My Dreams Come True, I'm a Porn Star
Recently, Ann received an email saying: "I just wanted to make a suggestion, I think Ted needs to update his picture. I can't even get myself to read what he writes because I look at the picture and I can't take him seriously... He looks like a 1970s porn star. The first time I picked up a Dealmakers Magazine I had to check the date; I thought I had a vintage copy... No offense, just a suggestion..."
Now I admit the picture is at least 15 years old, maybe 20, and it is on my "to do" list to be updated (I'm going to put it on the top of the list soon, real soon) but I didn't think I looked like a porn star. WOW, thanks, I take it as a compliment. Anyway, I get the hint and we'll have a picture of an old man instead of a young kid up here soon.
Not meaning to continually harp about my son, "But" I was talking to a broker friend and he asked how it was going with Josh joining the company. After a few minutes of discussion he said that he doesn't know if he would let his kid be a tenant rep in particular and that he wasn't sure about brokerage in general. I asked "Why?" His contention is that with all the consolidation going on between retailers and developers (Example; Kimco acquiring Pan Pacific's 138 shopping centers for $4 billion or Centro Watt buying Heritage's 176 centers for $3.2 billion just in the last few weeks and Bain acquiring Burlington Coat, Michaels and Toys R Us) much of the properties and leasing power will be in the hands of a small group with lots of clout, making it much more difficult for tenant reps to survive and prosper but putting a bigger demand for leasing agents working directly for the retailer and owner (like the "good old days"). At what point in time will a "Kimco" say to Target or Wal*Mart, who have brokers in every region, "Hey fellas, you're our tenant in 125 centers, we have a close working relationship, we DON'T WANT to have to pay a broker that does nothing but show you a property we've presented to you over 10 times during the last five years. We already know how to do a deal with you, why do we need a broker?" They'd be saving HUNDREDS of thousands of dollars on every deal and no matter how big or rich these companies are, spending money is not one of their priorities." Most REITs already have a "Meet the Retailers" day periodically where their in-house leasing staff meet with a different retailer once every two weeks or so. The retailer does a "show 'n tell" on who they are and what type of real estate they require and then each individual agent presents property they're handling that makes sense or they think makes sense for the retailer.
By directly dealing with the retailer, the REIT is beginning to cut out the broker and the time will come when the broker is cut out completely. However, in my opinion, the company with a small or regional portfolio will still need brokers to help assist their in-house leasing agent and this change is still up to 10 years off, but change will occur, it's when that's the unknown. My friend also contends that the future of "consultants" is bright for companies and individuals that can assist large owners in obtaining entitlements from towns/states, or other support services that require the type of experts that usually do not work well as employees, but do great as outside support personnel/consultants. I'm not sure if I agree with him, but there is logic behind his beliefs.
Which brings me to my next thought; while figures don't lie, they can be confusing. I was researching the ICSC's membership list and came up with some interesting numbers. First, "we've" grown to 65,000 members, which is a hell of a number and a substantial increase just in the last five years. But (like I say, there's always a "but") there are only 15,000 individual companies involved. In other words, each company averages four members and the majority of growth of the membership is in support services, not retailers or developers. What makes matters more startling is that of the 15,000 member firms, only about 1,600 are retailers, so basically about 10% of our industry are the "girls." Reminds me of the days when I was single and hit the bars to find female companionship. There were usually 10 guys for every female, and like many developers you "settle" for what you can get at 3 a.m., but you know it's not a long-term commitment.
Anyway, considering that our industry spends and earns BILLION$ a year and the impact of what we do for the economy and world is tremendous, we're a small group with lots of influence; I always find our influence amazing since I know who's involved and it's hard to be impressed.
Right now, the prospect of the economy going into a recession is slim. Even with a slowdown in leasing, the industry is doing well. Instead of being great, it's good and good is great. Rents for "A/B" properties and new developments are hitting record highs. Part of the reason for increases in rent is that land and construction costs are accelerating but most of the increase is occurring because the owner can command bigger numbers from the tenant. Not all these centers will do the sales to justify higher rents, but some retailers have to expand annually to keep Wall Street happy. New developments are the quickest and easiest way to open numerous stores year after year; so they're willing to pay the high asking rent. Also, new construction has an advantage over existing centers in that there's no history of sales to depress rental numbers, and by their nature retailers are optimists, so they tend to think/believe that the next new store will be a home run and therefore worth paying a premium for. God bless optimism.
My concern (and for the record, if I was an owner who COULD command high rents, even if the tenant couldn't do the numbers to justify the rent, I would) is that I have a gut feeling which I can't prove, that a high percentage of retailers are only making a profit from their older stores with low rents and that their newer units have either no or little cash flow. Let's hope I'm wrong.
Now I admit the picture is at least 15 years old, maybe 20, and it is on my "to do" list to be updated (I'm going to put it on the top of the list soon, real soon) but I didn't think I looked like a porn star. WOW, thanks, I take it as a compliment. Anyway, I get the hint and we'll have a picture of an old man instead of a young kid up here soon.
Not meaning to continually harp about my son, "But" I was talking to a broker friend and he asked how it was going with Josh joining the company. After a few minutes of discussion he said that he doesn't know if he would let his kid be a tenant rep in particular and that he wasn't sure about brokerage in general. I asked "Why?" His contention is that with all the consolidation going on between retailers and developers (Example; Kimco acquiring Pan Pacific's 138 shopping centers for $4 billion or Centro Watt buying Heritage's 176 centers for $3.2 billion just in the last few weeks and Bain acquiring Burlington Coat, Michaels and Toys R Us) much of the properties and leasing power will be in the hands of a small group with lots of clout, making it much more difficult for tenant reps to survive and prosper but putting a bigger demand for leasing agents working directly for the retailer and owner (like the "good old days"). At what point in time will a "Kimco" say to Target or Wal*Mart, who have brokers in every region, "Hey fellas, you're our tenant in 125 centers, we have a close working relationship, we DON'T WANT to have to pay a broker that does nothing but show you a property we've presented to you over 10 times during the last five years. We already know how to do a deal with you, why do we need a broker?" They'd be saving HUNDREDS of thousands of dollars on every deal and no matter how big or rich these companies are, spending money is not one of their priorities." Most REITs already have a "Meet the Retailers" day periodically where their in-house leasing staff meet with a different retailer once every two weeks or so. The retailer does a "show 'n tell" on who they are and what type of real estate they require and then each individual agent presents property they're handling that makes sense or they think makes sense for the retailer.
By directly dealing with the retailer, the REIT is beginning to cut out the broker and the time will come when the broker is cut out completely. However, in my opinion, the company with a small or regional portfolio will still need brokers to help assist their in-house leasing agent and this change is still up to 10 years off, but change will occur, it's when that's the unknown. My friend also contends that the future of "consultants" is bright for companies and individuals that can assist large owners in obtaining entitlements from towns/states, or other support services that require the type of experts that usually do not work well as employees, but do great as outside support personnel/consultants. I'm not sure if I agree with him, but there is logic behind his beliefs.
Which brings me to my next thought; while figures don't lie, they can be confusing. I was researching the ICSC's membership list and came up with some interesting numbers. First, "we've" grown to 65,000 members, which is a hell of a number and a substantial increase just in the last five years. But (like I say, there's always a "but") there are only 15,000 individual companies involved. In other words, each company averages four members and the majority of growth of the membership is in support services, not retailers or developers. What makes matters more startling is that of the 15,000 member firms, only about 1,600 are retailers, so basically about 10% of our industry are the "girls." Reminds me of the days when I was single and hit the bars to find female companionship. There were usually 10 guys for every female, and like many developers you "settle" for what you can get at 3 a.m., but you know it's not a long-term commitment.
Anyway, considering that our industry spends and earns BILLION$ a year and the impact of what we do for the economy and world is tremendous, we're a small group with lots of influence; I always find our influence amazing since I know who's involved and it's hard to be impressed.
Right now, the prospect of the economy going into a recession is slim. Even with a slowdown in leasing, the industry is doing well. Instead of being great, it's good and good is great. Rents for "A/B" properties and new developments are hitting record highs. Part of the reason for increases in rent is that land and construction costs are accelerating but most of the increase is occurring because the owner can command bigger numbers from the tenant. Not all these centers will do the sales to justify higher rents, but some retailers have to expand annually to keep Wall Street happy. New developments are the quickest and easiest way to open numerous stores year after year; so they're willing to pay the high asking rent. Also, new construction has an advantage over existing centers in that there's no history of sales to depress rental numbers, and by their nature retailers are optimists, so they tend to think/believe that the next new store will be a home run and therefore worth paying a premium for. God bless optimism.
My concern (and for the record, if I was an owner who COULD command high rents, even if the tenant couldn't do the numbers to justify the rent, I would) is that I have a gut feeling which I can't prove, that a high percentage of retailers are only making a profit from their older stores with low rents and that their newer units have either no or little cash flow. Let's hope I'm wrong.
posted by tedkraus at 3:33 AM
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