Current Economic Expansion Could Become Longest Yet, Says Nadji

Current Economic Expansion Could Become Longest Yet, Says Nadji

Attendees at Marcus & Millichap’s Retail Trends 2019 event in Las Vegas listen intently as CEO Hessam Nadji discusses the fast pace of change in the retail real estate industry.

LAS VEGAS — The reinvention of the retail sector now underway is getting a boost from a U.S. economic expansion that is nearly a decade old but which still has legs, says Hessam Nadji, president and CEO of brokerage services firm Marcus & Millichap.

Meanwhile, demographic shifts have altered the retail landscape in profound ways and will continue to do so, Nadji believes. Every day, 10,000 Americans turn age 65. An even greater number, 12,000, reach the age of 21 on a daily basis. “It is the most incredible dual demographic movement of any developed country on the history of the planet. That has a lot to do with why the economy is doing well and why retail is reinventing itself.”

The longest U.S. economic expansion on record spanned a decade, from 1991 to 2001. The current expansion is poised to surpass that high-water mark this July.

The economy has added 21 million jobs since 2009, a modest 16 percent increase during that span, according to Nadji. Meanwhile, inflation has been held in check. The PCE (personal consumption expenditures) inflation rate has fallen 190 basis points since 2007 to 1.5 percent.

The 10-year Treasury yield, the benchmark for long-term, permanent financing in commercial real estate, stands at about 2.4 percent, which is 170 basis points lower than it was in 2007, the height of the last economic cycle.

Add to the mix a healthy American consumer. Core retail sales, excluding auto and gas sales, are up 39 percent from the peak of the last economic cycle.

“Think about this: 21 million jobs with no inflation. That’s why interest rates have been so low, which is the lubricant for the business world and which is the lubricant that allows you to take some risk in the midst of this retail reinvention,” Nadji told several hundred retail professionals gathered at the Renaissance Las Vegas Hotel early Monday evening for “Retail Trends 2019” hosted by Marcus & Millichap.

“The 21 million jobs that we created since the bottom of the recession came at a very slow pace,” says Nadji. The slowness of the growth has ensured its durability.

In addition to Nadji, who was the featured speaker at Retail Trends 2019, the event included a panel discussion on the retail real estate investment market. Moderated by Scott Holmes, senior vice president and national director of retail for Marcus & Millichap, the panel included Beth Azor, president of Azor Advisory Services; Bill Lenehan, president and CEO, Four Corners Properties Trust; and Jami Passer, chief investment officer for Edens.

The Marcus & Millichap event occurred in conjunction with RECon, the three-day show hosted by the International Council of Shopping Centers that brings leading developers, owners, brokers, retailers and lenders all under one roof to do deals at theLas Vegas Convention Center. The RECon show attracts more than 30,000 attendees.

Illuminating findings

E-commerce, which is one piece of the vast and rapidly changing retail landscape, accounts for 14.8 percent of core retail sales nationally, according to Nadji. While online sales is the fastest growing retail segment, it’s noteworthy that the mobile commerce share of total online sales rose from less than 10 percent in 2011 to about 25 percent in 2018, stated Nadji.

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Consumers are also increasingly relying on their smart phones to place orders. For example, mobile ordering at Starbucks accounts for 15 percent of transactions, up from eight percent two years ago. At Home Depot, 37 percent of online shoppers make an additional, unplanned purchase when picking up an item in the store.

Digitally native brands are expanding their footprint. Casper, which sells mattresses and sleep products, plans to open 200 stores in the next few years. Men’s clothier Bonobos currently has more than 50 stores and plans to open 100 stores by 2020. Footwear retailer Allbirds plans to open eight stores in the next year.

The growing consumer demand for some online retailers to offer brick-and-mortar stores isn’t the only change that’s occurring, says Nadji. “The in-store experience is also changing. Allbirds has a hamster wheel so that you can try on your new shoes,” he said with a chuckle. And Casper encourages shoppers to take in-store naps.

Retail construction slows

While demand for brick-and-mortar stores has ticked up, construction activity has slowed dramatically, which has helped drive down the overall vacancy rate from nearly 8 percent a decade ago to under 5 percent today, the Marcus & Millichap data shows.

The single-tenant retail sector serves as an example. In 2007 and 2008, developers delivered 266 million square feet of single-tenant retail space nationally. In a sharp contrast, Marcus & Millichap projects the total space delivered in that retail segment from 2014 through 2019 will be 263 million square feet

“We are not overbuilding retail anymore,” concludes Nadji. Instead, the industry is adapting and reinventing as necessary to meet changing consumer tastes.

— Matt Valley

CIM Group Announces New Name for Downtown Atlanta’s Gulch District: Centennial Yards

CIM Group Announces New Name for Downtown Atlanta’s Gulch District: Centennial Yards

Centennial Yards in downtown Atlanta will include 12 million square feet of office, retail, apartment and hotel space.

ATLANTA — CIM Group has renamed downtown Atlanta’s Gulch district as Centennial Yards. CIM will develop Centennial Yards to include 12 million square feet of office, retail, apartment and hotel space. Local news outlets reported the site was up for consideration for Amazon’s national HQ2 search in 2017 and 2018. CIM Group expects the project to add 12 city blocks to the 16-acre site, which is currently a parking lot for nearby destinations including State Farm Arena and Mercedes-Benz Stadium. Los Angeles-based CIM bought the site in December for a reported $115 million. According to a press release, the term “Centennial” creates a clear geographical reference to the project’s location along Centennial Olympic Park Drive. Moreover, with over 100 years of rail and industrial history at the site, the moniker “Yards” pays homage to the rail history of the area. A timeline for construction of Centennial Yards was not disclosed.

Cushman & Wakefield Arranges $39.6M Sale of Vacant Hotel in South Florida

Cushman & Wakefield Arranges $39.6M Sale of Vacant Hotel in South Florida

The Palm House Hotel was originally built in 1961 and expanded in 1981. In 2006, the hotel underwent renovations that halted in 2014.

PALM BEACH, FLA. — Cushman & Wakefield has arranged the $39.6 million sale of The Palm House Hotel, a 79-room hotel in Palm Beach. The hotel was originally built in 1961 and expanded in 1981. In 2006, the hotel underwent renovations that halted in 2014. The hotel is now vacant. The buyer, an affiliate of London + Regional Properties, acquired the site via a Section 363 bankruptcy sale. Robert Given, Errol Blumer, Robert Kaplan and Michael Mulkern of Cushman & Wakefield represented 160 Royal Palm LLC, a bankruptcy court-appointed receiver managed by former Delray Beach Mayor Cary Glickstein, in the transaction. The Palm House Hotel sits on 1.4 acres at 160 Palm Royal Way on Palm Beach Island one block from the Atlantic Ocean.

GID Development to Build 600-Unit Apartment Project in Houston

GID Development to Build 600-Unit Apartment Project in Houston

The next phase of development at Regent Square in Houston will feature 600 multifamily units and 50,000 square feet of retail space.

HOUSTON — GID Development Group, which has nine regional offices across the country, will develop a 600-unit multifamily project within Regent Square, a 24-acre mixed-use development in Houston. The project, which will include 50,000 square feet of street-level retail space, marks the second multifamily phase of Regent Square, and follows the delivery of the 21-story Sovereign at Regent Square building in 2015. Floor plans will include studio, one- and two-bedroom units. The groundbreaking for the project, which is being designed by Boston-based CBT, is slated for this fall. JLL will handle leasing of the retail space.

HFF Places Loan for Refinancing of 717-Bed Student Housing Property in Houston

HFF Places Loan for Refinancing of 717-Bed Student Housing Property in Houston

Aspen Houston totals 717 beds.

HOUSTON — HFF has placed a loan for the refinancing of Aspen Houston, a 717-bed student housing property located at 4971 Martin Luther King Blvd in Houston. The amount of the loan was not disclosed, but the financing was arranged as part of a $92 million package to refinance a student housing portfolio totaling 1,653 beds in Iowa, Texas and South Carolina. Doug Opalka, Casey Wenzel and Michael Johnson of HFF arranged the funds on behalf of the ownership, which is partnership between Austin-based developer Aspen Heights and global investment firm Safanad.

Muskin Commercial Brokers Sale of 42-Unit Multifamily Asset in Austin

Muskin Commercial Brokers Sale of 42-Unit Multifamily Asset in Austin

AUSTIN, TEXAS — Locally based brokerage firm Muskin Commercial LLC has brokered the sale of Retama Trace Apartments, a 42-unit asset located in north-central Austin. Muskin Commercial represented the seller, 3405 Dimond LLC, in the transaction. Ray Quezada of Q Realty Austin represented the buyer, California-based Retama Trace Apartments LLC.

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