This week I attended the national convention of the International Council of Shopping Centers, a member-driven organization for the retail industry. This year there were about 25,000 attendees.

I felt the mood of the conference was positive optimism with a sense of getting down to business. Here’s what I’m taking with me:

Landlords and retailers are going to have to compromise on overhead. Many of the public companies have driven down costs about as far as they can go. As the economy heals, they will be opening up more stores to grow the top line. The standoff will be when commercial landlords can no longer deliver store space at the same occupancy costs that the public companies have been negotiating over the last two years. I believe this will resolve itself, but for a while it will be a stare down.

The CMBS market must find ways to heal itself. Commercial banks have the FDIC to be the “hall monitor” so to speak, enforcing regulations and maintaining control. On the other hand, the CMBS (commercial mortgage-backed securities) market is made up of bondholders all over the world. There are special service providers administering the loans, but there’s no umbrella organization for policy or governance.

The feeling was that the commercial banks, while inundated with problematic loans, will eventually work these through the system. The CMBS market is another story. These loans comprise a significant portion of the commercial property loans in the U.S. and about $60 billion come due in 2010.

Hard times have brought out the best in us. There was a spirit of cooperation at the convention. Businesses want to help each other survive and prosper. I think that’s something unique to this retail industry where relationships are so important. As I see it, relationships grow over time when the “bullets are flying,” the tide isn’t rising and when you need each other. Only then can there be a bonded relationship, strengthened over time, where the sum of the parts is greater than the whole.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
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