Brokers told TRD that they 20-year flagship model is no longer attainable, and now are looking for innovative ways to fill retail space.

By David Jeans | May 17, 2019 08:46 PM

Almost 30,000 retail real estate professionals will descend on Las Vegas for ICSC. Here’s what they expect.

Long gone are the days of the two-decade flagship lease. Now, brokers attending this year’s International Council of Shopping Centers conference in Las Vegas will be courting a new tenant: online companies seeking short, nimble leases.

This year’s event, which will be held from May 19 to 22, comes at a time when shopping malls across the country are shuttering, and global clothing retailers can’t afford the rents charged on Fifth Avenue in Manhattan.

Instead of the once-treasured 20-year retail lease, Robin Abrams, the vice chair of Compass’ commercial division in New York, said retail brokers this year will be chasing leases that that allow retailers to stick around for between one and three years.

“There is no norm anymore,” Abrams said. “It’s taken five years for the industry to see this.”

And as brokers and real estate professionals arrive from all corners of the country, and abroad, they are now targeting the same tenants: online companies.

“The native digital retailers who haven’t even begun to get to vertical, that’s our future,” said Joanne Podell, an executive vice chairman of Cushman & Wakefield’s retail division in New York. “As they grow they’ll realize that they need a brick-and-mortar retail presence.”

In Miami, Drew Schaul, a retail broker at CBRE, said he’s seeing online retailers actively pursuing lease deals in South Florida. “Digitally native retailers understand brick and mortar has to be apart of their growth strategy to be a true omni channel retailer … to maximize return on investment and expose the brand,” he said.

Brokers in Chicago said that despite the negative effects of e-commerce on the brick-and-mortar retail landscape, the city has experienced an uptick in activity in the past 60 days, according to Austin Weisenbeck, senior vice president for retail investments in Marcus & Millichap’s Chicago office.

“We’re going to be telling people that it’s still a great place to consider putting in money,” Weisenbeck said.

The sentiment has been echoed in Los Angeles, where the retail industry has struggled to fill stores along its main corridors in Downtown LA and the Bloc, alongside the rise of e-commerce.

“In the past couple of years, it was a bit of a shock as to what was happening,” said Jay Luchs, an executive vice chairman at Newmark Knight Frank’s Los Angeles office. “Now we’re kind of getting used to it.”

But while online stores may draw the attention of most brokers, Peter Braus, the managing principal of Lee & Associates in New York, is confident that there are still some big fish.

“There’s a high degree of confidence for an established brand,” he said. “If they are going to open, they will for 10 years.”

This year’s schedule of panels also reflect a push from the industry to seek out innovative ways to fill retail space. One panel featuring Brendan Wallace, the founder of Fifth Wall Ventures, which backs real estate-focused technology startups, will discuss examples of digital-native brands that have transitioned to brick-and-mortar storefronts.

Another panel featuring a Target executive will discuss how shopping malls are reinventing themselves, while a panel including leaders of fashion houses Tapestry Inc. and Guess, Inc. is expected to cover how retailers are using artificial intelligence to improve customer service.

“In previous years there’s been panels about flagship retail and the vibrancy of malls,” said Braus, of Lee & Associates. “Now the conversation has turned to what the fuck do you do with a class B and C mall?”

And, in line with the loosening of marijuana legislation, there is a growing demand for retail space to sell it. There’s a panel for that, too.

Additional reporting by Natalie Hoberman, Katherine Kallergis and Alex Nitkin.

Tags: Commercial Real Estate, ICSC, Real Estate Technology, Retail, Shopping Malls