Down to Business

ICSC Las Vegas remains the signature commercial real estate conference

The annual ICSC spring conference in Las Vegas defies the city’s iconic tagline. Because when it comes to the industry’s signature annual event, what happens in Vegas most definitely doesn’t stay in Vegas. From the people you meet to the projects and possibilities you talk about, the seeds planted in the desert tend to sprout and bear fruit in the future.

This year’s event felt both comfortingly familiar and, in some interesting ways, intriguingly different. The conference was well-attended and felt busier than ever, especially on Day 2, where the activity seemed, if anything, higher than normal. The afternoon of the second day is when we typically start to see things slow down a little, but this year, things were jumping. Interestingly enough, throughout the central and south halls, it felt like there were fewer freebies and a little less flash this year. The event felt more utilitarian—and that’s not necessarily a bad thing. The overall vibe was that folks were there to work and get down to business, which may be a sign of how industry professionals see ICSC these days: as a rare and valuable opportunity they can’t afford to squander.

In terms of takeaways, we were reminded that there is a real lack of quality available space out there and a fair amount of pent-up demand. Strong markets remain extremely, even historically tight, and there was a great deal of retailer activity at the show centered around brands looking for more space.?

The lack of new inventory is contributing to that dynamic, and some obstacles to new development remain. Part of that is interest rate related and part of it is connected to construction costs. By now, the construction cost narrative has been retold many times, but the good news is that there does seem to be some light at the end of the tunnel. We heard from several developers who noted that costs have leveled off somewhat after declining from their peak in 2023. The hope is that they continue to drop down to a point where developers can justify moving forward with new projects. One interesting market note is that some of the reluctance to sell seems to be easing. We’ve spoken to many owners who likely would have sold in the last year had it not been for the ongoing devaluation. These would-be sellers have been holding out and waiting for values to recover, but fellow brokers we talked to at the show said that a growing percentage of their clients who fit that description are now ready to transact.

Another theme we heard on more than one occasion in Vegas was about retailers’ increased sensitivity to sales transfer. Brands (especially F&B retailers) are much more concerned these days about the possibility of “stealing” sales from an existing location. As a result, they are paying closer attention than ever to factors like population density, traffic patterns, and natural or artificial barriers that might impact people’s shopping behavior. Some brands are even setting hard limits on how close each of their stores can be to one another.

Of course, we’re always paying special attention to any noteworthy trends that will have an impact in our home market here in Houston. One thing we’ve experienced here that seems to be a common occurrence in other major metro markets across the country is the difficulty in leasing even higher quality retail space downtown. The general consensus is that this is, in large part, due to the changes in how office space is being used. With so many more flex and part-time in-person work models, the only days you can really count on doing any business in downtown areas that don’t have a strong multifamily or residential component is Tuesday through Thursday—and that’s just not enough for most retailers.

Obviously, the big news at the show was the announcement that Red Lobster was filing for bankruptcy. TGI Friday’s is rumored to possibly be next in line. We heard lots of rumors about other brands, with names like Big Lots and Petco appearing on people’s professional who’s next lists. That’s consistent with what we’ve been hearing more generally about flattening of sales or even 0% same-store sales growth across many different retail categories. On the positive side for Houston, however, we continue to hear great things about Texas in general and Houston specifically, in terms of positive demographic momentum that continues to translate to positive sales trends. Retailers consistently had great things to share about the performance and profitability of their Texas stores.

We say this every year, but it’s worth reiterating because it’s so important: the quantity and quality of the information being shared at this show is unlike anything else in the industry. Much of that information comes from casual conversations, anecdotes, or asides, not even from scheduled meetings. Information is flowing freely if you can put yourself in a position to hear it. Baker Katz is a part of X Team and its platform of 40+ offices around the country, so that booth is always a great place to gather and meet. The greatest value of ICSC Las Vegas is making new contacts and starting to build those new relationships. It sounds like a cliché, but it’s undeniably true—and important. We made several connections at this year’s event that we’re excited to strengthen moving into the future.

Those new connections are why we always come back from a show like this with so much energy and excitement. The next part that we look forward to: following up and seeing what plays out and how those relationships materialize. When someone asks how the show went, the best reply might be to say, “Ask us in two years.” Some of the best and most important opportunities and relationships take time to develop.

There were so many questions around ICSC during COVID. It’s an expensive show to put on and to attend. There was real concern that it might go away forever or at least be unrecognizable compared to what it once was. The last two years have reaffirmed to us that there absolutely is a place for a show like this in the spring. ICSC Las Vegas might not be quite as vibrant or glitzy as it was pre-COVID, but it remains as productive, relevant, and important as ever.