Weekend Interview: CenterSquare's Rob Holuba On Essential Retail's 'Tremendous' Runway And Escaping The Herd Mentality

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

After learning lessons on the field as a Princeton University football player, CenterSquare Investment Management Managing Director Rob Holuba once hoped to keep the game going by getting into the exciting world of sports business.

But by the time he entered Georgetown University’s MBA program at the height of the Global Financial Crisis, Holuba discovered that sports didn’t feel as competitive off the field and that he could maneuver more nimbly by returning to an earlier interest in real estate.

Holuba found his niche when he took a role at Philadelphia’s Lubert-Adler, finding and buying up shopping centers that offer essential services. He went on to help build a $600M business at CenterSquare, where he's worked for almost 11 years and is helping to build a process framework for other asset classes that he learned from years developing and scaling essential retail. 

“A lot of what I spend my time on doing here at CenterSquare is not only continuing to refine and improve our service retail process to identify assets and qualify which properties we’re going to buy, then price them and close them, now I ask: ‘How do we replicate that in industrial real estate? How do we replicate that in rental housing?’” Holuba said.

“I’m working across the different teams so that everybody is following the same scorecard and process in order to be able to scale different verticals within CenterSquare. That's where I see the real opportunity.”

Holuba spoke to Bisnow about being in a sphere that was previously underestimated, why it's best not to follow the CRE crowd and where CenterSquare will find the sweet spot for its next deal.

This interview has been edited for length and clarity.

Bisnow: How did you get started in commercial real estate? 

Holuba: I've been in the commercial real estate investment industry for nearly 20 years now, and I joined immediately out of graduating from college. I started with a company called [Apartment Investment and Management Co.], a publicly traded REIT, where I was working in their development finance team.

I was born and raised in northern New Jersey. I went to college at Princeton, a few hours south of me. I needed to get off the East Coast. Aimco was a great opportunity because they're headquartered in Denver, Colorado.

Bisnow: What was your path from Denver back to the East Coast?

Holuba: While I was in Denver, I met another real estate investor who happened to be a Princeton alumni and invited me to come join his firm in New York City. Given that I was from the New York metro area and I knew everybody, it was an easy transition for me to move back and to transition my career from apartment renovations and development over to investments and acquisitions. I joined up with a company in New York City doing multifamily acquisitions in the outer boroughs.

And it was right around 2008 that I had moved back to New York, which happened to be around the same time as the financial crisis. You could see during that time period where the market was going to basically come to a standstill. There wasn't going to be any lending, there wasn't going to be any transactions.

At that point, I was probably around 26 years old. I was a little restless. I wasn't sure what I wanted to do with my career, so I transitioned to apply to an MBA to get into sports, be it the NHL, NBA or anything. I bounced down to Washington, D.C., for Georgetown University to start.

Later, when we got engaged, me and my future wife wanted to buy a home and start a family. We knew what the New York City commuting world looked like because her father had commuted in New York for the last 30 years, and we kind of saw that experience. So, when an opportunity popped up in Philadelphia with Lubert-Adler, I realized it was a great company. I was really excited about the opportunity, but I knew nothing about Philadelphia. The only place my wife and I had ever been to was Pat's and Geno's. We're like, where do you live? What do you do? How does Philadelphia work? Fortunately, I had a good friend in business school who grew up in Bryn Mawr, and I said to my buddy Joe, “Hey, Joe, give us the tour.”

It was supposed to be a temporary move, but we’ve stayed ever since. It’s a good fit. We cheer for all the Philadelphia teams, even the Eagles, though I grew up with the Giants.

Bisnow: What were you looking for in the sports world that you ended up finding in real estate?

Holuba: I went into the MBA program with a mission, and that mission was to be a career switcher into sports. I spent my first six months of business school networking and speaking with everybody I could possibly get in touch with at any kind of sports company, whether that be Nike or Adidas or Reebok, the NFL, the NBA [or] Under Armour. 

I started looking at my notes of all the different discussions that I had over six months, reviewing all the things I learned from different people I met. I realized that I hated everything I heard about it. It felt very bureaucratic to me. And what I realized during that process was everything that I was looking for in a career actually existed in the real estate world. I had just been too young and naive to really see it, and I decided to pivot back into real estate.

Bisnow: What did you learn that you liked about real estate that applies today?

Holuba: You know what I love about real estate? First and foremost is that it's tangible. You can see it, touch it, feel it. You understand why somebody would rent this apartment and pay more for that apartment. But even more so, you have the flexibility of where you work because it exists everywhere. I loved having that kind of flexibility, that I could live in Philadelphia or New York and I wasn't going to have to be beholden to Beaverton, Oregon, for example.

And then the second part was the evolution of how your career is going to change over time. Now, I've done development, I've done asset management, I've done acquisitions, I've specialized in retail. I've spent a lot of time on multifamily, and so there's a lot of different things that you can do, which makes it very entrepreneurial.

Bisnow: You have a particular specialty in essential-service retail. Can you define that?

Holuba: They’re essentially unanchored strip malls. They are e-commerce-resistant because they have tenants who provide services whose customers have to visit the store in order to consume the service. So if you think about it, if you needed to get a cup of coffee on your way to work, you're going to Starbucks. If you have to get your hair cut, you have to go to the barbershop. If you need your teeth cleaned, you then are going to the dentist. These are all things that cannot be replaced on Amazon. 

Back in 2016, we started investing into the sector because we identified it as something that was being overlooked. Now, we own about $600M worth of shopping centers across 17 markets, and we have a dedicated team who manages them. So it's been something that's been an awesome ride, building a business within a business.

We started out by buying shopping centers in Pittsburgh, and the performance of those investments were great. So we bought another two in Phoenix, same result, then another two in Vegas, same result, then another two in Orlando, same result. We realized that if you buy a certain type of the same product from a physical perspective with a mix of tenants, they are going to perform extraordinarily well. We've taken that strategy and then basically quadrupled it to where we are at today.

Bisnow: How are you dealing with the advent of new technologies? 

Holuba: Technology disruption, in a lot of ways, has helped our tenants. If you think about Chipotle or Starbucks, tenants of ours, being able to order online and picking up in-store actually helps their sales. All of those tenants are doing better today than what they were previously.

People used to make the argument of, is it e-commerce or is it brick-and-mortar? The answer is it is omnichannel. Everybody needs both, and you can't have one or the other. You're not going to survive, as companies like Warby Parker have kind of shown, with just e-commerce. They need the brick-and-mortar experience in order to attract more customers.

Bisnow: Moving forward, where do you see long-term stability and where do you see pain ahead in the retail world?

Holuba: This morning, we were talking about Walgreens closing 25% of their stores. I find it a little bit funny because Walgreens has a credit rating, right? So they're a credit tenant. And everybody always talks about credit tenants in retail, but that's not always the end-all in all regards to the health of a tenant. 

So with that, you'll always have recycling, and the media will pick that up and they'll try and spin it into a doomsday story that retail is dying, but look, retail has a tremendous amount of runway left. I say that because for a period of 15 years, from the GFC to today, the country has not built any new retail yet. At the same time, the country has grown by 30 million people, which is the same size as the continent of Australia.

So there has been a rationalization of square footage that we are now undersupplied retail, and as a result, the national retail vacancy rate is sub-5%. We can't snap our fingers and just turn back on supply for retail. It’ll be a good runway for investing for the coming years.

Bisnow: If you could make one change to the industry overall, what would it be?

Holuba: It's probably pervasive in every industry, but the concept of herd mentality is a little disenfranchising. You think about Nvidia and the FAANG stocks and how people get an idea and they just plow into a certain sector, regardless of the price, regardless of the valuation, and everyone's doing it. 

It took us awhile to bring on new investors into essential-service retail because retail was a four-letter word. But look at it now. You sometimes look at these really smart people and you say, “Guys, we're all just doing the exact same thing.”

Bisnow: What has been your best and worst deal, and what did you learn from both of those scenarios?

Holuba: The best deals are all the same. We often get them off-market and at better pricing, but at the end of the day, we're not necessarily in it for a quick flip. We're in it for long-term stability and growth and the investment, and that's working out over the majority of the investments.

For the worst, in the instance of a property that we own in Orlando, we bought it in the middle of an office park, and the office tenants who are surrounding us are fantastic. It’s Verizon, it's Deloitte, it's McKinsey, it's AAA. The problem with all of those companies is they never had anybody to come back to the office. Pre-Covid, we were doing great because we were basically the office eatery for all of these different corporate uses. Now, the center has continued to struggle just because it only has that demand driver. So we try to focus more on the hard-corner intersections that draw large traffic counts and can generate from a large use of demand drivers, so a tenant mix.

Bisnow: Could you give us your boldest prediction for commercial real estate?

Holuba: Over the next five to 10 years, if you are going to be an active investor in real estate, you need to diversify into and find other lending relationships outside of the banking industry. That is going to be very capital-constrained to the real estate industry. And the ones that are lending, you're going to have to be very relationship-driven. You cannot just go out and hire a debt broker and get a bunch of quotes for debt and then just go pick X, Y and Z bank. It's going to be fewer banks that are going to be lending on real estate, and the ones that are only going to do it for relationship-builders.

Bisnow: This is the Weekend Interview. How do you like to spend your weekend? 

I'm a father of three kids. I have a sixth grader, a third grader and a first grader, so most of my weekends are spent going and coming from kids activities. Both of my girls play field hockey and lacrosse. My son plays basically every sport under the sun, but we have a great time with it all.

I go where I’m wanted and needed, and I have a fun time helping out wherever I can with coaching. Sports were the No. 1 educational space in my life. There is not a day that goes by in my life that I don't think about a lesson I learned on the sports field. I can't say that about a lecture hall or a classroom, so I have a fun time coaching flag football with some of my other dad friends. We’re defending champs of our team, the Crimson Tide.

I have a 3-year-old golden retriever, and her name is Jolene. And then I have a 1-year-old German shorthaired pointer, and his name is Otis, which I got for my 40th birthday. He took a lot of time to train.

If we have free time, we love Charleston, South Carolina. In fact we’re going down this weekend with the kids and the dogs. We swim on the beach or hang out. Otherwise, in the fall I’m going up to Princeton football games. It’s fun to see your alma mater play.

CORRECTION, JULY 8, 11:30 A.M. ET: A previous version of this story misspelled CenterSquare Investment Management. It has been updated.