Kimco Realty CEO details how shopping centers are changing: ‘It’s all about services’

In a Monday interview with CNBC’s Jim Cramer, Kimco Realty CEO Conor Flynn described the changing business environment at shopping centers, saying “it’s all about services” rather than just traditional retail storefronts.

“Services is all about in person, all about the e-commerce resistant type use, and that’s what’s driving vacancy rates to all-time lows,” he said, adding that service businesses are often related to health and wellness, like urgent care and veterinary facilities.

There’s more demand for shopping centers than there is supply, according to Flynn. He said that most Kimco shopping centers are dominated by a “grocery anchor,” like Kings, Whole Foods, Sprouts, Trader Joes as well as TJX stores, which combine to hit “the sweet spot in retail.” He added that 80% of his company’s “new deal flow” is coming from service-oriented businesses.

Flynn suggested vacancies are being offset by these more “resilient” businesses. He claimed Kimco has backfilled half of the vacancies caused by Party City’s bankruptcy, with new tenants paying 40% more than what Party City paid. He also said Kimco’s “watchlist” of tenants — ones with credit issues vulnerable to bankruptcy — is small. The pandemic helped to weed out those businesses, he added, as ones with poor models or bad balance sheets couldn’t endure the economic climate.

Flynn said new apartment developments make him positive about the future. The company has plans to turn parking lots at shopping centers into dwellings, he continued. As robotaxis and driverless cars gain popularity, Flynn said he expects municipalities’ parking ratio requirements will decrease and make it possible to build on the lots.

“That’s where mixed use comes in to play,” he said. “Retail enhances the apartments, apartments enhance the retail. It’s a harmonious situation where they can drive traffic to each other.”

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