I just got back from ICSC REcon 2016. ICSC is the shopping center industry's largest real estate show. It brings together 1,000 exhibitors and over 36,000 attendees, and it's spread across three massive pavilions - North, Central and South - in the Las Vegas Convention Center.
The show brings together Shopping Center Developers, Retail Brokers, Retailers, Buyers, Sellers, Lenders and Real Estate Technology vendors.
Over three days, I had 18 meetings with CEOs, COOs, CFOs, CIOs, Property Management and Asset Management heads. I walked 15 miles of trade show floor, talked shop and then more shop with pretty much from Sunday to when I flew out on Wednesday.
Had some high quality time with the teammates and key strategic partners at NewMark Merrill, Datex Property Solutions and BlueList, too. Here's a shot from our team dinner, and on the left, the only picture I can show you from our party at the Hard Rock Hotel, which packed in 300+ people.
Having now had some time to ruminate on the many meetings, and all of the walking and talking, I wanted to share the three key takeaways I took from the show:
- The Sky is NOT Falling, but Understanding Merchant Categories is Integral: While new merchant categories are getting "Amazon'ed" with increasing regularity (e.g., Department stores are the most recent category getting killed), plenty of existing concepts are doing well and expanding. Moreover, new concepts are replacing the old ones, too. As such, the tone was decidedly upbeat at the show. But, portfolio owners all know that they need to think intelligently about how they segment their merchants into two buckets: 1) 'Cultivate and Grow'; and 2) 'Watch Carefully and Replace.' This is a long term trend throughout retail, so it requires prolonged vigilance.
- The Combination of Falling Cap Rates, Low Interest and Excess Capital has been Stunning: I heard a story from a friend about an Investor cohort of theirs who turned $20M in equity into $400M in equity in five years. How did they do it? Re-positioning, re-tenanting and re-development? Nope. Betting right on AAA properties, falling CAP rates and continued low interest rates. There was no so much cash chasing this market that the Investor literally had multiple buyers willing...no, desperate..to go hard on $100M deals with ridiculously limited due diligence. It's a highly illustrative example of the power of leverage at work. And this type of overheated, borderline reckless market, could go sideways tomorrow. Interest rates could go up, driving down free cash flow. Or, we could see another five years of this. Nobody really knows.
- Most Portfolio Owners are looking for Ways to Be Smarter and Operate more Efficiently: You wouldn't know it from their web sites, many of which were (seemingly) last updated in 2009, but most portfolio owners and operators do finally get it when it comes to embracing real estate technology. What felt like a missionary sale a year ago, now feels mission critical in terms of embracing technology to: A) Improve operations management; B) Optimize and Automate recurring processes to improve productivity; and C) Leverage big data to be smarter about the key performance indicators that drive the business. This is changing the equation of "good enough" from departmental silos (often in spreadsheets, emails and pencil and paper), to all departments (Property Management, Accounting, Asset Management, Leasing, Investor Management, Marketing and Executive Management) having a shared view, common data sets and common tools to better run the business. We're in the second inning of this one, but the industry as a whole has woken up to the role of real estate tech in getting ahead and staying ahead.
A final note. Our perspective on the above comes from three vantage points: 1) Eating the dog food as a shopping center owner and manager via NewMark Merrill; 2 )Being of Builder of Datex Property Solutions and having serious skin and a 15 operating history in the real estate technology game; and 3) Working closely with both developers and merchants via BlueList.
Oh, one more thing. Check out Datex's New Website. We launched it last week, and it's getting really good feedback.