Navigating the Evolving Landscape of Retail Real Estate
The 2025 ICSC Monterey Convention, held March 24–26 at the Monterey Conference Center, brought together approximately 1,000 commercial real estate professionals. The event emphasized authentic relationship-building, forward-looking strategy, and a clear-eyed understanding of both opportunities and constraints in today’s retail real estate environment.
Fostering Strategic Relationships
A dominant theme of the convention was the power of strong relationships. Attendees described the atmosphere as refreshingly positive, energetic, and focused—with the smaller, more curated crowd allowing for deeper, more meaningful conversations.
- The event drew serious professionals and real decision-makers, described as “the real players.”
- Impromptu, in-person meetings advanced deals more efficiently than email or phone outreach.
- Long-standing partnerships with groups like Mancini’s and Phillips Edison were reaffirmed, reflecting CRC’s strong reputation.
Expanding Retailers and Tenant Trends
Despite macroeconomic headwinds, several retailers continue to grow—though cautiously and strategically. Those with strong sales volumes and credit are still actively pursuing new locations.
Retailers Expanding:
- Dutch Bros – Continued selective growth.
- Pollo Campero – Expanding in the right markets.
- Oil change & auto tenants – Growing segment with solid fundamentals.
- Tesla (Collision Centers) – Ongoing expansion supported by lender confidence.
Retailers Slowing Expansion:
- Starbucks – Reinvesting in existing stores, cautious under new leadership.
- Dunkin’, Jimmy John’s, Baskin-Robbins – Pulling back in NorCal due to poor unit economics and rising build-out costs.
- Grocery Stores – Focused on backfilling due to construction cost challenges.
Retail Leasing Trends:
- Shift in interest toward unanchored strip centers—more flexible and recession-resilient than big box formats.
- More emphasis on accurate in-market performance data vs. unreliable third-party reports.
- Medical, auto service, and fast casual remain active tenant categories.
Market Realities and Economic Pressures
While the tone was positive, attendees acknowledged real challenges affecting dealmaking, development, and investor confidence.
Key Market Challenges:
- High interest rates and construction costs continue to delay or halt projects.
- Cap rates remain sticky; sellers haven’t fully adjusted pricing expectations.
- Permitting delays and bureaucratic red tape were cited as a persistent pain point.
- Economic uncertainty and political transitions are creating temporary hesitations.
- Many tenants now prefer existing buildings to minimize construction costs and time.
Capital Markets Perspective:
- Lending remains available for well-located, necessity-based retail.
- Bridge lending and creative capital stacks are gaining traction.
- Strong sponsorship and realistic underwriting are essential to closing deals in today’s environment.
Outlook For Investors, Clients & Cities at the 2025 Monterey ICSC Convention
The retail market remains active, but it is more selective. Investment is flowing where fundamentals are sound, cities are responsive, and partners are experienced.
- Cities that streamline entitlements and communicate clearly will attract more retail development.
- Tenants are favoring landlords and developers who can move quickly and manage costs.
- Partnering with experienced teams like Capital Rivers Commercial positions clients for success in this tighter, more discerning market.
