Super Bowl champion NFL coach and ICSC LAS VEGAS keynote speaker Andy Reid advised event attendees to elevate the energy givers on their teams and to sideline the energy takers. The tenants providing shoppers with essential services and memorable experiences are the energy givers in today’s Marketplaces Industry, filling vacancies, serving consumers and communities and attracting investment. Below are highlights from ICSC LAS VEGAS, including the hot tenant types from entertainment, healthy eats and specialty treats to health-and-wellness.

And farther down: organized retail crime, supplier diversity and retail’s high status among investors as evidenced by expert commentary and by the planned acquisition of The Necessity Retail REIT.

Entertainment Operators Help Fill Retail Space

Entertainment operators are helping fill and revive all kinds of existing retail space and even driving new development in some cases. In its first annual entertainment report, released at ICSC LAS VEGAS, JLL identified 9.1 million square feet of entertainment space slated to open in the U.S. and Canada within the next two years. The firm identified 503 entertainment concepts that have multiple planned or existing locations. Some are regional chains with modest ambitions, but many have national and international expansion plans.

Eatertainment concepts — which feature food, drink and multiple games under one roof — will open the most locations, totaling 2.9 million square feet. Up-and-coming concepts include Andretti Indoor Karting & Games, The Rec Room, FatCats and Evo Entertainment.

Virtual reality has the second most units opening, followed by competitive socializing, which is a single game along with food and drink. Emerging concepts in these segments include Chicken N Pickle, Flight Club, Immersive Gamebox, Sandbox VR and X-Golf.

Trampoline zones and kid parks, escape rooms, art installations and selfie museums, esports arenas, and lounges and barcades where customers play vintage arcade games in bar settings are other categories of growing entertainment tenants.

Most entertainment venues fall into two size ranges: 25,000 to 32,000 square feet for operators like eatertainment and art installations and 4,500 to 8,500 square feet for barcades and virtual reality.

Many such concepts are costly to construct and need a landlord to pay for the buildout in exchange for some kind of equity stake, according to Kristin Mueller, JLL president of retail property management. “Some concepts are expensive, especially if there’s a kitchen involved,” she said, noting that tenant improvement allowances for an expensive concept could be up to $400 per square foot.

The biggest hurdle in negotiations between landlords and tenants is the amount the landlord will contribute to upfront construction dollars. Rising interest rates have limited the opportunities to profitably borrow when funding new construction. “Our landlords give us high tenant improvement allowances and they build, and we pay higher rent,” said Garrett Stutz, director of real estate expansion at pickle ball-focused Chicken N Pickle. The company operates seven locations and plans to open eight more by next year. Some of its locations have helped boost sales 20% at surrounding tenants, he said.

Healthy Eats and Specialty Sweets Drive Leasing at Open-Air Centers

Chipotle, Panera, Starbucks and a host of emerging food-and-beverage chains like Sweetgreen, True Food Kitchen, Salad and Go, Dig and Vitality Bowls are driving leasing at many open-air centers. “We’re seeing the strongest growth right now in the healthy eats quick-service restaurants and specialty sweets categories,” said Phillips Edison & Co. vice president of national accounts and retail partnerships Mike Conway.

The specialty sweets category includes signature doughnut makers like Pinkbox Doughnuts and Shipley Do-Nuts, creative cookie makers like Crave and Crumbl and beverage specialists like drive-up drink shop Swig and Wow Wow Lemonade Stand, which offers fresh pressed Hawaiian lemonades.

Outlet centers, too, are welcoming more food tenants. For its six-property portfolio, TORG has signed leases for four new restaurants/eateries comprising over 12,000 square feet, most of which had been devoted to apparel retailers.

Health-and-Wellness Operators Fill Leasing Gaps

Health-and-wellness tenants continue to draw traffic and add a sense of community to properties. “More landlords are willing to put us front and center where we need to be,” said Jamie Goldberg, vice president of real estate and development for One Medical, an operator of health clinics that average about 4,500 square feet.

Many health-and-wellness operators are regional players that can’t afford upfront construction expenses and need to reinvest their profits in store operations, Goldberg said.

The Necessity Retail REIT Will Be Acquired and Other Signs Investors Crave Retail Right Now

Headlines about high interest rates and weak banks haven’t halted deal flow. “There’s still activity in the markets,” said Phillips Edison & Co. president Devin Murphy. His firm purchased four Publix-anchored properties for $78.7 million during the first quarter. Two kinds of sellers are floating grocery-anchored properties, he said: institutional buyers that are overallocated to real estate and selling what has the highest cap rate and individual holders that are being asked to put more equity into the asset because of loan terms and therefore want to cash out instead.

One of the country’s biggest investors in commercial property is bullish on retail: “We’re enthusiastic about retail at a high level because of record-low development,” said Blackstone managing director of real estate Stephanie McGowan. “We’re looking for pockets where we can find growth potential in the cash flow. We see it in the Sunbelt. We follow the population trends.”

Marcus & Millichap president and CEO Hessam Nadji declared: “Retail is the new apartments,” meaning that investors see retail as the strongest and most promising investment among the various commercial property types.

Indeed, during ICSC LAS VEGAS, industrial- and office-focused Global Net Lease announced plans to boost its retail property portfolio by purchasing The Necessity Retail REIT in an all-stock deal that would value the combined entity at $950 million. The combined companies will own and operate 1,350 properties with an aggregate asset value of $9.6 billion, according to a press release. Necessity Retail’s portfolio — 1,057 properties, according to its website — will increase retail’s share of Global Net Lease’s portfolio markedly. Most of Necessity Retail’s properties are single-tenant buildings leased to the likes of Truist Bank, The Home Depot and Petco.

Necessity Retail REIT won’t be the last retail-focused REIT to be consolidated this year, predicted JLL’s Mueller. “Ownership of real estate will be getting bigger, consolidating down to fewer REITs,” she said.

And REITs aren’t the only investors craving retail. Life insurance companies want more exposure to retail, too, said First Washington Realty CEO Alex Nyhan.

There’s also a new $2.6 billion fund aiming to gobble up convenience-anchored properties in 50 dense suburban markets around the U.S. Crow Holdings and a global institutional investor want to add properties to an existing $1.8 billion, 173-building portfolio of supermarket- and food-anchored retail that’s owned by two real estate funds and managed by Crow.

ORC Is a Costly Diversion, Retailers Say

Retailers are spending millions fighting organized retail crime, money that otherwise could go toward opening stores and upgrading existing ones, experts said. “We’re spending big on talent, including a 24/7 national strategic operations center and interactive training for associates,” Ulta Beauty vice president of loss prevention Julie Giblin said of efforts to fight ORC. “It’s table stakes for retailers to create a safe work environment.” Gangs have rushed into the company’s stores and swiped shelves clean of products, disrupting its supply chain and sometimes harming sales associates and customers.

The problem has led Ulta Beauty to do more risk modeling and site visits and have police department conversations before signing a lease, she said. Other measures include expensive new fixtures that make it harder to sweep shelves and technology that keeps power tools from functioning until they’ve been properly purchased, said National Retail Federation vice president of asset protection and retail operations David Johnston.

Retailers are asking landlords to pressure local and federal government leaders to put stronger laws in place that punish perpetrators and make it harder for gangs to steal from stores and resell the loot in other marketplaces. The INFORM Consumers Act, signed into law in January, is a model for further legislation, he said.

ICSC continues to actively advocate at the state and federal level for tougher ORC penalties, supporting legislation like S.140/H.R. 895, known as the Combating Organized Retail Crime Act of 2023, and other measures that classify certain thefts as felonies rather than misdemeanors and aggregate the dollar value of a series of thefts. ICSC welcomes the rollout of the INFORM Act in June, which will help deter resale of stolen and/or counterfeit items online.

Diversity Among Suppliers Generates More Dollars

Marketplaces Industry companies are cutting costs while boosting community involvement and sustainability by diversifying their suppliers. “By adding more suppliers, we’re opening up the pool,” said Charner Rodgers, McDonald’s USA development director of business diversity for U.S. restaurant development. “We’re not taking away from nondiverse suppliers. We are adding.” Rodgers said having a deeper, more diverse bench helps companies avoid groupthink, be more sustainable and save money.

Only about half of all companies have supplier bases that are at least 20% diverse, said Rock Irvin, chief commercial officer of SupplierGATEWAY, a software platform that helps companies procure, onboard, manage and track the progress of minority suppliers. Most SupplierGATEWAY clients have 3% diversity among suppliers and aim to get to 20% within two years, Irvin said. His company is working with ICSC and The Commercial Real Estate Diverse Supplier (CREDS) Consortium to meet growing interest among companies to further diversify their supply chains.

That’s a key directive for Kimco Realty because it’s good for business, said regional vice president of property management Levie Johnson. “An Influx of new vendors ensures you’re getting the best service,” he said, advising that landlords “spread the wealth” by rotating vendors frequently and having multiple vendors across a single market. In one instance, Kimco centers across the street from one another used competing landscaping firms. “When you have multiple vendors, you get a better deal,” he said.