ICSC Event Goes Live Again Amid Industry Optimism, Challenges

·14 min read

Thousands of developers, landlords, retailers, restaurateurs and representatives from the multitude of sectors that survive and thrive off the shopping center industry will converge on the Las Vegas Convention Center for the ICSC “Here We Go” convention, Sunday through Tuesday.

It’s live and in person after being virtual last year, and is being staged amid an atmosphere of mixed emotions, expectations and uncertainties.

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There’s optimism that the economy is strong, that most American consumers are financially healthy, and that traffic and sales at malls and stores have been steadily picking up since the fall and have been approaching 2019 levels.

People just want to get out and socialize and shop again, after months and months of being cooped up at home due to the pandemic, and the convention provides such an opportunity. The accelerating shopper traffic seen at malls and stores gives the industry encouragement and reassurance that despite the rise of the internet, the pandemic and the wave of bankruptcies in the last two years, brick-and-mortar retail is still relevant.

Still, just when it was beginning to feel like life was returning to some sort of “normal,” there’s been renewed worries since the end of November about COVID-19 because of the new Omicron variant rapidly spreading. While it’s not expected to impact the holiday shopping, it’s unknown what, if any, impact it will have on business and the health of the U.S. and globally in 2022.

All attendees at ICSC’s Here We Go convention must submit proof of full vaccination. The Biden administration has been encouraging Americans to get vaccinated, and to get booster shots. It will be weeks before scientists have had a chance to digest data from cases of Omicron to determine the efficacy of existing vaccines and boosters in preventing the spread of the variant and in minimizing symptoms.

For the retailing and shopping center industry, the uncertainty only adds to the turbulent times the sector has seen since early 2020. While upscale “A” type malls with high productivity rates continue to thrive, many “B” and “C” level ones are either closing or resetting their mix of tenants. Last year, Coresight Research predicted that roughly one-quarter of American malls will close down in three to five years and Moody’s Analytics expected roughly 135 million square feet of space at regional malls to become available during that time.

According to CoStar Realty Information Inc., as of this year, there are 115,044 shopping centers in the U.S., including 1,167 malls; 68,927 strip centers; 31,706 neighborhood centers; 2,316 power centers; 602 lifestyle centers, and 414 outlet centers.

By calling its convention, Here We Go, the ICSC is striving to project an upbeat tone and convey a message that the sectors it serves are moving forward, and aren’t stalled or moving backward.

“The industry is much more positive than a year ago. Most people recognize they’re not out of the woods on COVID-19, but do definitely see the future and things getting back to relative normalcy as we move into 2022,” said Stephanie Cegielski, ICSC’s vice president of research and public relations.

Beyond COVID-19, “The industry is really focused on hiring issues, supply chain constraints, inflation and the possibility about additional shutdowns, but at the same time the industry is really thinking ahead. How do we design things going forward that are pandemic-resilient? There are really a lot of conversations about what comes next.”

Cegielski also said the industry is researching and closely watching Generation Z and Millennials regarding how to design properties around their habits, wants and needs.

Also top-of-mind is the flight to the suburbs. It’s been happening since the onset of the pandemic, and challenges the industry to come up with ways to cater to the migration, and compensate for the decline in urban office and residential populations, though cities such as New York should eventually recover. In the suburbs, according to the ICSC, walk-up windows, café seating, streetscapes and other sights and sounds typical of the big city are emerging.

“It’s a perpetual look forward, which is not easy in this business,” said Cegielski. “Construction doesn’t happen overnight. A lot of property owners are really looking into what communities need. We see a lot more mixed-use,” meaning developments that would contain health care facilities, gyms, spas, recreational features, residential space, groceries and pharmacies, as well as retail and restaurants. The idea is to enable people to conveniently access goods and services closer to where they live and work, as more people are and will continue to be working from home, in many cases on hybrid schedules.

Developers continue to collaborate with retailers to accommodate the buy online, pick up in store service that has been rapidly expanding at stores nationwide. Retail executives consider BOPIS experiences their most profitable transactions since purchases don’t have to be delivered to homes, and sometimes those picking up packages at the store or curbside end up doing some more shopping inside the store. There are, however, additional labor costs associated with BOPIS.

Vacated retail space in malls could convert to warehouse or fulfillment-like operations, and last-mile delivery, though as Cegielski said, “That could be a little bit tricky from a permitting and local regulation perspective,” with centers being zoned for retail use. “My guess is that we will likely be seeing that debated.”

Another hot topic for the convention, as Cegielski indicated, is lease terms. Many retailers, particularly new or digitally native ones, are signing shorter-term leases, for possibly two years rather than five or seven.

Lease negotiations are also likely to center around providing rent break guarantees in the event of future lockdowns due to COVID-19 or other types of health emergencies or natural disasters. Retailers in many cases are increasingly cautious about signing leases and want to lower their risks.

The Great Recession of 2008 and the pandemic and ensuing store closings and bankruptcies have forced real estate developers and property owners to diversify the tenant base, as well as their own assets, and form new types of partnerships and marketing strategies.

“We have growth levers beyond our real estate assets that are unique attributes of our company,” David Simon, chairman, chief executive officer and president of Simon Property Group, the nation’s largest developer and operator of shopping centers, said in a recent conference call. “We have proven to be astute investors. We have unique business models and diversity of income streams.”

Simon Property has invested in licensing powerhouse Authentic Brands Group and has taken stakes in J.C. Penney Co. Inc., and its SPARC joint venture, which owns Forever 21, Lucky Brand and Brooks Brothers. Penney’s, Forever 21 and Brooks Brothers were all lifted out of bankruptcy.

“You call us a mall company. I think we’ve proven to be beyond that. And that’s what I encourage you to focus on,” Simon told real estate analysts and investors on the call. But he also stressed how it was important to remember that the company still gets 80 percent of its cash flow from its domestic property business.

Last October Simon Property teamed with Klarna to offer the mall operator’s shoppers the fintech company’s buy now, pay later in-store payment solutions. The companies also said in a statement that they’re working together on “additional strategic initiatives, which will be announced and rolled out in the future.”

Alternative use: Last summer’s Dino Safari at Tanger Outlets Deer Park in Deer Park, N.Y.
Alternative use: Last summer’s Dino Safari at Tanger Outlets Deer Park in Deer Park, N.Y.

Earlier this year, Tanger Factory Outlet Centers added Fillogic, a New York City-based start-up logistics platform operating a tech-enabled micro distribution hub, to its Deer Park outlet center in New York. Tanger sees the Fillogic site at Deer Park as the model for situating additional Fillogic hubs in other Tanger Outlet centers around the country. Fillogic offers a variety of shipping services, including same-day delivery for local residents, ship-from-store fulfillment, storing and shipping of direct-to-consumer orders, international shipping and aggregating shipments in trucks to save time and money for retailers.

“We are continuously looking for opportunities to innovate and improve our customer service,” said Stephen Yalof, CEO of Tanger. “Our partnership with Fillogic allows us to take our fulfillment capabilities to the next level with even faster and more convenient delivery and return offerings.

“One of our strategies is to get new customers and younger customers and get them to spend more time when they shop with us. Interesting new uses and creative use of our space has definitely given us this opportunity.”

Roughly, 15 to 20 percent of Tanger real estate could be transformed to alternative uses, Yalof said. “We have a strategy to become more of a customer-experience destination. There are definitely opportunities for some alternative uses in our shopping centers. Sit-down restaurants are pretty new to our format and we are finding that a lot of great local micro breweries and sit-down restaurants that serve alcohol are looking for locations.”

Not long ago, Tanger formed a partnership with Volta charging stations for electric automobiles. Charging stations will be rolled out to several Tanger outlet centers.

The scene at a 2011 ICSC convention. - Credit: Courtesy Photo
The scene at a 2011 ICSC convention. - Credit: Courtesy Photo

Courtesy Photo

For Here We Go, the ICSC is expecting about 10,000 attendees, including 1,000 retailers, and 453 exhibitors. There’s typically a strong turnout of developers, property owners, construction companies, engineers, tech companies, brands, real estate brokers, consultants, architects, landscapers, retail and REIT analysts, store designers, planners and representatives from lending and financial institutions. The ICSC has about 50,000 members in North America, though there are a couple of thousand members from outside the U.S. as well.

Last year the December ICSC event was held virtually due to COVID-19, and before last year, it was held at the Jacob K. Javits Convention Center on Manhattan’s West Side.

“When we needed to sign a contract with the Javits Center, they didn’t know if there would be events, having been a temporary field hospital for COVID-19 vaccinations. So we had to pick Las Vegas,” said Cegielski. “Javits wasn’t agreeing to future events,” due to uncertainties of the pandemic, Cegielski explained. Nevertheless, the expected turnout of attendees and exhibitors “is very comparable to what’s in New York,” she said.

“This is just a one-off event. It’s a dealmaking event and we do have some content, but our focus is really to get people together again and have in-person connections,” said Cegielski. The programming will revolve around ICSC’s marketing mantra, “Work, Place, Shop, Dine and Gather.”

The programming has sessions in the convention center on new dining concepts, tips to help small businesses transition from pop-ups to long-term leases, tips for using electric vehicle charging stations to drive shopping center revenues, and the future of the workplace, among other topics. The convention also has several receptions and networking opportunities, and is a forum for introducing new projects, as well as for discussing or striking up leases.

Among the retailers expected to be most intensively looking to sign new leases as they continue to aggressively expand are Citi Trends, Five Below, Dollar Tree, Family Dollar, Ace Hardware, Sephora, Ulta, Aerie, Burlington Stores and Tractor Supply.

Property owners are curious about Macy’s Inc. and its new off-mall strategy involving launching Market by Macy’s and Bloomies specialty formats, as well as furthering rollouts of the Backstage off-price format and Bloomingdale’s The Outlet.

The first Market by Macy’s in Southlake, Texas. Macy’s is rolling out the format to other cities. - Credit: STEVE WRUBEL
The first Market by Macy’s in Southlake, Texas. Macy’s is rolling out the format to other cities. - Credit: STEVE WRUBEL

STEVE WRUBEL

Other retailers to watch are Toys “R” Us, which later this month will open a flagship in the American Dream retail/entertainment complex in New Jersey and could open more stores; Intimissimi, the Italian lingerie retailer, which has disclosed bold retail expansion plans for the U.S., and Lafayette 148, the women’s upscale fashion brand that in recent seasons has stepped up store openings.

Rue21 is also back to opening stores, and Rack, the off-price division of Nordstrom Inc., is considering opening additional stores but not until it fixes inventory issues and generates better comp-store sales, as Erik Nordstrom, CEO of Nordstrom Inc., said last week.

Amazon continues to gobble up commercial space for its offices, fulfillment operations, and emerging fleet of stores, and is said to be developing a department store format.

On the food and beverage side, fast and casual dining chains never seem to have enough locations, most notably McDonald’s, Chipotle, Shake Shack and P.F Chang’s, which all continue to find space.

According to the ICSC, shopping centers in the U.S. are 91 percent occupied, though last year it was 89 percent.

The American Dream shopping mall in East Rutherford, New Jersey will have a Toys “R” Us store. - Credit: AP Photo/Ted Shaffrey
The American Dream shopping mall in East Rutherford, New Jersey will have a Toys “R” Us store. - Credit: AP Photo/Ted Shaffrey

AP Photo/Ted Shaffrey

Among the hottest areas for development in the U.S., according to the ICSC, are the Carolinas, where the population is booming, major mixed-use developments are on the rise, and brokers and developers are “bullish,” as indicated in ICSC’s publication “Commerce and Communities Today.”

ICSC cites the region’s mild climate, low cost of living and educational opportunities, and North and South Carolina were listed on U.S. News & World Report’s “Fastest-Growing Places” in the U.S. report for 2021-22, based on net migration.

Some major developments underway in the South include a 12-acre experiential mixed-use redevelopment in Plaza Midwood, one mile east of Charlotte’s city center. Plans call for 100,000 square feet of retail and restaurants, 383 luxury apartments, a boutique hotel and 400,000 to 500,000 square feet of office, according to the ICSC.

In Raleigh, N.C., the Raleigh Iron Works is under development on an 18-acre site which ICSC indicates will have 500,000 square feet of “creative” office space, 65,000 square feet of retail, and more than 200 residential units.

In Cary, N.C., the 69-acre, mixed-use Fenton project is underway, 10 minutes from Raleigh-Durham International Airport. The project is being designed with 350,000 square feet of retail, along with restaurants, entertainment, multifamily dwellings, offices and a hotel.

Then there’s Hughes Development Corp.’s BullStreet District, in Columbia, S.C., considered one of the largest urban redevelopment projects on the East Coast. It’s zoned for 3.3 million square feet of commercial use, much of which is under construction for retail and other purposes.

Manhattan’s Oculus Center. Urban shopping venues have been impacted by the flight to suburbs. - Credit: Ric Tapia via AP
Manhattan’s Oculus Center. Urban shopping venues have been impacted by the flight to suburbs. - Credit: Ric Tapia via AP

Ric Tapia via AP

Nashville, Tenn., the home of the country music industry, is another hot market. It has a growing population, is relatively affordable and has a vibrant nightlife. Fifth + Broadway, a Brookfield Properties development, opened in downtown Nashville last June. The $450 million, open-air, project houses 256,000 square feet of retail, the National Museum of African American Music, a food hall, an apartment tower, and an office building. It will be home to Amazon’s East Coast operations hub.

In addition, Southwest Value Partners is developing Nashville Yards on 18 acres downtown, for retail, food and beverage tenants and entertainment space.

Tanger is planning an outlet center in Nashville. “We have identified a 280,000-square-foot location in Nashville,” Tanger CEO Yalof told WWD in an interview earlier this year. “There is 7 billion square feet of retail space in the U.S. but only 70 million square feet of outlet [space]. There are some markets where we could definitely open an outlet center.”

Nashville is attracting development. - Credit: AP
Nashville is attracting development. - Credit: AP

AP

The New York-based ICSC trade organization has been stepping up initiatives and programming to support small businesses, and spotlight new and emerging technologies that businesses can utilize and take advantage of.

The organization rebranded this year, and just goes by ICSC, and no longer identifies itself as the International Council of Shopping Centers. Rebranding efforts encompass social media, digital advertising and a website relaunch and casts a wider net to attract more businesses and technologies to become members.

“Our membership has been broadening and the rebranding really reflects how that broadening is happening within the industry,” Tom McGee, ICSC’s president and CEO, told WWD at the time of the rebranding. “We want to reflect that. We want to be welcoming to all the changes happening in the industry. We want our brand to not be restrictive.”

The Scottsdale Fashion Square in Arizona. Luxury is selling.
The Scottsdale Fashion Square in Arizona. Luxury is selling.

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