolition of some shopping centers — some older malls — and a resurgence of growth in a lot of retail brands,” said Scott Schnuckel, CBRE’s managing director of retail for the Americas.

“That’s on the value side of the equation: mass merchants, grocers, a lot of off-price and food and beverage. That’s all coming together right now for record-low vacancy rates, which means growing rents.”

We also learned some interesting things, like the prevalence of (checks notes) trampoline parks?

Yup. According to JLL’s James Cook, the 16.5 million square feet of entertainment space planned in the U.S. and Canada includes a high proportion of kid zones and trampoline parks.

“Thematically it fits right in with the idea of barbell economy,” said Cook. “The idea is high net worth individuals are doing very well — and a lot of folks are on a budget looking for a value. In 1973, a one-day ticket to Disney was $27 in today’s dollars. Today, they charge a family of four millions.” (JK.)

Of course, those were only a few of the tens of thousands of conversations that went on all week. There were discussions about AI (which included a panel moderated by CO’s own Edward Cohen!) as well as side talks about inflationary fears, the ebbing of certain luxury brands and much more.

Doing our homework

In advance of ICSC we had been taking a good look at the retailers that have been flourishing and floundering.

On the floundering end, CO took a deep dive into Saks Fifth Avenue’s bankruptcy and global real estate fire sale.

“Saks is part of a larger trend of anchor stores vacating through bankruptcy or voluntary closure,” said David Vallas, a partner at the law firm Honigman. “The impact it’s having on shopping malls is an evolution of the business — that model is changing, as Saks, Sears, JCPenney have all closed numerous stores and locations.”

On the flourishing side, it would be difficult not to see how rising inflation isn’t a boon to dollar stores.

“Such a large portion of the American consumer base is seeking out value, not just lower-income folks,” said Brandon Svec, national director of analytics at CoStar. “Folks making $100,000-plus a year are now shopping at Dollar Tree, at Dollar General, at Walmart, as everybody looks to try and make their dollars stretch more.”

We looked at certain retail deserts and how to overcome them.

And we spoke to one of the mandarins of retail, Ed Hogan, previously of Brookfield and Vornado, about the Penn District, Fifth Avenue and more.

Not everything was retail…

Life went on outside of Vegas.

For one thing, the Scion Group and Ares Management decided to team up together and buy a 12-property student housing portfolio in the U.S. for $910 million from Harrison Street Asset Management.

There were a bunch of promotions, like JLL promoting Angela Gentry to vice chairman of leasing advisory.

Isaac Henderson is leaving Rockefeller Group to join Hudson Companies as its newest principal and its co-head of development.

Andrew Staniforth was named co-head of development at MaryAnne Gilmartin’s MAG Partners alongside Aida Stoddard.

And, despite widespread nervousness, build-to-rent investors caught a break when the U.S. House of Representatives passed the 21st Century ROAD to Housing Act, which wound up not adding a requirement that institutional investors sell their assets after seven years.

Oh, yeah: Did you hear that the two big heavyweights of multifamily ownership — AvalonBay and Equity Residential — are merging to form one massive, $69 billion behemoth? (What happens on Wall Street doesn’t stay on Wall Street.)

…but most of it was

Or, at least hospitality.

Mayor Mamdani announced last week that the city and the NYNH Host Committee had secured 1,000 affordable tickets to be sold to the FIFA World Cup to New Yorkers.

And while this will be welcome news to Gothamites, the hoteliers among us might not be so thrilled.

This is because despite the fact that there had been great anticipation about huge numbers of tourists pouring into the city for the soccer tournament, the bookings so far have been disappointing, with only 25 to 30 percent of available rooms reserved so far.

“FIFA promised 1.2 million visitors would come. However, demand remained flat year-on-year from February through the end of April,” said Vijay Dandapani, president and CEO of the Hotel Association of New York City. “In the end we expect to do better than last year, particularly with last-minute purchases, but the visitor number is expected to fall short by more than 50 percent.”

Not everybody was worried, though.

“I am not doom and gloom about the prospect of the industry doing really well during the World Cup and America’s 250th birthday celebrations,” said the head of the Hotel & Gaming Trades Council Rich Maroko. “It’s not uncommon to see a lag before a large sporting event, and, when you’re talking about something like the World Cup, that’s particularly true. Folks know who is going to be in the first round, but they may wait to see if their team makes it to further rounds and the final.”

CO talked to Maroko about the World Cup, the new contract hotel workers scored, Mamdani and more, which is worth a deep dive this Sunday.

Happy Memorial Day!