Economists Talk Optimism and Tough Times at ICSC

Even at a time that many economists are calling one of the worst markets in a generation, some retailers are expanding.

That was the news from Brian Tunick, an analyst covering specialty retail for financial services firm J.P. Morgan who made his case for optimism during a recent research conference produced by the International Council of Shopping Centers and held in Los Angeles.

Tunick pointed to several major manufacturers and retailers that are following through with plans to build branded boutiques. Manufacturing giant VF Corp., based in Greensboro, N.C., for example, has not changed plans to build more than 500 stores for its brands in the next five years, according to Tunick. The company is considering building 70 Vans stores, 200 Lucy activewear boutiques and 70 The North Face stores.

According to Tunick, New York–based Liz Claiborne Inc. is considering building more than 100 stores for its Kate Spade and Juicy Couture divisions. Texas-based Fossil Inc. is talking about opening 150 stores.

Retailers American Apparel, Urban Outfitters and The Buckle also are set to build stores during this tough economic time, Tunick said. However, the analyst also said the majority of retailers and businesses will have to brace for tough times.

“There are signs of success out there. But there is no rising tide,” Tunick said. If a retailer or a line is not unique, it would be battered by the poor economy, he said.

The next few business quarters will be tough for many businesses, according to Tunick. However, he said most established brands and companies will survive the turbulent market.Big picture

Tunick was one of several speakers at the 2008 ICSC North American Research Conference, which was held Oct. 5–7. In addition to discussing real estate research, the conference’s economists, researchers and businesspeople tried to make sense of the big economic picture, which has been dominated by ongoing bad financial news, including Lehman Brothers filing for bankruptcy protection last month and the escalating credit crisis.

Economist Mark Zandi spoke at the conference and predicted that the economy will start growing again in 2010. However, consumers might not start spending freely until late 2010 or early 2011. Zandi is chief economist and co-founder of Moody’s Economy.com, based in West Chester, Pa.

Zandi said he believes there will be a lag between economic engines revving and consumers finding confidence to start spending again. Zandi, a baseball fan, used a sports analogy to describe the progress of the national economy. “We’re in the sixth inning of a nine-inning game. It is not a double-header,” he said.Mall woes

Commercial real estate also will be affected by the market woes, said Jim Sullivan, managing director of Green Street Advisors, a commercial real estate research firm based in Newport Beach, Calif.

Power centers and shopping centers anchored by retailers focused on the flagging housing industry will suffer. They might not regain their footing until the housing market stabilizes. Lower-quality malls, such as those anchored by Steve & Barry’s, the national retailer that filed for Chapter 11 bankruptcy protection in July, might also brace for tough times, as they try to replace tenants that have left the mall.

The top malls should have an easier time finding solid replacements for vacant spaces in their retail centers. Prominent mall owners such as Simon Property Group Inc. might even be in a good position to buy newly available commercial property for a low price, Sullivan said.

The next couple of years will test the mettle of any business, said Rick Caruso, founder of Caruso Affiliated, which developed popular retail centers The Grove, the 4-year-old lifestyle center in Los Angeles, and Americana at Brand in Glendale, Calif., which opened earlier this year.

The best way to attract and retain customers, even in tough times, is to provide better customer service and innovative products. “The better customer is fickle,” Caruso said. “They have a lot of choices.”