Dennis Suh and Stan Siciliano represented ValueXpress at the International Council of Shopping Centers (ICSC) RECon convention at the Las Vegas Convention Center in Las Vegas, Nevada May 20-23. Much of the discussion at the convention centered on the fate of malls in America.
Class B and C malls in secondary locations cannot be financed and will have to be repositioned or, in the worst case, torn down and the land reused for another purpose. Class A malls will survive. Defaults on CMBS loans secured by class B and C malls are soaring. What is fascinating is that many of the CMBS loans on class B and C malls are reporting debt-service coverage well in excess of 1.25x for many years, yet are defaulting at maturity. This is a strong indicator that lenders are unwilling to finance these properties even though they are performing.
Another hotly discussed topic was the positive effect restaurants are having on retail properties. So far, Amazon cannot deliver chef-prepared hot meals to your door, and with more Americans eating out, restaurant tenants are one bright spot in retailing. Mall owners are looking to add as many diversified restaurant options as they can accommodate, and neighborhood and big-box centers are luring restaurant tenants to pad sites, end caps, or in-line spaces in an attempt to increase traffic to their centers.
Finally, Amazon chatter was everywhere. A primary takeaway was that retail owners are all looking to add “service” tenants that do not compete with Amazon, such as urgent care centers, dentist offices, hair salons and gyms. Grocery-anchored shopping center owners seemed the least stressed over the Amazon effect and were comfortable that home-delivery options will come from their tenants, not Amazon.
For additional color on the ICSC RECcon conference, contact Dennis at firstname.lastname@example.org or call him at (347) 393-3208.