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Retail’s Dealmaking Landscape – Key Takeaways from ICSC New York 2023

Greg Kaiser
December 14, 2023 3 mins

Editor’s Note: ICSC New York, an annual two-day event held in early December, is a leading gathering marketplace organized by the International Council of Shopping Centers (ICSC). The event attracts 8,000 to 10,000 dealmakers and industry experts including retailers, real estate service providers, owners/developers, and business services within the marketplaces industry.

Sentiment: Balancing Optimism with Realities

The brokerage community at ICSC New York expressed a prevailing sense of optimism, coupled with steadfast acknowledgement of the lower transaction volumes witnessed throughout the year. With markets anticipating multiple rate decreases in 2024, the community has ceased holding its breath and has instead adopted a more relaxed anticipation of organic volume growth. This hope is driven by the assumption that both buyers and sellers will not see a dramatic change in pricing, and that some moves must be made to benefit long-term portfolio health or the typical motivating factors that have always driven commercial real estate (CRE) transactions. Despite the slowdown in CRE transactions, LightBox RCM customers we spoke to were upbeat about the prospect of sourcing buyers who are less impacted by short-term market fluctuations.    

Retail Outlook for Commercial Real Estate

Many U.S. retailers are in an exciting wave of expansion, boding well for brokers and investors within this sector and driving expectations for funding to prompt significant capital investments. LightBox’s recent survey noted that respondents indicated high demand for shopping centers due to the continued evolution of the retail sector. Despite an undeniable pullback in specific sectors such as travel, auto, and luxury goods, retail sales volumes have seen continued growth. Consumers currently favor defensive spending, but projections anticipate a shift towards discretionary expenditures in the latter half of the upcoming year. The hope for softening inflation seems to be fading, with consumers potentially accepting new pricing norms and embracing “shrinkflation” for at least the near term.

Vacancy, Asking Rents and Transaction Volumes

Desirable retail space is becoming increasingly scarce, with retail vacancy rates hovering around 4 percent. Emerging trends indicate declining demand for aging sites, pushing Class A properties to the forefront. Inflation, high operating expenses, and persistent labor shortages continue to impact pricing and operations, despite a slowdown in hiring across other sectors. While overall transaction volumes have experienced a 60 percent decrease from last year across various asset types, there is a slight uptick for retail assets. Rent growth has slowed across all sectors, although a recent upswing has been observed in the most desirable locations and asset classes.

AI and Technology

While all CRE asset types depend heavily and rely on data, the retail sector undeniably stands out for its need for timely and dynamic information. Our Mid-Year Sentiment Report revealed how technology advancements are increasing efficiencies within the industry and the anticipated impact of new technologies. Not surprisingly, the general session on Day 2 of ICSC New York, Leveraging Artificial Intelligence for Business Growth, Innovation and Efficiency, attracted the highest attendance of the week. The session underscored the pivotal role technology can play in site selection and illustrated how predictive insights can be used to plot patterns of change expected for cities. Anticipated AI advancements that were teased for 2024 included enhanced tenant and customer experiences. However, there were some cautionary warnings regarding inaccurate “outputs” from generative AI as a result of poor or incomplete data. This highlights the necessity for comprehensive and accurate data to be used for smart decision-making and critical analysis. Property details, debt and loan maturities, demographics, natural hazards, and due diligence are just a few of the important data points that our LightBox team discussed with clients and attendees. As we look ahead, the synergy between AI technologies and accurate data becomes increasingly imperative for informed decision-making within the retail real estate landscape.

About the Author:

With over two decades of industry experience and sales strategy, Greg Kaiser serves as a Director, Strategic Accounts for the Capital Markets segment at LightBox. His successes with leading CRE firms like Marcus & Millichap and KW Commercial gained him extensive knowledge and the ability to solve the problems facing our most important accounts and the top-producing teams across the country. He consistently drives growth by offering actionable and working solutions to help our customers gain a competitive advantage. 

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