Autumn has been a busy time for our Retail, Restaurant and Consumer team, with our attendance at two major industry events each attracting thousands of attendees. Interestingly, both events recorded their largest attendance numbers to date, and given Brexit and the results of the U.S. presidential election there was much fodder for discussion. Here’s what we learned:
For the sixth year in a row, a contingent from Goulston & Storrs attended the annual MAPIC (le marché international professionnel de l’implantation commerciale et de la distribution) conference in Cannes, France in late November. Over 9,000 attendees convened in Cannes for three days of exhibition, presentations and networking events. We noticed the presence of more retailers this year, including start-up retailers, and an increase in attendance by service providers (mostly technology based vendors). We also noticed the presence of more U.S. based retail owners/developers, including our client WS Development. WS Development, along with representatives from The Lansco Corporation, Marvin Traub and Millman Executive Search, joined our panel entitled “USA Retail: Strategies for Successfully Bringing Your Brand to the States.” A lively discussion as always, we leveraged the group’s collective decades of experience in counseling retailers on their USA expansion plans and covered everything from location, talent acquisition, and the continued effects of omnichannel and the sharing economy.
As anticipated, the first question we were asked on the exhibition floor was about the results of the U.S. presidential election. Many attendees seemed knowledgeable of our election process (including the purpose of the Electoral College). Most were also surprised by the results and many were shocked with the tone and demeanor of the campaign.
The second most-discussed topic was Brexit and its impact on London and the rest of the UK, Europe and the U.S. Many of the Brits we spoke with said that, if the vote were held today, they think the vote would be to remain in the EU. Many noticed that, after a pause following the Brexit vote, business activity is picking up in London. They see more leasing activity, including the payment of key money by retailers wanting to secure prime locations. A major mall operator in and around London, for example, has two malls opening soon and their executives seemed optimistic about the success of these projects and retail in general in the UK. Historically, London has served as a spring board for European retailers before they enter the U.S. Italian, German, Spanish and other European retailers first open stores in London before they expand to the U.S. There was some thinking that, as a result of Brexit, these retailers may opt to skip London and come directly to the U.S.
Many of the people that we spoke with were very concerned with the surge in nationalism across the globe, first with Brexit and now with President-Elect Trump. Many believe that Germany may emerge as the defender of what many consider Western values – global trade, open borders and an inclusive social agenda. Spain appears to be having a financial resurgence. Our colleagues at the Manubens law firm, which is based in Barcelona, sent a large contingent of lawyers to the conference, and noted the positive change in Spain in the last ten years. The Brits we spoke with believe that many in Europe will view London as a good place to invest in real estate. They also believed that London will not lose its place as the financial center of Europe. The Germans, French and other Europeans we spoke with also thought that London is a desirable place to invest in real estate. However, some think that the financial center for Europe will move from London to Frankfurt, Madrid or Barcelona. Conversely, a recent article in the Financial Times (November 18, 2016) suggested that the U.S. might be the beneficiary of Brexit speculating that the European financial center will migrate to Manhattan because Manhattan already has the infrastructure in place to support the financial institutions and will become even more attractive to these institutions if President-Elect Trump is successful in relaxing current banking regulations as he has suggested.
Speaking of Manhattan, with the Trump Tower just a few blocks away, Goulston & Storrs also attended the annual ICSC New York conference in early December.
Record attendance of over 10,000 sparked a good mood overall, and one poll by an exhibitor showed that most respondents expected the economy to be even better in 2017. Deals are being done, and a surprising number of retailers are focused on growth. There are more vacant spaces in New York City than in past years resulting, in part, from landlords’ expectations that they can continue to achieve record setting rents for retail space. However, there appears to be a growing realization that these “record” rents can no longer be justified, and there is some optimism that a market correction is underway, which will lead to new stores being able open in these vacant spaces. Many also note that, in more conventional suburban shopping centers and malls, traditional retailers are decreasing the size of their stores as they focus on, and reap some of the benefits of, eCommerce. On the other hand, eCommerce retailers are realizing that they need to open old fashioned brick and mortar stores in order to grow and prosper, and these retailers are taking excess space in many urban and suburban retail projects.
As far as the U.S. election is concerned, no one we spoke with at the NY ICSC thought that their businesses would be threatened by the results of the election. On the contrary, most thought their businesses would see better days ahead. The election was not the main topic of conversation as it was at MAPIC, and we associate that with the tendency of most Americans (even New Yorkers) preferring to shy away from having public discussions about politics.
Interestingly, as the New York ICSC gets bigger, people in our industry are wondering about the ICSC’s objectives for the New York ICSC. Does it continue to be a larger version of itself as primarily a deal making conference perhaps eclipsing RECon one day, or does it become more of a networking conference, like the ICSC OAC, with an international bent like MAPIC? Those C-suite executives with whom we spoke prefer the later.
The Retail Law Advisor team will report on all of these and other developments as we continue to travel to future industry events.