There’s no doubt that retail plays an important role in keeping communities healthy, economically and emotionally.
“Obviously [retail] is critical to servicing the basics, such as grocery stores, cleaners and places to meet daily lifestyle needs,” said Richard Schermer, a real estate attorney with Buchanan Ingersoll & Rooney of Miami. “For one, when you lose those sites, the community suffers by having to drive further.
“If you lose a major anchor in a mall, co-tenancy clauses can create ripple effects,” Schermer said. Hand-in-hand with a closure, he added, there are lost taxes and lost jobs. The quality of life in an area is diminished.
To make sure that shoppers don’t walk away when a retailer does, forward-thinking city officials, landlords and developers are taking immediate action to maintain the viability of a property if retail departs—even if the leave is only temporary.
Boston re-branding: The Boston Redevelopment Authority (BRA) engineered an inventive plan to keep the city’s Downtown Crossing area vibrant while a key parcel undergoes a two-year-long, $625 million renovation. When complete, the former site of Filene’s Basement will reopen as One Franklin, a mixed-used complex. Filene’s Basement is the first tenant expected to return. The site is being redeveloped by New York City-based Vornado Realty Trust and Gale International.
“Even though the Filene’s site is dark, there are still 230,000 people going through that district daily,” said Kristen Keefe, retail sector manager for BRA. “So we are conducting a transition campaign. It was very important to keep them interested.”
For starters, the BRA tapped Toronto consulting firm Urban Marketing Collaborative to help with a re-branding effort. The first move was to wrap the building with banners and post other community signage to let people know what is coming in the future.
An initiative to re-brand the Downtown Crossing neighborhood as “Boston’s Meeting Place” kicked off in April. Downtown Crossing is not only a transit hub, but also edges the theater and financial districts. “This district reflects all walks of life and all socioeconomic levels, and we embrace that diversity,” said Keefe. Clever signage will reflect all of these connections—“flavor meets hunger” and “lawyer meets labor” are among the 250 such messages.
To further stimulate the area, the city has brought in its own version of pop-up stores in front of One Franklin. For the Christmas season, local vendor Lambert’s Holiday Market presented an array of Christmas trees and holiday decor. Boston-based Legal Sea Foods set up a counter offering its famous clam chowder. The city brought in corporate giants, too. Microsoft held court in a tractor-trailer in a promotion for its Card Scan product.
Keefe said the city is also keen on having some of the retail tenants of One Franklin set up temporary shops as a teaser for what is to come. “We would love to encourage that sort of activity.”
After Katrina: In times of natural disaster, the return of retail can signal a restoration of normalcy for a neighborhood. When Hurricane Katrina hit south Louisiana in August 2005, Stirling Properties of Covington, La., launched an urgent effort to get its properties up and running as soon as possible.
Grady Brame, executive VP and partner, said Stirling was able to restore two shopping centers it operates in Metairie, La., directly across the street from each other. One contained a Rite Aid and a Langenstein’s grocery store, “which was really critical to the people,” Brame said. “We were able to get those tenants restored in three to four weeks.”
The other property sustained $6 million in roof damage. “We had to reconstruct all of the spaces in that center,” remembered Brame. “We hit the ground running. Within a week or 10 days, we were able to find contractors. We had most of the tenants operating prior to Christmas.” Tenants in the retail and office complex included a gourmet coffee shop, a Subway sandwich store, bank, Blockbuster Video, along with a dentist, a surgeon and a CPA firm.
Redevelopment and natural disaster aside, Phil Rosenfeldt, a real estate attorney with Blank Rome of Philadelphia, said he is seeing more cases of retail abandonment.
“For whatever reason, we have worked with developers and brokers in bringing in new tenants. That is happening a little more now—generally because of what is occurring in the economy,” said Rosenfeldt. To clarify, he said, retailers are not necessarily shutting down. “But deals are being delayed.
“National retailers especially are slowing down and doing less deals and trying to kill deals that are in the pipeline,” he said. “They are retrenching. Deals that they wanted for 2008 or 2009 are being pushed to 2010. There is an uncertainty out there.”
OfficeMax 1Q sales fall on weak economy
NAPERVILLE, Ill. OfficeMax announced that for its first quarter ended March 29, total sales decreased 5.5% to $2.3 billion compared to the first quarter of 2007. Net income increased in the first quarter of 2008 to $63.3 million, or 81 cents per diluted share, from $58.5 million, or 76 cents per diluted share, in the first quarter of 2007.
OfficeMax Retail segment sales decreased 5.5% to $1.11 billion in the first quarter of 2008 compared to the first quarter of 2007, reflecting a same-store sales decrease of 8.7% partially offset by sales from new stores. Retail same-store sales for the first quarter of 2008 declined across all major product categories due to weaker U.S. consumer and small business spending and the negative impact of the Easter holiday occurring in the first quarter of 2008.
IKEA to open first U.S. manufacturing facility
DANVILLE, Va. IKEA, through its subsidiary Swedwood, announced that it will open its first U.S. furniture manufacturing facility on May 21 in Danville, Va. The 930,000 square-foot Swedwood factory will produce a variety of wood-based IKEA products, the company reported.
“We made excellent progress on construction last year and our installation of equipment and machinery has gone very smoothly,” said Bengt Danielsson, North American president of Swedwood. “Now our primary objective is to complete appropriate operational training for 175 coworkers as well as to ensure a seamless production and packaging process.”