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Brad M. Hutensky ICSC Chairman May 9, 2013

22 nd Annual Connecticut Commercial Real Estate Conference. Brad M. Hutensky ICSC Chairman May 9, 2013. Retail Real Estate Overview. T he International Context Internet’s Impact on Bricks & Mortar The Opportunities in US/CT Retail. Why Is Retail Exploding Globally?.

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Brad M. Hutensky ICSC Chairman May 9, 2013

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  1. 22nd Annual Connecticut Commercial Real Estate Conference Brad M. Hutensky ICSC Chairman May 9, 2013

  2. Retail Real Estate Overview • The International Context • Internet’s Impacton Bricks & Mortar • The Opportunities in US/CT Retail

  3. Why Is Retail Exploding Globally?

  4. Have Seen Growth First Hand • In Brazil: 44 Malls in next 24 months • In Middle East: Malls being built EVERYWHERE! • In China: 24.5 Million Sq. Ft. in Tianjin

  5. Shopping Center SpaceUnder Construction 24.5 mm sf • Tianjin, China • Shenyang, China • Chengdu, China • Abu Dhabi, UAE • Wuhan, China • Hanoi, Vietnam • Beijing, China • Shanghai China • Kuala Lumpur, Malaysia 10-14 Xi’an, Shenzhen, Chongqing, Nanjing, Guangzhou China Source: CBRE

  6. Retailer: The Growing Middle Class

  7. Year-Over-Year Retail Sales Source: ICSC

  8. GLA Per Capita 24 .76

  9. Mall Development 2007-2012

  10. Every market is different • Customers Wants & Needs • Government’s laws • Industry Norms

  11. World Speaks Language of Retail 1) Product 2) Price 3) Convenience 4) Service 5) Experience

  12. The Threat of E-Commerce

  13. Will E-Commerce make Bricks &Mortar Retail Irrelevant?

  14. Retail is dead, long live retail Brick-and-mortar stores serve customers who end up buying online The internet has made shops obsolete in some towns

  15. The Internet’s Growing Share of Retail Sales 5.2% 1.6 % Source: U.S. Census

  16. Showrooming: visit the store, study the product, shop online for the lowest price

  17. Retailer Bankruptcies & Store Closures

  18. BUT HERE’S THE TRUTH

  19. Retailers Still Expanding Source: RBC Capital Markets

  20. Where We Buy Depends on What We are Buying Buy on the Internet Buy at Stores Men’s suit, hair cuts, home furnishings, groceries, apparel, pharmaceuticals • books, music, shoes computer software, video games

  21. Need for Human Contact Trip to the Mall

  22. Need for Human Contact Trip to the Theater

  23. Advantages of the Store • Immediate gratification • Cash purchasers • Exchange/return • Omni Channel

  24. Retailers with Major B&M Presence Are 12 of the Top 20 Highest Online Sellers Source: The Top 500 List

  25. Conclusion • Customer is changing • Successful retailers are changing too • Internet is driving efficiencies in pricing, inventory and customization

  26. U.S. Retail Real Estate Markets

  27. U.S. Retail Real Estate Market in Brief • 113,355 Shopping Centers = 7.5Billion sq ft of GLA in 2013 • Creates 18 Million Jobs • Modest sales increases • Minimal New Development • Only 1 Mall opens in 2012 • About 46 new open air centers open YTD

  28. Three Observations AboutU.S. Retail R.E. Markets • We don’t need more supply, mostly • Bifurcation of Capital • “A” Properties get lots of attention • Non-stabilized, smaller market, lesser tenants get little attention • Lender Balance Sheets are swollen

  29. Where are the opportunities? • Redevelopment (aging stock; best locations) • Urban/Mixed Use • Serve the new population growth

  30. Repositioning Opportunities

  31. Age of U.S. Shopping Centers More than 15 years old ~80%

  32. e-Commerce Creates Opportunity As store sizes become smaller… • Re-tenanting upside • More locations per market • More new development

  33. Why Governments Embrace Retail Real Estate • $1 million in sales at a • brick-and-mortar store • creates nearly 4 jobs. • Catalyst for other uses (residential & office) • Retail attracts visitors and related businesses and generates tax revenue.

  34. Opportunity from Population Growth

  35. US Total Population Redevelopment (aging stock; best locations) 2010-2050 Growth 1970-2010 Growth ~440 million people ~309 million people ~203 million people

  36. Retail In ConnecticutFollows US Trends • Older stock: Lots of opportunity for redevelopment • Population: we will get less than our share • Urban/Mixed Use: • Blue Back Square: West Hartford, CT • Storrs Center: Mansfield, CT • Front Street: Hartford, CT

  37. International Council of Shopping Centers in Brief

  38. Total ICSC Membership 59,000+ Canada6% Other5% Europe7% U.S.81%

  39. ICSC World Wide • In 2012: 350 meetings; 100K+ attendees • RECon Las Vegas, USA 32K registrants • $57MM annual budget

  40. ICSC Goal: Members’ Success Networking: a business of relationships Education: Learn from the experienced Research: All the information you need

  41. Some Final Thoughts • Retail Real Estate Truly Global: In Different Stages of Maturity (US most mature) • Massive Change =Massive Opportunity • ICSC: Goal to help US & Growing International Members Prosper at Whatever Stage

  42. THANK YOU!

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