During this time of year, we'll read and hear lots of stories on the pulse of the consumer with interviews from retail CEOs as well as analysts. But another indicator on the overall health of the retail sector is the REITS that acquire, own, develop, redevelop, manage or lease regional and community shopping centers.
The occupancy of these REITs tell you just how robust the industry is performing—is it contracting or expanding? One of companies in this space is The Macerich Company (MAC) which owns approximately 73 million square feet of gross leasable space with primarily interests in 71 regional malls throughout the United States. Art Coppola, Chairman and CEO of the company tells me this holiday season could be a very merry one for the retail industry.
AC: We have high hopes that the consumer is ready to feel a little bit better about themselves, and to increase their spending back to the levels that would be consistent with the holiday season of three years ago. Obviously, two years ago in 2008 the consumers were very fearful of their own financial situation, and in 2009 they continued in their frugal way. My assessment is that people are ready to spend a little bit more.
They will be smart on their purchases, what we are seeing while sales are up across our portfolio, traffic is down a little bit because people are doing a little research before they go shopping. And when they do go shopping they are actually spending more per hour of shopping then they used to. The other thing that gives us a little reason for optimism is we are seeing several of our retailers hiring a little bit more help than they would normally hire for seasonal hiring, which I think is an indication that they (the retailers) understand that business is going to pick up a little bit this year.
The retailers are not over-stocking their stores in terms of merchandise but I think they are going to invest more in the sales help which I think people will appreciate. I think over the last couple of years, in the interest of cutting costs, a lot of retailers cut back significantly on their hourly employees. I think with consumers opening their pocketbooks more will create additional profits and sales for the retailers.
LL: The malls that you have are cornerstone's in the communities in which they are built in. Just to name a few, you have Tysons Corner Center just outside of DC, Queens Center in New York City, as well as Santa Monica place in California. What kinds of trends are you seeing from the occupancy side?
AC: Occupancies are up a little bit over the last year. We are close to 93 percent occupied right now versus 91.5 percent the same time last year For our portfolio that is close to full occupancy. You always have tenants moving in and moving out. The trends we are seeing in our portfolio are similar to trends people are clearly aware of—that "Fast Fashion" is something that is very much en vogue today and is very much what the consumer wants.
The people who are delivering fast fashion are delivering it at a price that is very attractive. So the H&M's of the world, the Forever 21's of the world, are delivering fashion very fast between concept and display in the store and they are delivering them at very attractive prices because they are vertically integrated in terms of their production. They're able to deliver merchandise at prices that are almost disposable for some folks. A lot of prices are $9.99 and $19.99.
LL: How would you characterize the consumer right now?
AC: Consumer savings rates have improved but the consumer basically has more disposable income than they had say two years ago. My sense of this is people were frugal for two years and now they are ready to loosen up a bit based on what we are seeing. I know when we opened Santa Monica Place in August, the mood among our retailers and consumers was we have been looking for something to celebrate in a way of shopping for quite some time and its kind of nice to do it.
I think people in general are beginning to loosen up a bit. They are still very frugal and smart, and that is their approach, but the key is we have the retailers that are delivering the merchandise that they want at the prices they are willing to pay, and I think that's what's translating into the improved sales and occupancies that we have in all of our malls.
LL: In terms of looking at growth opportunities for you. Where are they?
AC: We are really focusing on making our existing properties better. That's our whole focus and a huge opportunity for us. That's in our DNA for the last 35 years and we have quite a few projects on the drawing board ahead of us at Tysons and we need to finish off Santa Monica place. We've got exciting projects that we are thinking about at Scottsdale Fashion, at Walnut Creek (in California).
These projects we think will make the properties we have there even better. We have owned Santa Monica place for eleven years and its taken us that long to completely recycle it. And the results are dramatic. Our future is by making our existing properties better and that's our total focus.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."