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Retail REIT CEOs Talk Potential Trends

12/06/2012 | By Carisa Chappell

Just in time for the busiest shopping season of the year, REIT CEOs in the retail industry spoke with REIT.com about what they anticipate will be the dominant trend in the retail sector.

Craig Macnab, chairman and CEO of National Retail Properties, Inc. (NYSE: NNN), said consumer confidence is clearly one factor, yet he added that it's not the only factor. He noted that he pays more attention to employment and income trends.

"But, like it or not, we are in an environment where the consumers shop until they drop," he said. "Even though employment is not stellar, savings is less than it should be, and the consumer finds a way to keep spending."

David Henry, vice chairman, president and CEO of Kimco Realty Corporation (NYSE: KIM), said he has noticed smaller store prototypes across the board. Even the most successful retailers are trying to do a little bit more with a little bit less store size.

"We think that's going to continue, especially as they integrate their e-commerce and Internet operations with their store operations. But it's clear they still need their store operations for their display of goods. I believe some day you are going to see Amazon rent space in shopping centers," Henry said.

Tom Lewis, CEO of Realty Income Corporation (NYSE: O), pointed to low interest rates as a potential dominant trend if they are to increase. He said interest rates are likely to go up at some point in the future.

"If you look at the impact of interest rates on retailers who have borrowed money, you want to watch who your tenant is and maybe move up the credit curve in the future," Lewis said. "And then you look at the impact of interest rates on the consumers who, in the past year, may have borrowed a lot for their purchases. They may be stressed to do so."