My Way
The Sky Is Falling....The Sky Is Falling!!
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Well, maybe it isn’t falling but it sure looks like some pieces are being jarred loose. In the last month, Ann and I have been to the Atlanta ICSC DealMaking, Ann went to the Chicago show, Lorri went to the Southern CA event and I spoke at the Applied Geography conference in Tampa. We also exhibited at the PikeNet Expo in NYC. |
While overall the shows were "OK," Atlanta was down a little and California and Chicago were up in attendance. The ICSC New York show in December should be the biggest gainer in attendance for the year, probably to the extent that it will be a nightmare to walk the floor (but all shows should be like this). The mood of most events in the last six months is changing slightly--it’s gone from "jubilant" to "happy."
From what I gather, Atlanta was the "best" show for overall dealmaking, followed by CA and then Chicago. (The Tampa event was not a dealmaking event but purely educational, and PikeNet features Internet commercial real estate companies. It is a "dealmaking event" in the sense of: "come and buy/use our software/Web site").
The biggest single complaint from all three ICSC events appeared to be "SOS" (It’s the "Same Old Stuff" I saw last show and the show before) Atlanta is more entrepreneurial than Chicago and CA (except if you’re into dot-coms) so there were more new centers being shown, but because many developers in the south are small, they tend to specialize in smaller projects in middle/rural markets or do freestanding drug store/auto parts deals . While that can make for an extremely profitable business, it doesn’t generate the excitement of a 400,000 sq.ft. power center. Plus, leasing space to retailers in rural markets is not among the world’s easiest tasks.
Lorri said the California dealmaking went well, but it was her first time attending that show, so she had nothing to compare it to. Her two comments were: 1) Californians appear to be very "clique-y" and 2) they don’t appear to be interested in anything happening outside of California (the later statement I tend to agree with).
Ann said the Chicago show was good on day one but day two was slow. She felt the members would be better served with by a one-day event. There isn't enough going on to justify two days.
The biggest complaint she encountered besides the a lack of retailers or new developments was the facility the show was held at. The Hilton ain’t what it use to be. Numerous members felt the show should be moved to another location. The other complaint/concern Ann heard was about the day/date change for the Vegas show, from Tuesday-Thursday to Monday-Wednesday. Most felt that Wednesday would be dead, and now they can’t attend all the functions and golf outings they did in the past. I guess the concept of coming in on Friday or Saturday rather than Monday never dawned on ‘em. Now in fairness, most of those complaining were smaller companies, but "if you’re not failing, you’re not trying hard enough." I think it’s good to try this new arrangement and as I said before, I "think" it will work out better BUT I have confidence in the industry that if it doesn’t work, the ICSC will hear about and make the necessary changes.
At all the shows, retailers didn’t complain about, but did "mention" that sales were off 2%-8% for most categories. If we don’t have a great Xmas, I think what will happen is that the "smart" retailer will cut down expansion tremendously, but the majority (public companies that have to keep Wall Street happy) will continue to expand, not because they are profitable but because new stores are the only way to show growth if comparable sales go down.
Besides the Middle East crisis, the election of a new idiot to lead our country and the stock market’s inability to pick a direction to go, what is really bothering the industry is a combination of soft retail sales (we’ve been hearing a lot lately of retailers laying off leasing reps, but don’t worry: there’s still a big enough demand out there that no competent person goes long without a new position), a lack of new concepts, an increase in bankruptcies in general and movie theaters in particular, and increases in interest rates for development or refinancing (the good news, if you want to call it that, is that C+ and lower centers are dropping in price). Many people not only are concerned but are beginning to prepare for a slowdown. I only hope it’s a slowdown and not a disaster.
We exhibited at the PikeNet Expo in New York City. It’s one of the major real estate and Internet shows held each year (unfortunately, there are so many produced, that if you decided to go to ‘em all, you wouldn’t have time to do anything else.) I sensed mixed "feelings" from the attendees. The good news was the Internet real estate industry is growing rapidly, driving changes that make this an extremely exciting time. That’s the good news. The bad news is that the financial end of dot-com IPOs stink, so these companies are having a tough time surviving. I recently read an article that predicted 95% of all dot-coms will fail in the next three years. I have no idea if that’s will turn out to be true but I do believe the majority will fail, and another article stated the Web-based real estate sites lost $1.5 billion last year, and there's no sign that they'll stop leaking money anytime soon.
Most of the real estate dot-com’s I’ve visited have "limited" information/listings. Their main problem is they want a fee for a developer to list but because this is still an unproven concept, the developer/owner is reluctant to spend money. Making matters worse, when a prospective "Lister" searches the site, there’s no critical mass of space available for lease, and that almost always turns them off. ( "I only want to list my property if my competitor lists his." ) Many of the dot-coms have been sending sales staff to the owner’s office to "educate and sell" their services, a very expensive method to gain customers (and we’ve been told the Internet would eliminate the salesperson and save money on marketing...HA). I personally believe they’ll be better off letting companies list for free until they get that critical mass. The only site I think that has gained critical mass is Loopnet.com and that’s for ‘property for sale’ only. ‘Property for lease’ has a long way to go to gain that critical mass, and even though Loopnet appears to be the industry leader, they continue to lose their shirt. Also a "rumor" has it that several of the listing sites will be "redirecting," which is a code word for "we're in trouble--let's change directions and see if we can survive that way for awhile." So instead of being a listing service, individual sites will be trying to sell the use of their software to developers and retailers.
At PikeNet, several companies tried to sell me software for problems I didn't know I had. One of 'em has an elaborate system to "speed up" leases with all sorts of sexy bells and whistles on their Home Page. What they don't seem to understand is the problem in getting a lease negotiated and done is NOT a procedural problem but a PEOPLE problem. Some executive decision-maker has to make a decision--some thing many of them don't have the ability to do with any skill. There ain't no software that I know of that's going to speed that along.
Also, what most dot-coms (and surfers) don’t seem to understand is that retailers represent the smallest segment of the "unholy trinity" (retailers, developers and brokers) on the Net. The largest users of commercial real estate sites are brokers, followed by developers, and in third place are retailers. So if you do list your property for lease, don’t expect to save money: you’ll still be going through a broker. I’ve spoken to several companies and individuals who are gathering e-mail addresses of retailers so they can do submissions, and most are in for a big and unpleasant surprise. We’ve been gathering retailers’ e-mail address for nearly a decade (of course, the last three years shows the biggest gain) and what we’ve learned is that retailers don’t want spam, which is what they consider unsolicited proposals to be.