At the show, I spoke to dozens of retailers under 6,000 sq.ft. who were aggressively seeking space, and a day doesn’t pass when we don’t get a call from a local or regional retailer wanting to open in a center we manage in the 2,000 sq.ft. to 6,000 sq.ft. range. We have more "big box" space available for lease than small shop and the rents we’re getting for the small space is decent, and we usually don’t have to give a 4,500 sq.ft. tenant a $25 psf. allowance. The reason for this uptick in leasing activity, I believe, is for the last decade there’s been a trend to build power centers with no or minimal small-shop space, so there’s a built up demand for stores under 6,000 sq.ft. And further fueling this demand is the growth in franchising, making many of these Ma & Pa stores national in appearance. The only problem is that the vast majority of franchisees seeking space are food oriented, and while every center needs some food, few centers can accommodate the amount of food tenants wanting space.

I also spoke to several outlet-oriented retailers in Vegas and they were the only group "crying the blues." Business, according to the majority I spoke to, "sucks," using their term (not mine). I was told that many outlet tenants, as their lease expires, are converting to a percentage-only deal instead of minimum rent. You know the center can’t be doing well if the landlords are agreeable to that drastic of a lease change. One tenant said that he guesstimated that 35 out of every 100 leases are percentage-only. That helps the retailers cash flow, and keeps "him" open for the short term, but what does it do to the industry in five years? (Nothing good I can assure you).

One of the few complaints about the show I did hear was that the ICSC was becoming too aggressive in selling services and ads. Nothing wrong with that, a financially-strong organization is good for its members (but I’d guesstimate that half of our members would love to be as profitable as our non-profit organization.) The complaint was about selling ad space on the carrying bags handed out with all our registration material. Brokers and developers don’t and can’t object to a competitor having an ad or insert in Shopping Center Today (or any publication) but resented carrying a bag that promoted their competitors. Yes, other trade organizations do it, but in my conversations with board members of other organizations such as NACORE, they all are envious of the ICSC and its cash flow. Our local and national shows draw a lot more members and bring in a lot more money than theirs do. So while we should want the ICSC to be healthy, they don’t have to sell "naming rights" for the organization to continue and prosper.

Oh, I noticed more cities and "Alliances" were at the show than I remember from the past. While most "City Development Officers" are knowledgeable and hard working in the majority of cases they appear to be lost souls. They’re not quite sure what to do and they stumble a lot. They want to do a deal. They sometimes even know how, it’s that they just have trouble finding someone willing to "play" with ‘em. The ICSC is doing an excellent job in assisting, educating and marketing towns to potential tenants and developers, but with few exceptions no one has found the right method to revitalize a tiring downtown.

One group that was ecstatic in Vegas was the liquidators and dispositions folks, all of them sporting smiling faces ( and just wait until the interest rates rise, then their smiles will become smirks). Another "happy" group is the excess space companies. All have more space to lease than they can handle. Their salvation ties into my earlier statement about smaller retailers aggressively expanding and the abundant amount of surplus space retailers have. But I also spoke to a lot of their clients who complained that in the first six months of signing a contract they do great, but after the "good stuff" is leased, nothing happens. For them or any leasing agent to succeed we need more retailers coming to the DealMaking shows. I’ve been saying that for 10 years and will continue to do so until we start to get "fresh meat" showing up.

Ranting on...Another trend confirmed at Vegas was the conversion or closing of regional enclosed malls. I spoke to at least six companies that had recently acquired malls of 600,000 sq.ft. or more and were either demalling the center or converting the property to another use. This has been occurring for nearly a decade and it’s increasing every day. The June issue of Shopping Center Today had two excellent articles titled "Department Store Blues," and "What Ails Them," explaining how and why department stores are closing in malls and are no longer the "draw" they were in the past. One article stated that many developers are electing not to replace a closed department store with another, but are opting for another use such as entertainment, food or category-killers such as Bed Bath & Beyond. I agree with most of the article. HOWEVER, I also believe that what was not discussed was the change that this reduced drawing power by the department stores has on centers. The regional mall and the department store anchors were once the "kings" of retailing. Now, instead of being "king," they are just part of the "court," and some malls and department stores are more court jesters than royalty. There are major changes occurring in retailing that will affect our future more than we can guess.