Kimco Realty (KIM) Bernstein 42nd Annual Strategic Decisions Conference summary

Market trends and retail evolution

• Open-air, grocery-anchored shopping centers are experiencing high demand and record occupancy, driven by consumer preference for convenience and daily needs shopping.

• E-commerce profitability challenges have led retailers to reinvest in physical stores, using them as distribution hubs for online orders.

• Younger consumers are increasingly shopping in person, defying expectations of a shift to online retail.

• Off-price and service-oriented tenants are expanding rapidly, with 80% of new small shop leases now service-based.

• The lack of new retail supply, with only 0.3% of stock under construction annually, is creating significant pricing power for landlords.

Supply-demand dynamics and leasing

• Rents must rise 40-50% to justify new retail development, limiting new supply and supporting high occupancy.

• New lease spreads are consistently above 30%, while renewals average 10-12%, but only a small portion of leases reprice each year due to long lease terms.

• Retailers prefer long-term leases for cost certainty and to justify store investments, while landlords are gradually gaining more pricing power.

• Anchor tenants, especially grocers, retain strong negotiating leverage and may restrict adjacent tenant uses.

• Pre-leasing activity is robust, with spaces often leased before becoming available, sometimes at 30-40% higher rents.

Consumer and tenant trends

• Shopping center traffic is up 3% year-over-year, with cross-shopping and service offerings driving repeat visits.

• Off-price retailers (TJX, Ross, Burlington) continue to expand, often competing for the same locations, and have broadened their demographic appeal.

• Dollar stores have slowed growth due to market saturation, but chains like Five Below are still expanding aggressively.

• Mixed-use developments are a focus, with 14,000 apartment units entitled on underutilized parking lots to enhance both retail and residential value.

• Capital allocation includes recycling ground leases into higher-growth assets and developing mixed-use communities.