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Atlanta Retail's Mixed Signals Heading Into ICSC's Big Show

The spike in retailer shutterings and bankruptcies may cast a pall over what is the biggest retail networking shindig of the year next week in Las Vegas.

The networking floor at ICSC's RECon retail conference in Las Vegas, May 2016

Some Atlanta retail brokers and professionals interviewed say the news of bankruptcies — from JCPenney to Rue21 most recently — could have a chilling effect on leasing demand during the International Council of Shopping Center's RECon, which starts May 22. 

“It feels to me the mood in Vegas now is a lot more trepidation than it would have been in January,” said Harold Shumacher, founder of one of the Atlanta area's more prolific retail brokers, The Shumacher Group.

Since the calendar turned to 2017, the rate of store closings and the shrinking demand for square footage by retailers has accelerated at the same time.

“I think you're still seeing interest in Atlanta from select retailers in select markets,” Shumacher said.

There was a time, he said, in the early 2000s, when retailers would go to the RECon show, shopping for multiple sites within the Atlanta market in an effort to grow quickly. Those days are gone for the time being.

Trillist Cos.' Scott Leventhal and The Shumacher Group's Harold Shumacher

“I don't see a retailer barraging Atlanta with multiple store openings,” Schumacher said. "I think that ship has sailed for the time being."

For ICSC, the poor retail news in 2017 does not appear to be impacting attendance at the show, with an expected 3,500 retail representatives expected to attend.

"Not only have we not noticed any effect from the bankruptcies, but we're actually trending ahead" of expected attendance, said ICSC spokesperson Nicole Bacharach, which would mean more than 37,000 people at the conference.

Greg Maloney, JLL's CEO of retail in the Americas, actually cautioned his brokerage team to expect retailers to use ICSC as a way to renegotiate their leases under the auspice that the sector was in a struggle right now.

"It's all about leverage,” Maloney said. And right now, the retailers not facing losses have it.

While some retailers unable to adapt to the changing demographics in the U.S. – and the preferences in ways Millennials and Generation Z like to shop – are falling by the wayside, others have used technology, design or winning 21st century business models and are thriving.

“Even though all the news is doom and gloom and the sky is falling, the fact is the facts don't follow that,” Maloney said.

Retail locations in coastal U.S. cities are doing much better than in tertiary and Midwestern cities. And Maloney said landlords are back-filling many vacant spaces with budget chains such as T.J. Maxx, Dollar Store and Nordstrom Rack or restaurant and entertainment offerings, which are increasingly taking a growing chunk of shopping centers.

Nick Garzia, former director of retail leasing for Hines in Atlanta.

The Shopping Center Group chairman David Birnbrey echoed that sentiment.

“There's been pent-up demand ever since the recession and very few new spaces available,” Birnbrey said. "These closings are creating opportunities in markets that we've not seen in years."

Birnbrey said it is possible Atlanta's retail absorption rate could turn negative in the near term. There is a lag between announced store closings and when they actually close, and that may see a lot of emptying spaces by year's end. But, he said, negotiating new leases also has a lag, and by mid-2018, absorption could come roaring back.

“I'm still bullish,” he said. “In terms of on our side, identifying opportunities, it's been a great time for us.”

Nick Garzia, director of retail leasing in the Southeast for Hines Interests – whose big assignment is Atlantic Station – has had some leasing victories leading up to his trip to ICSC. Hines recently reached agreements with Victoria's Secret to expand at the Midtown mixed-use project and add its PINK brand to the mix, and Z-Gallerie is opening a new store as well. And Hines sees its planned activity at ICSC as strong, even with the bad news surrounding retailers in the media.

“Several of the discussions center around expansion of our many successful stores, and some relocations in order to maximize the overall merchandising of the center,” Garzia said, adding that he is even meeting with retailers not yet in the Atlanta market, though he declined to identify them.