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Connect Retail West Recap: “Alive, Well, & Here to Stay”

By January 23, 2019No Comments

By Dennis Kaiser

Connect Retail West, held Tuesday, January 22, 2019 at The Resort at Pelican Hill, drew a crowd of 300 to hear from the innovators in the retail space. The afternoon discussion featured panels on the future of malls, where investment sales are headed, experiential retail that every customer wants to come back to, and a special keynote conversation with industry icon Sandy Sigal of Newmark Merrill.

Today, we’ll hit the highlights of yesterday’s conference, but look for deeper dives of each panel in the coming days on Connect CRE.

It Starts with Service featured a Special Presentation by Caruso’s Vincent J.Burneikis, Vice President of Learning, Development, & Hospitality, on what it takes to create the experience in retail centers that every customer wants to come back to. That is accomplished by capturing “heart share and market share.” He points out, one of the inherent needs of people is to feel the energy of the street, a secret Caruso has uncovered and incorporates into its properties. In doing so, the retail developer and owner has achieved success few others have. That includes centers that capture longer shopper visits, generate higher per-visit spending, and places where 92% of shoppers purchase something.

The guest experience at a Caruso property is encapsulated in three elements: product, service and atmosphere, all of which must work together to create the right mix. By acutely focusing on customer service, Caruso helps give people the gift of time.

The Future of Malls panel focused on redevelopment, reinvestment and reinvisioning. Developers and investors shared how they are changing retail spaces, and thinking way outside the box to create new spaces where we shop, eat, work, and play.

Festival Companies’ Robin Bhalla predicts “Amazon is here to stay. I don’t see that as problem. They’ve helped retailers adapt and step up their games.” Today, that typically means focusing on placemaking, creating connectivity, and giving people a reason to get off the couch.

Simon Property Group’s Matt Sebree points out a strategy today may often involve exploring what digital native brands fit a market or mall. If an owner can help a digital native brand make the successful transition into a brick-n-mortar location it means more opportunities for everybody. If they don’t make the shift, it may mean they shut down online channels, too. But, if they are able to make the jump, he says, “there’s more [stores] open to buy [from in] our portfolio and for everybody” and that helps to evolve the retail sector.

GPI Companies’ TR Gregory agreed it is no secret that e-commerce is here to stay, though the initial fear surrounding it is evolving into new opportunities and synergy for retailers. As online retailers open up brick-n-mortar stores, it becomes a new reality and more opportunities. That’s especially true if they do fulfillment for online orders from those locations. He notes that’s a good thing because it brings people to a property.

Stream Realty Partners’ Michelle Schierberl notes she expects to see more alternative uses emerge across the retail landscape. An example of that is San Diego’s Horton Plaza, which is being converted from a retail center to creative office. The days of 100% retail could give way to a residential component being introduced or a hospital facility being added to a center, she says.

Greenberg Glusker’s Craig Coan pointed out that he’s heard that retail properties in China only contain 30% retail space, with the balance being occupied by such uses as kids tenants, like tutors or healthcare services.

The Up, Up, Up? Investment Sales in 2019 and Beyond panel explored what’s next. That included putting the recent market volatility and changing trends into perspective as the year of consolidation, dispositions, and redevelopment unfolded. Investment sales leaders shared what they see for the future and the next cycle. 

CBRE’s Philip D.Voorhees says rent rolls are being transformed and now contain medical, fitness and other services. He predicts the better malls will still survive, though the poorly-performing ones will “go away” and the deck will get cleared. Still he cautions, the start of 2019 could potentially be a bit bumpy because of the government shutdown, the equity dip and other factors, which could create a trickle down effect on consumer confidence and spending.

NKF’s Glenn Rudy says, “at the granular level, retail is alive and well. It is here to stay,” noting 90% of sales still occur in stores. E-commerce has not killed brick-n-mortar, he says, “it has enhanced it as online retailers have invested in themselves and their omnichannel experiences.” He cites clear evidence of retail’s health is the record annual sales achieved last year, and high, 45% year over year increase in sales. He notes, the right kind of retail continues to thrive.

PASSCO’s Alan Clifton points out the retail numbers don’t reflect what the reality is, and the way markets may be valuing the sector. He says, “we’re America and we’re built on change” and the ability to adapt to change. He expects new visions to be created as the “next generation” emerges within the retail sector.

Marcus & Millichap’s Bill Rose says it is not “doom and gloom” for the retail industry, but “evolution.” He is concerned the market has plateaued from 2015 through 2018 though. As a result of that flattening, he advises to pay attention to job growth, money supply constraints, and in a low interest rate environment if values plateau.

Donahue Schriber’s Ryan J. Gillard says they see opportunity in good tertiary markets, especially with open air grocery-anchored centers.

The afternoon panels concluded with a keynote conversation between Connect Media’s President and Founder, Daniel Ceniceros, and Newmark Merrill’s President and CEO Sandy Sigal (pictured above on left).

Sigal shared how his passion for retail real estate has turned into a career-long endeavor. His firm has built a retail portfolio of 80 assets that touches 2,000 tenants.

For Sigal, the key in retail is to find the right balance between consumers “heads and hearts. Sentiment drives traffic,” he says.

Today, he notes monitoring and using consumer data, including trends gleaned from Facebook, Yelp or other Social Media channels, allows retail developers and owners to better understand consumers and then create experiences they actually want.

The level of measurement for a center’s traffic has evolved to now include sophisticated tech resources and tools such as Wifi. That can let an owner know what stores people are visiting, or what parts of a property are most popular. In turn, that information can be used to market the center to consumers, build a tenant mix that’s right for a neighborhood, or build events that resonate with the community. Sigal says, centers that give back to the community will be rewarded.

Sigal shared that he believes online retail’s emergence and growth has actually been good for retail centers. “The number of online only shoppers has gone down three years straight,” notes Sigal. “The number of in-store only sales has been static,” but he points out, when shoppers who do “both are considered, the number has gone straight up. Brick-n-mortar retailers have figured out how to reach customers online, and online retailers have figured out how to get into stores,” says Sigal.

This article was originally published on Connect Media.

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