The ICSC convention for retailers, brokers, analysts, landlords, and dealmakers returned to Las Vegas this year with more than 24,000 attendees and 800 booths. Here is what we heard over the three days of events from retail experts and enthusiasts who are driving innovation and evolution in the industry:
- The retail sector has sustained positive momentum; however, experts exercise caution as consumer spending decreases, the market faces a scarcity of high-quality retail space, and the cautious approach adopted by developers due to excessive development in previous years has resulted in limited new retail space entering the market, thereby contributing to an upward trend in rental prices.
- Restaurant operators prioritize vibrant neighborhoods and mixed-use projects as they expand their portfolio while undertaking extended permitting and construction periods. We forecast quick-service restaurant openings to increase by 10% in 2023.
- Retailers are hunting for spots that are easily accessible to accommodate convenient in-store pickups and build more brand awareness, as customers demand more of a destination worthy of a trip that goes beyond simply placing an order online.
- Despite a scarcity of sellers in the market, the sentiment toward retail investment sales remains optimistic. Investors are strongly inclined to pursue profitable opportunities, particularly in centers with robust CAGR and value-add components. Although transactional activity has decreased, retail center valuations remain strong due to the high demand from prospective buyers, presenting a favorable opportunity to capitalize on the current surplus demand in this domain.
- Well-positioned big box space is being backfilled quickly and often receives multiple offers due to the limited supply of space as a result of developers pulling back over the last few years.
- The rapid growth of artificial intelligence will provide retailers and landlords with detailed consumer insights, such as sales based on the size of a consumer’s shopping bag as they depart the store.
- It is forecasted that slowing consumer spending, reduced availability of credit and rising penetration of e-commerce may contribute to the closure of retail stores by 2027. However, numerous retail industry experts perceive these closures not as signs of an impending industry catastrophe but as a familiar process of eliminating weak and troubled companies.
- To cope with the economic situation, retailers are implementing various measures such as cost-cutting, supply chain automation, inventory reduction, and a more cautious approach to profitability. Middle-income-focused chains may face challenges. In contrast, discounters and luxury chains are expected to thrive as consumers seek bargains and higher-income shoppers maintain their spending at upscale retailers.
- Experiential and the health and wellness industry have caught the attention of retail landlords and property owners looking to fill space and activate their properties. These tenants have shed their earlier reputation for expensive buildouts and potential noise concerns, transitioning into a tenant class known for driving foot traffic to surrounding businesses and attracting a wide range of demographics that boost sales.