While dozens of retail industry folks gathered within the Jacob Javits Convention Center for the International Council of Shopping Centers event in New York this week, one thing was clear—it wasn’t all smiles and cheerful discussions when it came to the state of the retail sector.
That’s according to Colliers International retail partner and vice chairman Brad Mendelson.
“I think the overriding sentiment in the convention was the slowness in the marketplace, what’s causing it and how long it’s going to last,” Brad tells Bisnow.
Brad says there's a decline in the number of active retailers in the market, and those that are active are being much more selective about the spaces they’re renting. And with the mass shuttering of physical stores, particularly anchors and department stores like Kohl's, Macy’s and Sears, the market is seeing a supply-demand imbalance.
“It has turned into more of a tenant's market,” Brad tells us. “Department stores have some very large issues. For the most part they’re cumbersome, their sales aren’t that great and they’re selling stuff at a loss of what they’ve paid for.”
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Brad says department store sales have taken such a hit that they were looking to “dump merchandise” and excessive products they were unable to sell even during Black Friday and Cyber Monday. “I’m not sure they’re making money,” Brad tells us.
On the opposite side of the spectrum, two major trends are impacting retail operators and investors today. On one hand, there are landlords who’ve been aggressively buying up expensive property within the past three to four years because they expected the market to continue its upward trajectory. These landlords are having a very difficult time filling space, Brad tells us, mostly because they have little room to take tenants that will pay below their projected price target without losing money.
On the other hand, owners with 20 to 50 years under their belt has the ability to fluctuate prices because they’re not stuck needing to reach a milestone.
“These owners can make more money renting for less, than they will keeping properties vacant,” Brad tells Bisnow, “while the other guys are going to keep properties vacant or they’ll lose it."
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