After 35 years, I'm Still Working in the Trenches...And After You've Been
After 35 years, I'm Still Working in the Trenches...And After You've Been
Working the Sewer Long Enough, You Think Everything Stinks.
I attended the Washington, DC ICSC Dealmaking show and, attendance-wise, it
was a hit, with 2,300 dealmakers present, up about 10% from last year. Can’t
complain about that. Tuesday night’s cocktail was a super success with the
hall jammed. (But the food was horrible even though it was a sponsored
event. As I say, you don’t go to these events for the food, but it would be
nice to be able to nosh while networking.) I spoke to a dozen or so people
at the cocktail party who came for the party, but weren't attending the
actual dealmaking. Makes no sense to me.
The luncheon on Tuesday with Sam Donaldson as the keynote speaker was
jammed, as were the retailers' runway and classes held in the morning.
Everything "jelled" and people were upbeat. Nearly everyone I spoke to was
happy with their leasing activities for the year so far, but many said they
noticed a mild slowdown. (I heard that at the Chicago and Charlotte shows
also.) While the residential real estate market may or may not be having a
meltdown, the desire to acquire shopping centers is as strong as ever, with
several people mentioning they were being offered strips at a 5 ½ CAP rate.
It’s insane out there. One company president I spoke to said he wouldn't buy
a center at less than an 8% CAP. I asked when was the last time he acquired
anything and it was two years ago.
Wednesday, the day of the actual dealmaking, was another story. There were
forecasts of snow for the day before and the day of the dealmaking. Most of
the attendees became paranoid and left early. My questimate is that 30% left
by 1-1:30, but it still ended up a decent event and worth attending. Unlike
the Chicago show a month ago, where it also snowed (but anything under two
feet of snow doesn’t faze anyone who lives in Chicagoland), Mid-Atlantic
people tend to be more "meek" and get uptight when they hear the word
"snow," but they made sure to make all their appointments and network as
much as possible before heading out.
Even with so many punking out early, everyone present definitely wanted to
do a deal. Of course, the fact that the DC market is one of the most stable
areas of the country doesn’t hurt and I heard many of the retailers
complaining that the rents were getting out of control, but I’ve been
hearing that for a decade and it doesn’t seem to stop most from expanding.
All the retailers I spoke to complained about CAM charges and contend the
developers are ripping them off.
Without going into a "Josh" story, he couldn’t attend the DC show because he
was at the ICSC school at Wharton in Philly. His opinion of the instructors
and learning were high, but what I found most interesting is that he
contends that about 25% of those taking classes were former residential
sales people who now want to get into commercial. That should be an
interesting addition to our industry He also contends another large segment
of attendees were "support" personal (legal, finance, operations) that
wanted to gain some insight into leasing, since in most cases, lawyers and
bean counters have absolutely no idea what we do for a living or how
difficult it can be. But after three days of schooling, they should be
instant experts. Yeah, right. Oh, Josh went to the AZ ICSC show, and while
it’s a smaller event than most (under 800 attendees), he contends it was
upbeat, and, because he’s new to these events, he felt the show should have
lasted two or three hours longer. Can’t agree with him on that, but his
attitude is right. He also said he saw more new development at this show
than any other. He just called me from the Monterey show and said the
retailers' runway was packed with people.
On a different note, "we" (the Dealmakers) have done several e-blasts (we
send an email to 55,000 real estate pros on behalf of retailers) looking for
space. The response rates are excellent, but what’s really interesting is
the amount of "problemed" real estate being offered. In one case, the same
retailer was offered four different locations within one mile of each other
in the same town on the same road. Talk of a problem market. One of the
respondents was an experienced leasing professional, but in his email he
said: "And my location is far superior to that of Rouse's mall, a 1/4 mile
away. All the tenants in their center are leaving, mine have been here for
up to four years." Not a great response, but an interesting approach to
leasing in a weak market.
The good news is that with the industry expanding like crazy for the last
decade, the amount of vacant retail real estate is minimal. Nationwide, we
just have a few weak "pockets" to deal with, so with few exceptions, the
"bottom fishers" (and I say that in the most respectful manner) are having a
hard time finding as many locations as they want (and can justify rent for).
I tend to exaggerate when it comes to the amount of “C” and lower retail
properties available because after 35 years, I’m still working the trenches,
and after you’ve been working the sewers long enough, you think everything
stinks. But there’s been a major decline in vacancies, even in low quality
property. If you can’t lease now, maybe you should look into changing the
use of the center or get another job.
On another topic, one of the biggest complaints I hear at all the shows is
the difficulty of finding somewhat experienced leasing people. At least five
companies have called me this month alone wanting to know if I knew of
anyone "looking." What’s "cute" is that they all say: 1) I don’t want to
hire some dumb broker. (Duh, any idea what I do for a living?) and 2) We don
’t want to hire any "old" geezer. (FYI, I’m 61, I guess I’m an old geezer.)
But, they’re all willing to pay a decent buck for a warm body with two years
experience. While I don’t think I’d be willing to start over again in this
industry if I was in my twenties, the starting salaries are great compared
to what we "old geezers" made. Of course, as my grandmother would have said,
bread was only five cents a loaf in the good old days. The salaries in our
industry are high -- for the moment. Of course, if you can't lease or
acquire, you're fired fast, but that's part of the game.
Oh, before I forget, I highly recommend you make your plans for Vegas NOW,
as there’s a good chance this year will be another record-breaker. I’m told
many of the hotels are sold out and we just got our plane reservation and
finding desirable times was difficult, since many of the direct flights were
already booked.
On a different note, several years ago we worked on a center that had a
closed Kmart and the small shops were struggling because of a lack of
traffic. We brought the owner several offers running between $3.50 and $5
psf but were turned down because TI was required. Long story short, he
leased the Kmart to a flea market for $3.50 psf but no TI, just six months
free rent. I recommended against doing the deal but then, what do I know? I
just got a call from him today wanting to know if we’d try leasing again. He
lost 90% of his small shops and just bought out the flea market. (Guess he
ended up paying TI after all.)
As we talked, he explained he now needs $9 psf net, since he has to get back
the money he spent buying out the flea market. I tried to explain that his
"costs" didn’t matter, only the market rent did, but he wouldn’t listen. He
also explained he wasn’t putting any money into the deal. It was "as-is,"
take it or leave it.
I suggested he try one of our competitors that I don’t like to do the
leasing and gave him their number. Some people never learn. His real estate
isn’t bad, but it’s not that good, so coming up with some TI isn’t
unreasonable. I had suggested he either sell the center now or find a JV
partner so he’d have TI money available, but that was rejected also.
Now don’t get me wrong, I’m not opposed to flea markets. In “my younger
days,” I did dozens of flea market, roller rink and bowling alley deals in
centers, but I always knew it wasn’t the best use for the property.
Sometimes you got to do what you got to do to keep a center alive. But in
today's world, where raising money is easy and finding a JV partner is even
easier, it makes even less sense to screw up the tenant mix.
Working the Sewer Long Enough, You Think Everything Stinks.
I attended the Washington, DC ICSC Dealmaking show and, attendance-wise, it
was a hit, with 2,300 dealmakers present, up about 10% from last year. Can’t
complain about that. Tuesday night’s cocktail was a super success with the
hall jammed. (But the food was horrible even though it was a sponsored
event. As I say, you don’t go to these events for the food, but it would be
nice to be able to nosh while networking.) I spoke to a dozen or so people
at the cocktail party who came for the party, but weren't attending the
actual dealmaking. Makes no sense to me.
The luncheon on Tuesday with Sam Donaldson as the keynote speaker was
jammed, as were the retailers' runway and classes held in the morning.
Everything "jelled" and people were upbeat. Nearly everyone I spoke to was
happy with their leasing activities for the year so far, but many said they
noticed a mild slowdown. (I heard that at the Chicago and Charlotte shows
also.) While the residential real estate market may or may not be having a
meltdown, the desire to acquire shopping centers is as strong as ever, with
several people mentioning they were being offered strips at a 5 ½ CAP rate.
It’s insane out there. One company president I spoke to said he wouldn't buy
a center at less than an 8% CAP. I asked when was the last time he acquired
anything and it was two years ago.
Wednesday, the day of the actual dealmaking, was another story. There were
forecasts of snow for the day before and the day of the dealmaking. Most of
the attendees became paranoid and left early. My questimate is that 30% left
by 1-1:30, but it still ended up a decent event and worth attending. Unlike
the Chicago show a month ago, where it also snowed (but anything under two
feet of snow doesn’t faze anyone who lives in Chicagoland), Mid-Atlantic
people tend to be more "meek" and get uptight when they hear the word
"snow," but they made sure to make all their appointments and network as
much as possible before heading out.
Even with so many punking out early, everyone present definitely wanted to
do a deal. Of course, the fact that the DC market is one of the most stable
areas of the country doesn’t hurt and I heard many of the retailers
complaining that the rents were getting out of control, but I’ve been
hearing that for a decade and it doesn’t seem to stop most from expanding.
All the retailers I spoke to complained about CAM charges and contend the
developers are ripping them off.
Without going into a "Josh" story, he couldn’t attend the DC show because he
was at the ICSC school at Wharton in Philly. His opinion of the instructors
and learning were high, but what I found most interesting is that he
contends that about 25% of those taking classes were former residential
sales people who now want to get into commercial. That should be an
interesting addition to our industry He also contends another large segment
of attendees were "support" personal (legal, finance, operations) that
wanted to gain some insight into leasing, since in most cases, lawyers and
bean counters have absolutely no idea what we do for a living or how
difficult it can be. But after three days of schooling, they should be
instant experts. Yeah, right. Oh, Josh went to the AZ ICSC show, and while
it’s a smaller event than most (under 800 attendees), he contends it was
upbeat, and, because he’s new to these events, he felt the show should have
lasted two or three hours longer. Can’t agree with him on that, but his
attitude is right. He also said he saw more new development at this show
than any other. He just called me from the Monterey show and said the
retailers' runway was packed with people.
On a different note, "we" (the Dealmakers) have done several e-blasts (we
send an email to 55,000 real estate pros on behalf of retailers) looking for
space. The response rates are excellent, but what’s really interesting is
the amount of "problemed" real estate being offered. In one case, the same
retailer was offered four different locations within one mile of each other
in the same town on the same road. Talk of a problem market. One of the
respondents was an experienced leasing professional, but in his email he
said: "And my location is far superior to that of Rouse's mall, a 1/4 mile
away. All the tenants in their center are leaving, mine have been here for
up to four years." Not a great response, but an interesting approach to
leasing in a weak market.
The good news is that with the industry expanding like crazy for the last
decade, the amount of vacant retail real estate is minimal. Nationwide, we
just have a few weak "pockets" to deal with, so with few exceptions, the
"bottom fishers" (and I say that in the most respectful manner) are having a
hard time finding as many locations as they want (and can justify rent for).
I tend to exaggerate when it comes to the amount of “C” and lower retail
properties available because after 35 years, I’m still working the trenches,
and after you’ve been working the sewers long enough, you think everything
stinks. But there’s been a major decline in vacancies, even in low quality
property. If you can’t lease now, maybe you should look into changing the
use of the center or get another job.
On another topic, one of the biggest complaints I hear at all the shows is
the difficulty of finding somewhat experienced leasing people. At least five
companies have called me this month alone wanting to know if I knew of
anyone "looking." What’s "cute" is that they all say: 1) I don’t want to
hire some dumb broker. (Duh, any idea what I do for a living?) and 2) We don
’t want to hire any "old" geezer. (FYI, I’m 61, I guess I’m an old geezer.)
But, they’re all willing to pay a decent buck for a warm body with two years
experience. While I don’t think I’d be willing to start over again in this
industry if I was in my twenties, the starting salaries are great compared
to what we "old geezers" made. Of course, as my grandmother would have said,
bread was only five cents a loaf in the good old days. The salaries in our
industry are high -- for the moment. Of course, if you can't lease or
acquire, you're fired fast, but that's part of the game.
Oh, before I forget, I highly recommend you make your plans for Vegas NOW,
as there’s a good chance this year will be another record-breaker. I’m told
many of the hotels are sold out and we just got our plane reservation and
finding desirable times was difficult, since many of the direct flights were
already booked.
On a different note, several years ago we worked on a center that had a
closed Kmart and the small shops were struggling because of a lack of
traffic. We brought the owner several offers running between $3.50 and $5
psf but were turned down because TI was required. Long story short, he
leased the Kmart to a flea market for $3.50 psf but no TI, just six months
free rent. I recommended against doing the deal but then, what do I know? I
just got a call from him today wanting to know if we’d try leasing again. He
lost 90% of his small shops and just bought out the flea market. (Guess he
ended up paying TI after all.)
As we talked, he explained he now needs $9 psf net, since he has to get back
the money he spent buying out the flea market. I tried to explain that his
"costs" didn’t matter, only the market rent did, but he wouldn’t listen. He
also explained he wasn’t putting any money into the deal. It was "as-is,"
take it or leave it.
I suggested he try one of our competitors that I don’t like to do the
leasing and gave him their number. Some people never learn. His real estate
isn’t bad, but it’s not that good, so coming up with some TI isn’t
unreasonable. I had suggested he either sell the center now or find a JV
partner so he’d have TI money available, but that was rejected also.
Now don’t get me wrong, I’m not opposed to flea markets. In “my younger
days,” I did dozens of flea market, roller rink and bowling alley deals in
centers, but I always knew it wasn’t the best use for the property.
Sometimes you got to do what you got to do to keep a center alive. But in
today's world, where raising money is easy and finding a JV partner is even
easier, it makes even less sense to screw up the tenant mix.
posted by tedkraus at 7:45 AM
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