One look at the retail real estate landscape is enough to tell you that things they are a-changing. Cities that once dropped their juiciest bait to lure the likes of Wal-Mart and Target are now instituting ordinances to limit their size, or ban them altogether. Lifestyle centers are continuing to gain ground, and vertical mixed-use developments, once relegated to urban cores, are spreading their wings into the suburbs—all due in large part to changing demographics, land scarcity and soaring building costs.
A group of real estate professionals gathered in San Francisco last November—as part of a ChainLinks retail real estate forum—to discuss emerging trends and ongoing challenges. During the Atlanta-based ChainLinks’ bi-annual convention, a number of industry trends were identified, two of which I think warrant highlighting in this column.
In 2007, we will see increased resistance to big-box and multiple retail locations in urban areas. Consider the following facts, presented at the forum, which illustrate a burgeoning bent toward limiting urban big-box growth:
In Chicago, the city council passed the Big-Box Minimum Wage Ordinance last September, which would have forced large retailers to pay their employees at least $10 per hour in exchange for building or operating inside the city limits. (The law was vetoed by the mayor and would have affected workers at Wal-Mart, Target, Toys “R” Us, Lowe’s Cos. and The Home Depot);
In Fresno, Calif., last July a federal judge ruled that zoning laws enacted in Turlock, Calif., do not violate Wal-Mart’s constitutional rights. The ban of stores larger than 100,000 sq. ft. that devote at least 5% of their space to groceries effectively prevented Wal-Mart from building a planned 225,000-sq.-ft. superstore in the area. The state supreme court has refused to hear the case; and
In Austin, Texas, last December the city council gave preliminary approval to a new ordinance that would make it more difficult to develop big-box stores in the city. The new rules require developers of retail sites reater than 100,000 sq. ft. to obtain a conditional use permit from the city. The changes also require city staff to notify residents within a one-mile radius of a proposed project to allow them time for comment.
Another trend that received hefty discussion time at the recent forum is one we talk about routinely in Chain Store Age: The popularity of lifestyle centers is on the rise. ChainLinks predicts that the high cost associated with building enclosed malls and changes in urban demographics will only perpetuate the newer format’s popularity. But there’s another format that has caught my eye—the vertical mixed-use development. I talked with Michael Lebovitz, senior VP of mall projects for Chattanooga, Tenn.-based CBL & Associates Properties, for this month’s story on open-air centers (page 115). In discussing the company’s new Pearland Town Center project near Houston, which combines a mind-boggling five uses in which the retail is layered in vertically, Lebovitz said, “This is a morphing business model.” And one that bears watching through 2007 and beyond.
Victoria’s Secret Names New CEO
Columbus, Ohio, Limited Brands Inc. on Monday announced that Lori Greeley will replace Grace Nichols as CEO of Victoria’s Secret Stores. Greeley is currently executive VP and general merchandising manager of intimates for Victoria’s Secret.
The retirement of Nichols, a 20-year Limited veteran, from the CEO post was announced in May 2006. She will take a new role supporting initiatives within Victoria’s Secret, including the growth of its Intimissimi brand.
Additionally, Mark Weikel, COO of Victoria’s Secret Stores, will add the title of president.
Wal-Mart to Focus on Expanding Seiyu
New York City, Wal-Mart Stores is open to acquisition opportunities in Japan, but the retailer is more focused on expanding business at its 53%-owned Seiyu chain, according to a report by Reuters. Shares of Seiyu jumped Monday after Wal-Mart vice chairman Michael Duke told the Nikkei business daily that the company might look for more acquisition opportunities in Japan.
The paper reported that Duke welcomed planned changes in corporate laws in May that will enable foreign companies to buy Japanese firms through share swaps.
Wal-Mart last year tried to invest in superstore operator Daiei Inc., aiming to boost its presence in the country, but it lost the chance to Aeon Co., Japan’s second-biggest retail group.
Wal-Mart entered the Japanese market in 2002 by taking a small stake in Seiyu. It has since invested more than $1 billion in the chain, but has yet to return the retailer to profitability.
Wal-Mart spokeswoman Amy Wyatt said Wal-Mart’s focus in Japan is on Seiyu.
“It’s a very sizable business today, so we still think that there are a lot of growth opportunities in the existing business,” she said.
In terms of acquisitions, she said: “I wouldn’t go as far as to say we’re shopping for them.”