As we look forward to a new year, what challenges do you see the shopping center industry facing, and how best do these need to be addressed?
The shopping center industry in the U.S. and Canada is clearly in a mature phase with a need for only limited new development. However, there is significant opportunity for repositioning existing, well-located properties to unlock intrinsic value. Also, look for more public private partnerships as cities and towns seek to attract the jobs and economic spark created by a well-conceived retail project.
Some have said that the Internet and social media are killing the bricks-and-mortar store. Are they right?
No. Twelve of the top 20 online retailers such as Wal-Mart, Staples and Best Buy are mainly traditional store operators. Retailers will grow their e-commerce business; they also continue to open new bricks-and-mortar locations from which they also serve their online customers. The good retailers will prosper as they sell to their customers in both places.
Now the elections are over, what are ICSC’s priorities in Washington?
ICSC’s top priority is to pass Sales Tax Fairness legislation to level the playing field between store-based retailers and online retailers by requiring the latter to collect the state sales taxes currently in place. We believe the current 20-year-old policy is obsolete in this multi-channel, 21st century retail world. ICSC backs legislation that empowers states to decide how best to enforce their existing sales tax and use tax laws, and takes the burden off consumers. ICSC is also vigilant in making sure that its members’ interests are protected in the end-of-year budget and tax negotiations.
What capital markets trends are you expecting in the coming year?
I see two major trends continuing. Extremely low interest rates will continue to make financing very attractive and keep cap rates low even in the face of more challenging real estate fundamentals. And second, the rush toward quality by buyers and lenders will continue. “A” properties are very hot, while those that are unstable or are in smaller markets garner little interest. Having said this, there are still many fine shopping centers that are very successful and attractive to an investor even if the capital markets don’t think so.
This question-and-answer session was produced as part of SmartBrief’s 2012 Best Of reports, which capture the year’s most important stories in each industry. Sign up now for ICSC SmartBrief to get tomorrow’s report on the top must-read stories from the shopping mall industry.
Image courtesy of the International Council of Shopping Centers.