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Buzz from the Bs: The real value in B Malls

BY Jeff Green

I know it’s simply human nature to want the best of the best, and to prioritize top quality. And, it’s certainly no different in our industry. Lately, analysts and investors seem to be spending an awful lot of time and energy focusing on only the “top” properties and brands. I think they may be a bit short sighted and could even be missing out on some great opportunities. I’m talking about the ongoing debate between “A” and “B” malls.

I’m encouraged by the recent announcement from General Growth Properties Inc. spinning off 30 of their “B” malls from the rest of their portfolio. I think it’s great to finally have some attention paid to these properties with often very real potential. The new REIT, Rouse Properties, Inc., is really the first of its kind to focus exclusively on “B” malls. They have the right mix to do big things: a seasoned management team with capital. The properties in their portfolio span the country from Minnesota to Louisiana, Arizona and North Carolina, and include locations in metro markets like Southland Center in Taylor, Michigan (just outside of Detroit), and smaller markets like Silver Lake Mall in Coeur D’Alene, Idaho. Most of them — 60%, in fact — are the only game in town for 120 miles. To be honest, I’m excited to see what they do with these malls. I think it’s quite possible they could be the consolidator of B malls throughout the industry.

Unlike “A” malls, “B” malls have traditionally been viewed as riskier propositions for both retailers and developers alike. But, I think — and always have thought — that there can be real value in “B” malls, especially with the current state of the “A” mall marketplace where demand is higher than supply and the prices are bordering on outrageous. Many “B” malls are in “A” locations along major thoroughfares where they enjoy terrific visibility and steady commerce. Most are even surrounded by well-patronized neighbors — restaurants, strip centers and power centers. I’ve stated before how “B” malls have one specific challenge: they tend to have too much small shop space. The good news is investors oftentimes have the opportunity to reconfigure that small shop space into larger spaces (perhaps ideal for the shrinking big box stores we’re seeing?). Many of these locations have real lease-up or repositioning potential. It’s that potential that makes these locations worth considering.

To me, having an influential new REIT focused exclusively on what are considered “undervalued” opportunities is significant for our industry. For retailers who are already at capacity in most primary markets or who are bumping up against increasingly high rental rates, these are the kinds of locations that can kick off the next wave of expansion. And while not every “B” mall is an investment opportunity, I see some real reasons for optimism for many of these spaces. Generally speaking, these are not malls that have gotten a lot of owner focus in terms of investment and financial support over the last few years. Now that they have that support, there is a much greater chance that they will realize their potential. While it will take real investment and focus to make that happen, many of these locations have a built-in consumer base just waiting to be relieved of that 30-minute drive to larger regional destinations just to get the necessities. Capturing those local consumer dollars and kicking off a self-reinforcing cycle of investment, development and growth will be key to sustaining momentum in these markets.

In past development cycles, we’ve seen “B” malls emerge as solid opportunities for investors, developers and retailers who were able to capitalize on the industry’s preoccupation with “A” locations. For the first time in quite awhile, we are starting to see that same dynamic in play, and retailers are being presented with an opportunity to expand into some relatively untapped markets at a reasonable price. While it remains to be seen if this “B” mall buzz will grow louder, I like what I am hearing so far.

What do you think? Please make a public comment below or feel free to e-mail me privately at [email protected].

Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.


Click here for past columns by Jeff Green.

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Asda invests big in 2012

BY CSA STAFF

Asda, Walmart’s U.K. subsidiary, has big plans for 2012 that include investing more than £500m ($784 million) in its stores in 2012.

The company said it will invest the money in opening 25 new stores and three depots, as well as expanding and remodeling 43 of its existing stores. According to the company, this investment will create up to 5,000 new jobs in the United Kingdom. The company noted that current Asda associates would have the opportunity to enhance their careers through the company’s apprenticeship program.

According to Asda, the new stores will add more than 600,000 sq. ft. of net selling space to Asda, through superstores, small format supermarkets and Asda Living. The depots, will add additional capacity and efficiency to Asda’s logistics network, enabling it to meet planned organic growth, the company said. The depots will be located in Rochdale, Scotland and Yorkshire.

Commenting on Asda’s announcement, Prime Minister David Cameron said, “The additional investment and 5,000 new jobs announced by Asda today will be a real boost for the economy and more importantly for people around Britain seeking jobs. I also welcome Asda’s commitment to not only create jobs but invest in their staff too; offering employees the chance to join an apprenticeship scheme to gain skills which will benefit them throughout their career.”

Asda currently employs over 180,000 people in 528 stores and depots across the United Kingdom.

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Survey: Americans to spend $11 billion celebrating Super Bowl

BY Katherine Boccaccio

Washington, D.C. — Survey results released Thursday by the Retail Advertising and Marketing Association, and conducted by BIGinsight, found that 173 million people will watch the Super Bowl football game on Sunday, Feb. 5, the most in the survey’s eight-year history and up from an estimated 171 million last year.

Consumer spending for the Super Bowl will reach an all-time high, too, with the average game-watcher expected to shell out $63.87 on related merchandise, apparel and snacks, up from $59.33 last year. Total Super Bowl spending is expected to reach $11.0 billion.

“With a few weeks of anticipation ahead of them, it seems millions of Americans are already planning to have a knock-out good time for Super Bowl XLVI,” said Mike Gatti, executive director, RAMA. “Hot on the heels of a solid holiday season, many retailers will look to meet consumer demand and expectations with big promotions on party essentials, including 3D televisions, team décor and apparel, and, of course, food and beverages.”

Grocery, apparel, electronics, sporting goods and home furnishing stores can expect to see their share of Super Bowl-related spending as sports fans head out to buy food and beverages (71.3%), team apparel or accessories (8.6%), decorations (6.4%), and furniture or a new entertainment center (2.4%).

Of those planning to watch the game, nearly 63.6 million (27.1%) are planning to attend a party, up from last year’s 61.2 million, and another 35.9 million (15.3%) plan to throw a party, also up from the 34.9 million who said they would host a party in 2011.

Of those planning to watch the game, at least 5.1 million (5.1%) will buy a new television specifically for the big day, compared with 4.5 million last year and the 3.6 million who said they would do so in 2010.

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