One of the things I am committed to this year is capturing my Takeaways from the various events that I attend throughout the year and sharing them. Click here for Previous Takeaways.

In 1966 Robert F. Kennedy delivered a speech at the University of Cape Town, South Africa. In this speech, known as Day of Affirmation Address, Kennedy said something fascinating! There will be a tie-in here, I promise…

Thursday, August 17th  NAIOP Southern Nevada’s breakfast program was titled – The Evolution of Retail. That morning our moderator was NAIOP Retail Broker of the Year – Adam Malan.

On the panel…

  • Dan Hubbard– Retail Broker with Cushman Wakefield
  • Mitch Ogron – Developer with Sienna Holdings
  • Frank Volk– Retail Broker of Las Vegas Resort Properties with RKF

Adam was fluid! He kept the conversation moving, and at the same time, was able to get the panelists to go really deep in certain areas. This program was chock full of information. So much so, that I am going back to the origins of Takeaways, and will provide the information in bullet points so we can cover a ton of ground. But first, here is the tie-in…

Even though Bobby Kennedy’s speech in Cape Town was about individual liberty, he could have easily given part of the address on the Evolution of Retail, and much of it would apply. When he wanted to emphasized the dangers of the day he used this line…

“There is a Chinese curse which says, May he live in interesting times.”

And then he continued with,

“Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind. And everyone here will ultimately be judged – on the effort he has contributed to building a new world society and the extent to which his ideals and goals have shaped that effort.”

Uncertainty. Most creative of any time in the history of mankind. Judged on the efforts contributed to building new.

Does that not sound like the narrative in the Retail world today?


I became keen to Kennedy’s Day of Affirmation Address after panelist Mitch used his line, (there is a Chinese curse – May you live in interesting times.) I was intrigued. Why would it a be curse to live in interesting times? Wouldn’t it be a blessing to live in interesting times? I looked it up.

It’s not a curse. It’s not even Chinese. In fact, there isn’t even an equivalent expression in Chinese. The closest thing to it translates to “Better to be a dog in a peaceful time, than to be a human in a chaotic period”. What’s my point here?

Sometimes, when you take something at face value, you’re liable to miss critical nuance. Now, there is no debate that the retail world is changing. But I am personally not convinced that we will see the death of brick-and-mortar. There is too much nuance. It’s just not accurate. If it were, why would Amazon buy 460 Whole Food stores for $13.7 billion?

We spent more than an hour that morning discussing the ever changing landscape of Retail real estate. Every bit of it was productive.

  • Who are the active retailers right now and why?
  • Is there a risk of saturation with fast food restaurants?
  • With headlines like “Death of the American Mall” is there a concern about Fashion Show and all of the retail currently being built on the Strip?


Adam kicks off with a question to Dan – “compare leasing today to pre-recession markets.”

  • Tenant demand today is strong. Especially in end-cap, class A spaces.
  • Restaurants in particular. They are the new anchor.
  • QSR (quick service restaurant) and Sit down.
  • Pad buildings and drive-thrus are all active.
  • It’s not quite build it and they will come, but back to healthy rents.
  • Every gas user is active.
  • Medical is on the move. They are good space fillers and they can pay retail rental rates.

On vacant anchor boxes. Who is most active?

  • It’s really trade area specific.
  • The closed Vons at Boca Park is rumored to have a deal on table.
  • Furniture users are absorbing anchor boxes, and specialty grocers.
  • Kmart on Eastern that closed has converted to At Home and Seafood City.
  • SproutsT.J. MaxBurlingtonRoss. All active.

Malan shifts gears: “Mitch. What are you developing?”

  • Working on QSR’s. StarbucksTexas Roadhouse.
  • Mitch has 2-3 years of work in the pipeline.
  • He likes QSR’s because there is less risk.

“Contrast the current environment to 1998 – 2000.”

  • Lenders were more gracious. After Dodd Frank loan requirements are more stringent.
  • Developers need 60% pre-leasing for new development and more equity is required for financing.
  • Mitch’s development formula starts with rents he can achieve with a tenant, adds construction costs, builds in an 8% return on cost and backs into the price he can pay for the land.

Adam praised Frank Volk. Refers to him as the Wizard Behind the Curtain. (I made that up). Then asks, “What are you seeing for tenant demand on the Strip. Which users are active? Contrast pre-recession activity with what you’re seeing today.”

  • Strip retail is essentially closed mall retail.
  • We’re seeing more F&B (food and beverage) activity.
  • In fact, The Shoppes at Palazzo is converting 30% of its retail to F&B.
  • Rents have been static pre-recession to now.
  • Not surprising because Strip retail was never a concession submarket.
  • When leasing space in the suburbs (credit worthiness of the tenant) gets you concessions.
  • On the Strip credit just gets you in the door.
  • Then landlords look at concurrency on sales, branding, etc.

On sales and cap rates… Dan, Adam and Mitch chimed in.

  • For anchor retail we’re seeing an influx of new buyers.
  • Institutional REIT type buyers. Avocado Farmer type buyers.
  • Smith’s at Montecito sold for a sub 6% CAP rate with high rents.
  • Shadow properties are selling for mid 6% CAP rates with buyers casting a 5-10 year hold strategy.
  • Strip centers are selling at low 6% CAP rates.
  • Chic-fil-A and In-N-Out are trading at 3.5% 4% CAP rates.

On Land… “Are we at or past peak pricing? Is there a concern about construction costs increasing?”

Mitch went on a little riff.

  • Land is up.
  • Construction costs are up.
  • Labor is up.

Then he said it… “There is a Chinese curse – may you live in interesting times.” He went on to opine…

  • This is not a bubble.
  • There is geopolitical uncertainty.
  • Global capital is looking for a safe place.
  • Mid 4 cap to low 5 cap rates are becoming a standard. (Adam threw that in).
  • But what happens if cap rates jump 1% from 5-6 to 6-7 and you’re only building to an 8% return?

Frank weighed in about property sales and development on Las Vegas Blvd.

  • Won’t see a big sales volume.
  • Trades have been to pension money and sovereign money.
  • There is a lot of unlocked value with casino property frontage.
  • Problem is casinos are just not in the landlord business.
  • We’re seeing starts and stops on north end of the strip.
  • Convention Center is going.
  • Wynn’s Lagoon is going.
  • Genting is going.
  • Fountainebleau was rumored to be in escrow. Icahn announced that it closed 12 days later. (That’s why you shouldn’t miss NAIOP events homie!)
  • Even with $7 billion in development slated for delivery in 2020, the North Strip needs more density and ADR’s to increase.
  • 60/70% of dollars being spent by visitors are not on gaming.


Back to Dan for the wrap up and then the Q&A.

  • The developments we are seeing are demand based.
  • Not seeing supply getting way out in front of rooftops.
  • It has been a while since we’ve seen this many site-plans for new development.
  • Smith’s at Cadence.
  • Sprouts has 3 active sites which will include shop spaces built around the anchor.
  • Albertson’s has 3 sites.
  • Walmart and Costco.
  • Walker Furniture is going up by IKEA.
  • We are seeing a trend in apartment projects with ground floor retail. (*coughs – Millennials Hipsters)
  • Raiders – we’re waiting to see what retail will be popping up around the stadium and are talking with land owners.

Questions from the Audience:

Isn’t there a concern of fast-food or QSR saturation?

  • Restaurant sales exceeded grocery for the first time in history.
  • These restaurants are where a large portion of the population are getting their meals.
  • Restaurants are the new anchors.
  • Development and new locations are driven by sophisticated tenants that will not open too close to other stores.
  • Answer is no.

We have all read the ‘Death of the American Mall’ headline. Can you speak to this?

  • Retailers closing is largely retailers’ fault.
  • By not adapting or by managing their inventory so tightly they don’t have items in store.
  • There are A malls, B malls, and C malls. 60% of retail sales happen in A malls.
  • That stat alone tells you some of those malls can go by the wayside.
  • But the mall isn’t going anywhere. Retailers will just adapt.

There it is again. Uncertainty. Creativity. Efforts to building new.

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