1 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DECEMBER8,2016

15 Quick Takes from the ICSC New York National Deal Making Conference

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The Fung Global Retail & Technology team attended the International Council ofShoppingCenters’(ICSC)NewYorkNationalDealMakingConferenceinNewYorkCityonDecember5–6.Theeventdrewcloseto10,000retailrealestateprofessionalsfromacross thecountry.Theconference focusedonnetworkinganddealmaking,butalsofeatured presentations on growing retailers, trends and opportunities in urban andsuburban spaces as well as breakout sessions on driving customer engagement anddefiningproperty.

15QuickTakesfromtheEvent

1) The New York National Deal Making Conference was a hive of businesstransactionactivity.Therewerenearly10,000developers, retailers,brokersandother retail real estate professionals from around the country in attendance attheconference,whichistheICSC’ssecond-largestglobaldeal-makingevent.

2) Food, beauty and fitness brands are taking over the vacant retail spaces leftbehind by Office Depot, Office Max, Kmart and Sears. Big boxes are gettingbrokenupandexperientialretail isfillingthevoid.GrowingretailbrandsincludeCharmingCharlie,CinemaxCinemas,ClubPilates,FiveBelow,FlywheelSports,LePainQuotidien, Sephora, ShakeShack, Skechers, SweetgreenandTacoBell. Thecommonthreadsamongthesegrowingbrandsaretheirdistinctbrand identitiesandtheirclearunderstandingof theircustomerdemographic.Forexample,FiveBelow differentiates itself as a store that offers “trend right” products topredominatelypreteenandteencustomers.

2 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DECEMBER8,2016

3) Companies that create communities of engagement around their brand are themost successful. Think Soul Cycle, Apple and Lululemon Athletica. Brands thatcreateaholisticbrandexperience,wherethecustomerwantstospendtimewiththebrand,are creatingpowerful connections. Forexample, Sonos,abrand thatsellsspeakersandaudioequipment, letscustomers“tryon”itsproducts,anditsstudio houses seven listening rooms. Some stores host activities to createcommunity.Lululemon,forinstance,hostsstoreactivitiessuchasgrouprunsandyogaevents,whichattractconsumerstothebrand.Otherbrands,suchasAppleandUrbanOutfitters, have created such brand loyalty that consumers come totheirstorestospendtimewiththeproducts,resultinginlongerdwelltimeandanevenstrongerbrandconnection.

Source:Twitter

4) Retailers cannot just deliver a product anymore. There is an expectation of anelevated, integrated store experience. This is happening everywhere. Starbuckschangedthecoffeebusinessinthe1990s,andthebrandwasconsideredhighendthen.Now,theStarbucksbaristaexperienceisbecomingmoresophisticatedandvisual,withStarbucksrollingoutanewlookforitsshopsandlaunchingStarbucksReservestores.Thenewshopswillsell$10cupsofcoffeemadeinglasssiphons,$10“flights”ofReservebrewsandnitrocoldbrewviaaseparateReservemenu,therebyofferingcustomersawholenewexperience.

5) Festivalsbuildacommunityaroundbrands.Sweetgreen,agrowingfoodretailerfocused on locally sourced, farm-raised produce, held its first Sweetlife musicfestival in 2007 with 500 attendees. The festival has grown to over 23,000attendeesandnowfeaturesmorethan15bands.Thebrandsaidthatmusichasalwaysbeenanessentialpartofretailers’DNAandthatitbringspeopletogetherinacommunity,likefooddoes.

6) Consumers are looking for experiences that they can post on socialmedia, andsome retailers are responding. The Galeries Lafayette mall in Paris relied on acompanycalledSkyBoytocreateanaugmented-realityChristmasexperience.Onthesecond floorof themainstore, shoppersare immersed inadreamlikestorythat features a virtual polarbearwalking throughas if itwereactually roamingaround inside the store. Virtual snowflakes fall, draping the entire dome in awhiteshroud.

3 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DECEMBER8,2016

7) Demographics should inform how retail real estate targets customers. Forexample, retail space focusedonmillennials should feature restaurantsand fastfood, because millennials account for the biggest share of spending on thiscategory per year, 28% (baby boomers’ share is only 21%), according to datapresentedbymarket research firm,AlexanderBabbage, Inc. Babyboomers andmillennials spend $11,000 per capita per year on general merchandise sold atshoppingcenters,whileGenZersspend$7,000percapitaperyear.Babyboomersaccount for16%ofhealthandpersonalcarespendingwhilemillennialsaccountfor11%.

8) GenZ, the fastest-growingdemographic, isdifferent frompriorgenerationsandpresentsauniqueopportunity forretailers.Bornafter2000,GenZersrepresent26%ofthepopulation.Thegroupismoreindependentthanmillennialsare,andisthe first generation to grow up not having known life without technology andrelatedservices.Manyretailersarecurrentlyignoringthisboomingsegmentandmissinganopportunityforgrowth.

9) Creativeuseoftechnologywillhelpdrivecustomerengagementandexperiences,buttherehasnotbeenagreatdealofitintheretailspace.OneexceptionistheClevelandMuseumofArt,whichusestechnologythatallowsvisitorstosynctheirlaptops to “takehome” theentiregalleryofart.Thisallowsvisitors tocontinuetheirenjoymentbeyondtheretailexperience.

10) Physicalretailisstillveryimportant.Impulseorunplannedpurchasesaccountfor43%ofsalesatshoppingcenters.Accordingtodatapresentedbymarketresearchfirm Alexander Babbage, a company with an omnichannel presence is moreproductive if ithasaphysical store.Anomnichannel retailer thatallows returnsnets $1.06 on returns due to exchanging or upselling in-store, whereas an e-commerceretailerwithreturnsnetsonly$0.78oneverydollar.

Source:Twitter

11) Customersoftenchooseamallbasedonconvenienceandeaseofnavigation.Theshoppingcenterrealestateperceptionisimportantfromabrandperspectiveanddirectsthecustomerengagement journey.Thecustomerexperiencebeginswiththeshoppingcentersignageandparking,which isoftenoverlooked.Storytellingusing kiosks is effective in helping shoppers navigate, and Simon Malls hassuccessfullydeployedsuchkiosks.

4 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DECEMBER8,2016

12) TouristmarketsarefeelingtheimpactofastrongUSdollar.However, localsarestepping up to the plate as they experience what RichardWagman, ManagingPartner at Madison Capital, characterized as the “Trump bump.” Wagman’ssentimentwascautiouslyoptimisticregardingthemarket’sreactiontoTrump,astax cuts, infrastructuredevelopment andwage growthwould all bepositive fortheretail industry. IfTrump’sannouncedplansonthese frontsarenotenacted,therewillbeacorrection—andtheworryisthatitmaybemoresignificantthananticipated.

Source:Twitter

13) UnderArmourCEOKevinPlanksaidthathewantstoreinventretailandbuildthebestretailstoreintheworld.Hechallengedtheconferenceattendees,saying,“Idon’twanttoinsultanyone,butcomeandgetit!”PlanksaidthatUnderArmourwants to be an anchor tenant, and that 190million people use at least one ofUnderArmour’s apps today. The companyhas experienced20%growth for thepast26quarters.

Source:Twitter

5 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DECEMBER8,2016

14) UrbanrenewalishappeninginBaltimorethroughSagamoreDevelopment,whichisbehindthesecond-largesturbanrenewalprojectinthecountry.Theprojecthasmore than $535 million in public financing and is a planned $5.5 billioninvestment.SagamoreDevelopment’sPortCovingtonprojectwillhelpBaltimore’seconomic development, and help bring jobs toMaryland and keep them there.Theproject includes2.5miles ofwaterfront spanning235 acres, and14millionsquare feet of mixed-use development. Port Covington will help to fundinfrastructure improvements, includingnewparks,a citygrid,a light rail stationand a pedestrian bridge. The projectwill also be the home forUnderArmour’sglobal headquarters. Similar revitalization projects on different scales arehappeninginCincinnatiandDetroit.

15) High-streetrentsareoffthechartsandsomelandlordsareturningtosecondaryandtertiarymarketsasaresult.Despitevacancyratessoaringbymorethan50%,from10.1% in the fourthquarterof2015to15.9% in thethirdquarterof2016,ownersofcommercialrealestatelocatedbetween49thStreetand60thStreetinNewYorkCitycontinuedtopushrentstoall-timehighs.

Source:Twitter

6 DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DECEMBER8,2016

DeborahWeinswig,CPA

ManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comErinSchmidtResearchAssociate

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