I am pleased to share that ten of the Progressive Real Estate Partners team have just returned from a few very intense days at the ICSC Las Vegas Conference which is the largest annual gathering of retail real estate professionals. Our team estimates that we shook hands, hugged, fist bumped, and of course talked and met with at least 700 participants including retailers, property owners, city officials, and vendors. Although the conference is certainly an opportunity to discuss specific deals, it is more an opportunity to strengthen relationships and obtain industry information.

After conferring with the team, the following are 9 of our takeaways from this year’s conference.

1. Tenants Are Paying Their Rent: We met with numerous property owners and one of the questions we like to ask is whether they are seeing an increase in delinquencies. Across the board, the answer was “no”. There are always isolated situations where vacancies occur, but currently vacancies are not being created for economic reasons. There was certainly concern about the future. Many that we spoke to have been through a few cycles and they recognize that when it seems too good, it sometimes can be, but overall the retail market from a rent payment perspective is healthy.

2. Shop Space Development May Be Mostly History: Rising construction costs was a constantly repeated theme. These rising costs are substantially impacting the potential for new development. It appears that new shop space is costing at least $600/SF to build including land, buildings, common area improvements and soft costs. To justify building in today’s interest rate/cap rate environment, rents have to be $4.00 to $4.50/SF/month, plus triple net charges to justify new construction. Yes, there will be some isolated shop space built as a part of larger projects and there may be some small, high profile shop buildings built to accommodate a few high-volume restaurants, but otherwise, expect that the days of building multi-tenant strip centers in Southern California will be rare.