Shopping center industry notes bright spots at Vegas convention

By Steve Green (contact)

Sunday, May 17, 2009 | 7:58 p.m.

Struggling with bankruptcies and store closings, the shopping center industry opened its annual convention Sunday in Las Vegas by highlighting retailers that continue to aggressively expand despite the recession.

Heading the list was Wal-Mart Stores Inc., which, despite the economic slowdown, plans to spend $12.5 billion to $13.55 billion in the fiscal year that started Feb. 1 on capital expenditures, including opening, relocating or expanding 165 to 185 stores in the United States and 550-600 in other nations.

Speaking at the International Conference of Shopping Centers ReCon conference on Sunday, Wal-Mart international real estate executive Joe Albright said that with its worldwide expansion, the company is transforming to take a global approach instead of being a U.S. company with international operations.

The company, largely through acquisitions, operates under numerous brand names worldwide. It has operations in 15 international markets including 1,221 stores in Mexico, 371 in Japan, 360 in the United Kingdom, 346 in Brazil, 312 in Canada and 249 in China.

"They're becoming the international 7-Eleven," said retail analyst Dana Telsey, a moderator of a panel on retail trends.

The value approach is working well for the company, she said.

"They save people money so they can live better lives," Telsey said.

Similarly, Darden Restaurants, which presented at the panel, is offering more value items on its restaurant menus. The company's restaurant chains include Red Lobster and the Olive Garden.

"If you want to win in '09, it's going to be about value," Telsey said.

Other companies that are growing and that presented during the panel were AutoZone, Dollar General, Dunkin' Brands Inc., Panera LLC, Pinkberry and Collective Brands, which owns Payless and Stride-Rite stores.

Also speaking Sunday was international consultant Kate Ancketill, managing director of GDR Creative Intelligence Ltd. of London.

She highlighted three trends that are changing business and are important to the retail industry.

Online social networking, she said, is likely to expand into physical businesses where people can meet up to both work and socialize. She cited a new business in London, the Hub Culture Pavilion, which bridges the gap between virtual and reality and where members can barter their services to each other using "Ven" knowledge currency.

The concept is catching on, especially with people out of work, she said.

"They're becoming consultants, they don't want to be alone at home," she said.

A second trend involves brand-building opportunities.

Such opportunities, she said, "are greatest in a downturn."

Telsey noted, however, that during the recession many companies don't have a lot of excess capital to invest in brand opportunities and must use it on existing operations.

Ancketill highlighted Tide's extension of its brand with the opening of dry cleaning shops as a test in the Kansas City area. Using extensive research and modern marketing techniques, Tide hopes its new concept will catch on with features such as environmentally friendly processes, convenient tailoring and lockers where people can pick up their dry cleaning after hours.

Finally, Ancketill highlighted companies differentiating themselves through innovation. A Paris mobile phone store, for instance, has devoted use of one-third of its space as a concert venue to capitalize on the convergence of phones and music.

Michael Kercheval, CEO of ICSC, said attendance at the Las Vegas event this year will be about 30,000 people. That's down from 50,000 reported last year and is on par with the numbers seen in 2005 and 2006, he said. The number of exhibitors is about 1,800.

"Overall, companies are still participating, but they're sending fewer people to events," he said.

The conference is set against the troubling background of the demise of many retailers -- and likely more to come.

The international real estate firm Colliers International issued its Spring 2009 Retail Report saying many markets now have retail vacancy rates above 12 percent, with Las Vegas at 13 percent, and, "even though the apparent stabilization of the stock market has provided a bit of hope that the worst of the recession is behind us, the fact remains that significant pain is still in store for the retail sector."

"Shopping center owners, investors and tenants alike have fallen victim to a severe reduction in retail spending, leaving store space vacant and same-store sales well below levels seen in recent years. Retailers have shown little interest in opening new outlets, and are instead waiting on the sidelines for economic conditions to improve and for a visible uptick on the jobs front," the report said.

"In the meantime, a perfect storm has developed for retailers. The shrinking consumer dollar has essentially left the retail real estate marketplace overbuilt, and as a result, the retail sector is in the midst of one of the greatest contractions experienced in decades," Colliers said.

Specific findings in the report:

-- Most chains will continue the trend of shuttering underperforming locations that began in 2008. Retailers closed more stores than they opened last year, and will do so again this year.

-- This fallout could spread to otherwise well-run retailers due to plunging sales.

-- In terms of occupancy growth, 36 of the top 42 U.S. markets -- including Las Vegas -- recorded negative net absorption during the first quarter.

-- As for construction, developers are quickly putting projects on hold.

-- Rents are trending downward.

-- Retail real estate investment trusts are facing one of the toughest environments ever.