Industry Settles in for Long Haul at ICSC New York Show (12/10)
Dec 10, 2008 12:01 PM
The mood at this week’s annual ICSC New York National Conference and Dealmaking was one of overwhelming caution. Overall, more than 6,000 retail real estate professionals attended the conference this year, down from last year’s record attendance of about 8,500.
Companies across the board are settling in for a prolonged and difficult recession. Many industry pros expressed bewilderment at the current economic conditions, which are unlike what most have ever experienced. The consensus is that this slowdown already overshadows what the industry went through during the short 2001 recession. It’s also looking worse than the recession in the early 1990s. Most are approaching the situation like the recessions of the 1970s and 1980s and hunkering down for a slow and painful turnaround.
As a result, many firms think that 2009 will be a very quiet year for the sector. Expect few projects in the pipeline to open next year. Many have been pushed to 2010 and beyond or scrapped entirely. For example, Columbus, Ohio-based Stanbery Development, will open two centers next year, but has shelved work on four others. In some cases it’s driven by a lack of retailer interest in expansion right now. But it’s also a question of financing.
Instead of building ground-up, firms are taking the opportunity to queue up projects that will debut when economic conditions are brighter. Others are combing through existing portfolios and seeking opportunities to reposition and redevelop assets. On the investment side, firms with deep pockets and low leverage are waiting for prices to drop a bit more, but all indications are that they do expect to go bargain hunting sometime in the next 12 months.
The mood for the conference was set early during a panel discussion featuring Howard Davidowitz, chairman, Davidowitz & Associates Inc., a New York-based retail consulting and investment banking firm. He advised attendees to run their businesses “as if there is a depression.” He pointed to Sam Walton, who always ran Wal-Mart with that mindset.
“The guy was a pretty rich guy. The family has got a net worth of, I don’t know, $100 billion. And I had to lend this guy money to buy a newspaper. I’m serious, we pulled into a gas station and he said, ‘Have you got 50 cents?’ I said, ‘OK Sam, here it is.’ The guy never had any money,” Davidowitz said. “In good times, he ran the business as if it was in a depression. I think that it’s a good lesson for all of us.”
