From repurposing parking lots to the specter of tariffs, disappearing pharmacies, and helping to ease the nation’s housing shortage, there are no lack of challenges and opportunities to be mulled over at this week’s ICSC New York convention.
“Most of the conversation that will take place will center on that lack of available space for tenants to move into,” Stephanie Cegielski, ICSC‘s vice president of research and public relations, said. “We have such incredible occupancy levels and not much space is coming available.”
Cegielski also expects discussion around what the Federal Reserve will do to further ease interest rates. “We’ve seen two rate cuts so far this year that have been encouraging. Rates are not high but they are high compared to what developers have been accustomed to,” Cegielski said. The Federal Reserve’s current target range for the federal funds rate is 5.25 percent to 5.50 percent.
Because of the high rates and because the nation is over-malled and over-stored, there is little opportunity for ground-up development or redevelopment. That being said, owners and developers in recent years have started to build new housing either connected to a shopping center, or nearby. The objectives are multifold: to ease housing shortages in the community, create a larger local population that retailers and restaurants in the center can tap, add an element of convenience for consumers, and raise the value of the shopping center property.
Stephanie Cegielski
Among other topics ripe for discussion at the ICSC convention are the downsizings in the drug store/pharmacy sector, where hundreds of locations are closing, and modernizations and transformations at John F. Kennedy International Airport, and La Guardia and Newark airports, enticing new tenants to take space.
In addition, real estate executives are eager to learn how to better use foot traffic analytics and data to increase consumer engagement, and whether the 2017 Tax Cuts and Jobs Act, a major overhaul of the tax code enacted by the Trump administration providing tax cuts, will be extended by Congress. The TCJA is scheduled to expire at the end of 2025. Some politicians and businessmen believe an extension would fuel economic growth; others point out that taxes shouldn’t be cut because it would increase the federal deficit.
Many property owners are looking to local governments to waive or ease requirements on how much parking space they need to have, in order to repurpose some space. Rarely are the parking lots completely filled with cars other than on key holiday shopping days. Owners in certain parts of the country are also seeking waivers on electric vehicle charging stations, which are expensive to install.
With Macy’s, Sears, Kmart, RiteAid, CVS, Walgreens, Family Dollar and 99 Cents Only having closed or in the process of closing hundreds of stores, developers can gut and convert their space into residential use or demolish a big box and build anew. For example, Macerich, among the nation’s largest shopping center developers, is redeveloping the FlatIron Crossing Mall in Broomfield, Colo., with housing. Kimco Realty’s Westlake Shopping Center in Daly City, Calif., is converting a former Burlington Coat Factory into housing. And Westfield’s Garden State Plaza in Paramus, N.J., is adding apartments.
A Sears store in Portage Park, a suburb of Chicago, closed in 2018 and was transformed into 6 Corners Lofts, a 206-unit, loft-apartment building with a Target, a glass atrium, dozens of added windows and balconies, a top floor lounge and speakeasy, and a rooftop swimming pool. Novak Construction reportedly invested $90 million in the transformation.
If not for housing, abandoned department stores in malls are sometimes transformed into distribution centers or sports facilities. In addition, “We’re seeing more service providers, for health care, fitness, hair and nails, physical therapy, and yoga studios” filling previously unoccupied space, Cegielski said.
The Brixmor Property Group is redeveloping Heritage Square, 30 miles west of Chicago in Naperville, Ill., into “a restaurant district” called Block 59. The project involves demolishing a great deal of real estate. New restaurants are seen opening in 2025 and Brixmor expects to complete the project in 2026. Heritage Square sits within Brixmor’s larger, 555,000-square-foot Westridge Court, where in 2021 the REIT completed updates on the facade, lighting, parking lot, sidewalks, landscaping and signage.
ICSC New York, being held Wednesday and Thursday at the Javits Center, will attract a crowd of about 8,000, in line with last year’s turnout at the event, according to Cegielski. It’s a swarm of mostly domestic developers, retailers, property owners, service providers, representatives from restaurants, with some international visitors as well. It’s also expected that if the economy stays strong, ICSC New York in years ahead could draw the 10,000 or so attendees it typically did pre-pandemic. “We’re creeping back,” said Cegielski.
ICSC New York this year has attracted 286 exhibiting companies, and has arranged 11 content sessions. The event has taken over 131,000 square feet of Javits’ 850,000 square feet of exhibit space and 102,000 square feet of meeting space.
ICSC New York is the trade organization’s second-biggest event of the year. ICSC Las Vegas in the spring is the largest, drawing about 25,000 attendees. The mission of the ICSC (no longer known as the International Council of Shopping Centers) is to promote marketplaces of all kinds, be it a mall, lifestyle center, outlet center, power center or strip center, places where people shop, dine, work, play and gather. At the convention, attendees learn about projects in the works, where space is or will be available, industry trends and innovations, and lease deals are negotiated.
In the U.S., there are about 112,000 shopping centers of one kind or another, including traditional malls, lifestyle centers and outlet malls. Among the more interesting retail developments is the rise of Belmont Park Village, a 340,000-square-foot, high-end outlet shopping complex. It’s part of the Value Retail portfolio which operates The Bicester Collection of open-air, service-oriented luxury outlet centers in Europe and China. Belmont Park Village, the first North American outpost of the collection, expects to house about 160 shops, and is located in Elmont, Long Island, adjacent to the Belmont Park racetrack and the UBS Arena.
The mood at ICSC New York should be bright, with real estate investment trusts reporting high occupancy levels, rental incomes rising, and sizable crowds visiting brick-and-mortar venues this holiday season so far — and in increasing numbers post-pandemic.
“Demand for our space from a broad spectrum of tenants is strong and steady, and we continue to strengthen our unique retail real estate platform through our growing development and redevelopment pipeline,” David Simon, chairman and chief executive officer of the Simon Property Group, said during his recent third-quarter conference call.
While there’s much concern and many unanswered questions about the Trump administration implementing steep tariffs on China, Mexico, Canada and other countries, consumers are still spending despite higher interest rates and inflation.
“There was a great turnout over the Thanksgiving weekend,” said Cegielski. “We are seeing a return to pre-pandemic levels of foot traffic.”
ICSC New York
ICSC
