Shopping Centers Today International

JAN 2016

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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Page 38 of 59

Institutions stay bullish on top-tier malls Richard Coppola, Managing Director and Head of Capital Markets Transactions, Global Real Estate, TIAA-CREF Financial Services New York City We have been very active in the re- tail space this past year and expect that to continue into 2016. We tend to focus on super-regional malls that dominate their markets and are run by top operators. These assets tend to outperform through all cycles, and we expect that to continue. The best example of that strategy in 2015 was our investment in Ala Moana Center, in Hawaii, which is probably one of the best malls in the world. We chased some of the other large transac- tions that were in the market this past year. Interestingly, the challenge with this asset class is access to product. There aren't a lot of new super-regional malls being developed, which has con- tributed to the strong performance of existing assets. Some of the best invest- ments you can make with your capital are in improving strong retail assets you already own. The returns on such invest- ments are usually significant. Internet-resistant merchandising key Patrick S. Donahue, Chairman and CEO, Donahue Schriber Realty Group Costa Mesa, Calif. In our sector, necessity-based centers, we are likely to see continued upward pricing pressure on assets this year, due to a lack of new supply. Cap rates could move down even further if interest rates remain relatively unchanged. To take advantage of current pricing trends, our firm is likely to be a net seller in 2016, if only by a slight margin. This year we will also see a contin- ued focus on Internet-resistant mer- chandising of centers. That means adding more restaurants and service- and entertainment-type tenants, such as dental offices and veterinary prac- tices, fast-casual food concepts and luxury cinemas. We have been looking at each of our centers on an individual basis with an eye toward refining their mer- chandise mix and ensuring that the right tenants are in the right centers and spaces within each property. We will be buying back leases in an effort to retenant our spaces and improve the selection for our customers. In our region, the Western U.S., employment should continue to improve, and high housing prices and low housing inventory are the only real negatives. The major chal- lenge for developers in this region is finding the tenants to drive develop- ment. The anchors that have tradi- tionally been the catalyst for new de- velopment are still on the sidelines. That, coupled with the difficulties surrounding the entitlement of new projects, makes for a very tough pe- riod for developers. If you have an existing center or portfolio, you are in a much better place, because there is little to no new competition — that is, development — and the supply-de- mand equation is in your favor. "We will see a continued focus on Internet-resistant merchandising of centers. That means adding more restaurants and service and entertainment." J a n u a r y 2 0 1 6 / S C T 39

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