Craig
LONG BEACH, CA-“In the later part of last year, we got some healthy momentum; however, the recovery is not without its challenges.” So said economist Joseph Magaddino, chairman and professor of economics at Cal State University, Long Beach, at ICSC’s 2011 Southern California Idea Exchange at the Convention Center in Long Beach. The No. 1 challenge, he said, is the unemployment rate. “We are projecting solid growth in employment throughout the year, but it won’t be a big bounce back.” The primary reason for that, he said, is the level of unemployment.
Magaddino joined several other panelists in the opening general session titled, “What’s New in Your World?” at the event, which drew roughly 1,100 attendees. This year will be a good year, Magaddino projected. “Consumer finances are improving, we are seeing an increase in real household wealth, credit conditions are improving, and there will be positive job formation—projected around two million jobs this year.” He added that he expects growth in GDP of around 3% for the next three years.
Despite Magaddino’s forecast, there is still a perception of a lack of capital in the marketplace, explained moderator Steven Craig, president and CEO of Craig Reality Group in Newport Beach, CA. Capital markets specialist Steve Fried, principal of Mesa West Capital, based in Los Angeles, said that he is seeing an uptick in the marketplace. “In the last 90 days, we are getting a lot more requests,” he said. “You are seeing more capital out there now.”
ICSC Panel
Capital markets expert Bruce Krall, managing director of Cohen Financial, based in Chicago, said that lenders "are feeling a bit more confident.” For example, life companies have allocated more funds to real estate, non-traded REITs are raising money and the overall capital outlook is "very optimistic."
With money coming back to the market, so are developers, according to tenant rep broker Mike Navarro, owner of Navarro Retail Group, based in Newport Beach, CA. “I think it is going to be an exciting year for new development, particularly adaptive reuse,” he said.
Some retailers are scaling down and others are scaling up, Navarro explained. “On top of that, retailers are changing their footprint much quicker than they ever were before,” he said, “so you have to be open-minded and flexible.” Navarro said that he cautions developers not to get too excited about current conditions. "I am concerned that all the activity will artificially raise rents or expectations and that will get us into trouble,” he said.
Tenant rep broker Nelson Wheeler, founding partner of Strategic Retail Advisors of Newport Beach, said he isn’t necessarily bullish now on the recovery, but is definitely seeing signs of improvement. “The supply is dwindling. My crystal ball gets cloudy, but things feel a whole lot better now. 2012 will be a great year with positive views in all sectors,” he said.
Mark Miller, vice president of real estate for the Western US at CVS Caremark, based in Woonsocket, RI, said the company had "a great holiday season" after a tough couple of quarters in 2010, and is now expecting "a positive 2011." Miller said that his company is being a bit more conservative on its growth patterns, but wherever a store makes sense in California, the company is willing to move forward.
Jim Warmington Jr., president and CEO of the Costa Mesa, CA-based housing developer Warmington Group, said that for home builders, "It is still a weak and fragile recovery and the biggest problem is demand, which is affected by unemployment to the biggest degree.”
Going forward, Warmington Jr. said the company is focused on strong locations, closer to job bases and closer in than places like the Inland Empire. “A little improvement these days can make a huge difference in our profitability to our company," he said.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
