Uncertain post-pandemic reopening plans threaten real estate market

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    The changing nature of in-person and remote work is affecting the commercial real estate market, Empire State Realty Trust CEO Anthony Malkin tells Kelly Evans on ‘The Exchange.’ For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

    The biggest global trade association for the retail real estate industry is rebranding to update its image amid massive changes in the way people shop.

    The International Council of Shopping Centers announced Monday its initials ICSC will now stand for Innovating Commerce Serving Communities. ICSC said the changes have been about nine months in the making.

    The 65-year-old trade group said the shift is indicative of how ICSC, its members — which include U.S. mall and shopping center owners — and the entire retail real estate industry are rapidly evolving, in part due to repercussions of the coronavirus pandemic.

    “The terminology ‘shopping centers’ or ‘retail real estate’ are still clearly an important part of our membership,” ICSC President and CEO Tom McGee said in an interview. “But they’re somewhat descriptive to the historical nature of who our membership was, from a demographic standpoint … the property type that it was. As opposed to the impact that the industry has upon communities.”

    Today, McGee said, ICSC’s membership base is expanding to include other businesses such as technology start-ups and real estate service providers.

    “This is not just a rebranding,” he said. “To me, it’s reflective of what’s happening in the industry as a whole, and within our membership. And we’re evolving with the industry.”

    ICSC also hopes that a major facelift will make the trade association more appealing to a younger workforce.

    “We must modernize the brand to attract new and younger generations to the industry and be more welcoming to emerging businesses and other sectors within [commercial real estate],” ICSC said in a package sent to some members ahead of the announcement Monday.

    The rebranding comes as much of the retail real estate industry is trying to find a new footing coming out of the health crisis. One of the biggest threats to many retail shopping centers and malls has been the ascent of e-commerce.

    Not all properties have been harmed over the past year. Centers anchored by grocery stores and big-box retailers like Target, for example, have thrived as shoppers seek out those businesses for essentials. Others, however — and primarily enclosed shopping malls jammed with apparel boutiques — have lost tenants and watched shopper traffic fall off a cliff. Roughly 25% of America’s 1,000 or so malls have been predicted to close by 2025 as more consumers shift their spending online.

    Visitors are beginning to return. An index of 100 indoor malls tracked by retail analytics firm Placer.ai found shopper traffic was down just 8.1% last month from June 2019, pre-pandemic.

    Landlords face other hurdles in the fundamentals of their business. In parts of the country, rents for retail assets have plummeted, and the amount of available space has skyrocketed, with supply far outweighing demand. Across Manhattan, retail rents have fallen for 15 consecutive quarters and are touching historic lows.

    The vacancy rate for all retail real estate space in the U.S. climbed to 10.6% in the first quarter of 2021, according to research compiled by the real estate firm Newmark and Moody’s Analytics REIS. That marked a high not seen since 2013. More than 3.6 million square feet of retail space was returned to the market in 2020 and 800,000 square feet was returned in the first quarter of this year, Newmark and REIS said.

    Vacancies for U.S. malls hit 11.4% in the first quarter, the highest percentage in a decade, according to REIS.

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