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Luke Apicella Talks Prudential’s “Impact Investments” in Newark: How to Convince Employees to Live and Shop in the City

Aug 9, 2018
by Josh Anderson

NEWARK, NJ — One of the most highly-awaited panels at CapRE’s recent Newark CRE Summit was Newark’s Retail Evolution & Mixed Use Mania: Modern Consumer Demand, Impact of Amazon and Redevelopment of Brick City. Moderator David Wolfe, Managing Partner, Skoloff & Wolfe, P.C. kicked off the discussion with a question for Luke Apicella, Investment Manager, Prudential Impact Investments.

“Luke, can you talk a little bit about what the “Impact of Prudential” is, for people who don’t know, and then let’s step back and talk about, at a retail level, the retail apocalypse” he asked. “Do you think it has been overblown? Do you think that Amazon is really going to eat everyone’s lunch?”

Luke Apicella, Investment Manager, Prudential Impact Investments.

“Well, I usually like to refer to a very short definition of impact investment. It’s become an umbrella concept for anything related to responsible investing,” replied Apicella. “The definition I like to use investment or allocation with virtue. We like to think about what we want to see in the world, and that plays a really important part in our investment decisions. And then, for Newark, we’ve been captivated and committed to this city for a long time.”

In Apicella’s opinion, the last ten years have shown a lot of promise in Newark’s re-insurgency. “As the Governor said, it’s “Newark-Mania.” And I think that’s a great quote that I’d love to hear, over and over again,” he mused. “When we think about how real estate markets work in Newark, one thing is clear. It requires investments in buildings to really change and create opportunities, to have much more of circular focus of how money continues to flow within this community.”

“Some of the things that we’ve been thinking about is how we can get our employees to live within the city, and of course shop here too,” he continued. “And so as investor, there is obviously a lot of discontent around the retail market. People use the term “retail apocalypse” but as I researched it, I think that it’s a bit overblown. It’s very clear that there’s been a disruption in the industry of e-commerce, especially over the last fifteen years. As cell phones have become a lot more ubiquitous, it’s become a lot more convenient to order goods online.”

“That said, you know, I think that it’s important to realize that going from zero to eighty or ninety percent for e-commerce is a really big, aggressive growth plan,” he cautioned. “But the trees never grow past the sky. This is going to balance out somewhere. And having the real estate market that offers retail is going to exist. People are going to use place as a way of finding their goods. So there is going to be a transition of that.”

Apicella then predicted that what we are most likely to see is a bit of a correction. “We’ve overbuilt retail over the last fifty years, and that clear when we compare it to other countries,” he explained. “For the last fifty years we built retail at square footage rates that were twice what our population growth was. We had five times as much retail as the rest of Europe, ten times as much as in Germany. So I think there will be a correction here. And I think that’s what we’re starting to see with the announcements of BJ’s closing stores. It’s overbuilt. So the long-term scheme line, what’s going to happen is that they’re not going to have e-commerce companies or retail companies.”

Instead, Apicella thinks the industry is most likely going to have these goods and service companies that enjoy both a presence online and in the real world and in real estate. “And the headlines have supported that, with Amazon buying Whole Foods, and the same way with how Wal-Mart now is putting so much attention into e-commerce,” he concluded.

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