Electric Daisy Carnival attendees shuffled their way out of Las Vegas last week just as the International Council of Shopping Centers kicked off its largest trade event of the year.
The neon, platforms, fishnets and other looks seen across EDC, where tickets for the three-day fest started at $525, offered one view of retail and consumer sentiment. As ICSC attendees landed at Harry Reid International Airport last Sunday, executives dressed in blazers and business casual arrived to spend the next three days talking about where money is flowing in another corner of the retail industry. That is, the malls, big box spaces being left vacant by retailers filing for bankruptcy, emerging markets and rebuilding post-Pacific Palisades and Eaton fires.
The contrast between EDC and ICSC served as a fairly accurate view of retail at the moment. While headlines play up costs and tariff uncertainties, consumers are still out there spending.
What follows is a few other takeaways from the Las Vegas Convention Center that offers a view on where retail may be going.
Lifestyle Centers
The traditional, enclosed mall may have fallen out of favor, but the lifestyle center is alive and well.
After years of lukewarm interest from family offices and other types of investors, the lifestyle center is making a strong case for itself to the capital markets.
Part of that is simple supply and demand.
Pre-pandemic, the country saw a surge of lifestyle centers built. That led to a glut of inventory. Once developers pared back on building, it gave demand a chance to play catch up.
Now, the segment is desirable, particularly when paired with apartments or office to create new community centers.
Small Business
Lifestyle centers and other types of retail properties keen on differentiation, are strategic when it comes to tenant merchandising.
A portion of a center’s success boils down to what tenants will serve as unique draws. While small businesses have been a speed bump for property owners and managers less willing to play with the risk associated with non-credit tenants, they’re also realizing how important they are to a center.
Figuring out how to work with that segment of renters in much the same way there’s a standardized way for landlords to approach due diligence with national chains is now being talked about a lot more in a bid for legitimate solutions.
Retailer Bankruptcies
The bankruptcies of Forever 21, Joann, Party City and Rite Aid raise concerns about which way retail goes this year. It’s a key question in a market that’s splintering and quickly separating the weak from the strong.
Property owner after property owner at ICSC waived off the idea that retailer bankruptcies would lead to an unleashing of vacant space that would go unabsorbed. Most said they were already bracing for impact before Chapter 11s were filed and knew just where to go to backfill that real estate.
Of course, that could all change if more bankruptcies are in the works this year.
Tariffs
Retail is the art of the sale.
While ICSC was filled with career salespeople doing overtime to pitch the idea that retail’s just fine, there was only so much sugarcoating that could be done around the impact of tariffs.
What that impact is, no one could say for certain.
But the tariffs have chilled some deals from happening or have given leverage to buyers in some cases looking for discounts on centers.
It’s more the chain reaction of what happens at the consumer level that could set off a wave of events that will have implications for malls and other retail centers that many property owners are watching.
One executive at ICSC offered that they expect the markets to see a cooling around the key back-to-school selling period but couldn’t say whether that bleeds into holiday.
Wildfires and Growth Markets
Even in markets such as Southern California where there’s plenty of retail, developers still see opportunity to build.
Case in point are the Palisades and Altadena areas, which are facing an unprecedented, multi-year rebuilding effort after the January wildfires that will require not only housing to be rebuilt but also commercial structures. There’s also a trickle-over effect on other communities, some at ICSC said. As residents impacted by the fires fan out to other parts of Southern California, it could boost the need for additional retail.
That’s a similar story in growth markets such as Las Vegas, Phoenix and parts of Texas, many retail executives said at ICSC. Plenty of communities are seeing a wave of population growth that will require the need for big Target-anchored (or other big box) power centers. Several developers have caught on and are bullish on the prospects in those communities.
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