nd 22 Annual Connecticut Commercial Real Estate Conference
- Slides: 42
nd 22 Annual Connecticut Commercial Real Estate Conference Brad M. Hutensky ICSC Chairman May 9, 2013
Retail Real Estate Overview • The International Context • Internet’s Impact on Bricks & Mortar • The Opportunities in US/CT Retail
Why Is Retail Exploding Globally?
Have Seen Growth First Hand § In Brazil: 44 Malls in next 24 months § In Middle East: Malls being built EVERYWHERE! § In China: 24. 5 Million Sq. Ft. in Tianjin
Shopping Center Space Under Construction 24. 5 mm sf 1. Tianjin, China 2. Shenyang, China 3. Chengdu, China 4. Abu Dhabi, UAE 5. Wuhan, China 6. Hanoi, Vietnam 7. Beijing, China 8. Shanghai China 9. Kuala Lumpur, Malaysia 10 -14 Xi’an, Shenzhen, Chongqing, Nanjing, Guangzhou China Source: CBRE
Retailer: The Growing Middle Class Global Middle Class Spending Projections $56 Trillion (2030) $21 Trillion (Today)
Year-Over-Year Retail Sales 16 14 12 10 8 6 4 2 0 Brazil China Russia U. S. Canada UK Source: ICSC
GLA Per Capita 24 . 76
Mall Development 2007 -2012
Every market is different § Customers Wants & Needs § Government’s laws § Industry Norms
World Speaks Language of Retail 1) Product 2) Price 3) Convenience 4) Service 5) Experience
The Threat of E-Commerce
Will E-Commerce make Bricks & Mortar Retail Irrelevant?
Retail is dead, long live retail Brick-and-mortar stores serve customers who end up buying online The internet has made shops obsolete in some towns
The Internet’s Growing Share of Retail Sales 5. 2% 1. 6 % Source: U. S. Census
Showrooming: visit the store, study the product, shop online for the lowest price
Retailer Bankruptcies & Store Closures
BUT HERE’S THE TRUTH
Retailers Still Expanding Retailer Number of Units - Next 24 months Subway 5, 000 Dollar General 1, 300 Five Guys Burger and Fries 1, 200 T-Mobile 600 Walgreens 571 Zara 450 Taco Bell 400 Wal-Mart 300 T. J. Maxx 150 Famous Footwear 100 Macy’s 20 Source: RBC Capital Markets
Where We Buy Depends on What We are Buying Buy on the Internet • books, music, shoes computer software, video games Buy at Stores • Men’s suit, hair cuts, home furnishings, groceries, apparel, pharmaceuticals
Need for Human Contact l l a M e h t o t Trip
Need for Human Contact r e t a e h T e h t o t p Tri
Advantages of the Store üImmediate gratification üCash purchasers üExchange/return üOmni Channel
Retailers with Major B&M Presence Are 12 of the Top 20 Highest Online Sellers Source: The Top 500 List
Conclusion • Customer is changing • Successful retailers are changing too • Internet is driving efficiencies in pricing, inventory and customization
U. S. Retail Real Estate Markets
U. S. Retail Real Estate Market in Brief • 113, 355 Shopping Centers = 7. 5 Billion sq ft of GLA in 2013 • Creates 18 Million Jobs • Modest sales increases • Minimal New Development • Only 1 Mall opens in 2012 • About 46 new open air centers open YTD
Three Observations About U. S. Retail R. E. Markets • We don’t need more supply, mostly • Bifurcation of Capital – “A” Properties get lots of attention – Non-stabilized, smaller market, lesser tenants get little attention • Lender Balance Sheets are swollen
Where are the opportunities? • Redevelopment (aging stock; best locations) • Urban/Mixed Use • Serve the new population growth
Repositioning Opportunities
Age of U. S. Shopping Centers Built Before 1998 Built After 1998 More than 15 years old ~80%
e-Commerce Creates Opportunity As store sizes become smaller… – Re-tenanting upside – More locations per market – More new development
Why Governments Embrace Retail Real Estate • $1 million in sales at a brick-and-mortar store creates nearly 4 jobs • Catalyst for other uses (residential & office) • Retail attracts visitors and related businesses and generates tax revenue
Opportunity from Population Growth
US Total Population Redevelopment (aging stock; best locations) 2010 -2050 Growth 1970 -2010 ~440 million people Growth ~203 million people ~309 million people
Retail In Connecticut Follows US Trends • Older stock: Lots of opportunity for redevelopment • Population: we will get less than our share • Urban/Mixed Use: – Blue Back Square: West Hartford, CT – Storrs Center: Mansfield, CT – Front Street: Hartford, CT
International Council of Shopping Centers in Brief
Total ICSC Membership 59, 000+ Canada 6% Europe 7% Other 5% U. S. 81%
ICSC World Wide § In 2012: 350 meetings; 100 K+ attendees § RECon Las Vegas, USA 32 K registrants § $57 MM annual budget
ICSC Goal: Members’ Success Networking: a business of relationships Education: Learn from the experienced Research: All the information you need
Some Final Thoughts § Retail Real Estate Truly Global: In Different Stages of Maturity (US most mature) § Massive Change = Massive Opportunity § ICSC: Goal to help US & Growing International Members Prosper at Whatever Stage
THANK YOU!
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