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Changing Perceptions

Toward the end of 2008, it became painstakingly obvious to retailers that impulse spending was out and frugal saving was in. Faced with an imminent recession, staggering job loss and quickly depleting discretionary and savings accounts, consumers began to shift their focus to value. The impact of such a large-scale economic event and an abrupt consumer focus shift would appear to alter the fundamental realities of retail.

As the recession slowly becomes a fading memory, consumers have grown accustomed to getting good deals, and, fundamentally, customer expectations and priorities have shifted. Any stigma associated with discount retail in the past has evaporated. Today, it is the opposite: Looking for a bargain has become cool. Even the meaning of the word discount is changing. Discount has become value. Everyone and everything is shifting in favor of value, looking for ways to get value into new spaces and in front of more customers.

Not surprisingly, no category of retail has been as profoundly transformed by this shift as discounters. What was once an afterthought in the retail segment, discount retail has rapidly gained acceptance and validity in the industry, becoming a sought-after entity by landlords and shopping centers and finding co-tenancy alongside prominent retailers.

A shift in perception

Over the past few years, many major changes in retail have occurred — big brand names went out of business, and there was a tremendous amount of consolidation seen throughout the industry as downsizing or rightsizing became a common theme. As the recession continued and the importance of value increased among consumers, discount value brands made up the majority of retailers that were expanding. To compete, everyone from luxury and upscale names like Neiman Marcus and Polo, to established discount brands like Kmart, began looking to capitalize on these changes by promoting their own new and existing discount concepts.

The influence that the perception shift in value shopping has had on the industry is perhaps most evident from the shopping center tenant mix we’re seeing today — the retailers that were previously discouraged from occupying certain spaces through the use of covenants and leasing restrictions are now fully accepted into the mix. At Easton Gateway in Columbus, Ohio, for example, Dick’s Sporting Goods, Whole Foods and REI coexist happily with Saks Fifth Avenue’s discount spin-off Saks OFF Fifth. The change has been so dramatic that it has gone from some developers and landlords actively avoiding discount retailers to now actively seeking them out.

The omnichannel significance

The increasingly complex and demanding nature of retail today is also a very important, but not as obvious, aspect within the story of discount retail’s reinvention. Retailers that are finding success today are deploying cohesive, strategic execution across multiple shopping channels, such as mobile, digital, brick-and-mortar, direct mail and TV to drive value to the customer.

While it’s difficult to determine the results of some of these channels, it is obvious that there is a lot of money to be made in the discount segment of retail, and high-end retailers have taken notice. Polo, Nordstrom and Saks Fifth have always had discount spin-offs, but these retailers are no longer simply using their outlet stores as a way to dispose of unsalable goods — they are actually hiring buyers for those stores as well. Nordstrom Rack is one prominent example of a store that was once little more than a “clearance store,” but today is really just another retail channel.

Ultimately, observing and experiencing the visible and positive effects that an omnichannel approach can bring, developers, investors and retailers have discovered that discount retail is actually just another important channel to consider in appealing to a broader range of consumers.

The new face of discount retailers

What discount retailers look like today — and where they can be found — is strikingly different than just a few short years ago. While it would be a mistake to make sweeping generalizations about this diverse segment (Nordstrom Rack is quite different from Goodwill, for example), one thing that retail analysts and observers can say with confidence is that 2014 will likely see new and exciting chapters written in the continuing story of retail’s reinvention.

However, with so many preconceptions swept away, and retailers and consumers alike coming up with their own definition of value, there is a compelling case to be made that it’s hard to truly differentiate who is a discounter anymore — it has become just one more value-add retail channel in order to compete in a complete market.

Jason Baker is a principal at Houston-based retail brokerage firm, Baker Katz. Dave Cheatham is the president at Phoenix-based Velocity Retail Group. Baker and Cheatham are partners of X Team International, an alliance of retail real estate specialist with locations in the United States, Canada and Europe.

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Weather or Not

BY Bob Kenyon & Jim Bieri

Record-breaking frigid temperatures and snowfall from the recent polar vortex incursion have made unprecedented demands on the nation’s power supply. As some owners of shopping malls and retail centers have discovered, this has left large retail destinations more vulnerable than ever to blackouts, has damaged operational continuity and impacted the bottom line for businesses across the country. The impact has been particularly punishing in places like the Deep South that are not accustomed to, or prepared for, such harsh winter weather conditions.

While it is easy to treat this stress on existing infrastructure as a fluke, the reality is quite different. From the great Northeast Blackout of 2003 to Superstorm Sandy in 2012, millions of businesses have learned the hard way just how disruptive and costly a large-scale power interruption can be. And the headline-making disasters are only part of the danger — the Christiana Shopping Mall in Delaware experienced two significant blackouts in the 2013 holiday shopping season affecting sales at more than 100 stores during the busiest time of the year.

Landlords and tenants alike need to understand what steps they should be taking to prevent and prepare for power outages and emergencies and protect their properties, businesses and bottom lines.

Be prepared

Emergency generators are a logical and essential foundation of any emergency preparedness planning. But selecting the right generator(s) for your center is important, and understanding where to place those generators is vital. Installing generators in a basement or other area that might be prone to flooding is a common and easily avoidable mistake. Many generators require an uninterrupted power supply (UPS) to ensure that there is no gap between power interruption and generator startup. It is a good idea to seek the advice of a trained professional to determine which UPS solutions are right for your system and your property.

Plan ahead

While the presence of a generator can provide some peace of mind, it is really only the beginning of preparing for a blackout or other power emergency. For landlords, big questions remain: How are you going to communicate with tenants? Where are you going to get the fuel to keep those generators running? Shipping disruptions are also possible as power outages often disable gas stations, thus preventing delivery drivers from filling their tanks. Developing a detailed emergency preparedness and response plan that answers those questions and addresses those uncertainties is critical.

Secure your fuel supply

Because a generator is only as good as its fuel supply, preparing ahead of time for an uninterrupted source of fuel (even in the most dire emergencies) is essential. In a true emergency, lines of supply can be disrupted, and local and regional shortages are common — gas stations close, refineries are shuttered. It is wise to participate in a guaranteed fuel supply program with a provider that has the regional and national resources and relationships to stand by its fuel delivery promises. Also remember to plan for enough fuel and resources to operate not only generators, but also any vehicles you and your property require to continue functioning normally.

Establish lines of communication

For landlords and tenants alike, designing an effective means of communicating with employees, customers and professional partners during an emergency or power outage is important. Social media networks are an increasingly popular resource to disseminate information, and emergency notification services can be an effective way to get in touch with large numbers of tenants or employees.

Train and test regularly

The last thing a mall or retail center needs in an emergency is an unwelcome surprise. Minimize those chances by maximizing preparedness: Establish a maintenance program and test equipment regularly, and provide regular training to ensure that all personnel are familiar with existing emergency equipment and procedures. Review that equipment and those procedures regularly to ensure that they can meet the needs of the property and its tenants.

Read the fine print

The issue of extreme weather or other unexpected events does present a problem for fixed CAM (common area maintenance). A big storm or even an extended period of challenging weather is likely to exceed any kind of maintenance budget a landlord or shopping center owner sets, potentially leaving the tenants to do things themselves and pick up the extra costs. For this reason, retailers should ensure they are covered for these unexpected events during lease negotiations by asking questions like whether there is a back-up generator available, who will pay for the additional cost of gas for the generator and what happens if the landlord fails to provide these essential services. It is also important that every tenant checks with their insurance company before signing a lease — making sure that all potential liabilities are covered in the case of extreme weather or other unexpected events (and understanding who is responsible for handling them).

At a time when landlords and retailers are increasingly dependent on a fragile and extremely complex array of technologies and communication networks, any damage or interruption to that infrastructure can be extremely damaging — and extremely costly. In that context, understanding the basics of emergency preparedness (and putting those safeguards in place) to ensure that your mall or your business is able to keep the lights on is a comparatively small investment with a potentially dramatic and difference-making ROI.

Bob Kenyon is executive VP sales and business development at Taylor, Mich.-based Atlas Oil Company. Jim Bieri is principal of Detroit-based Stokas Bieri Real Estate, and a partner of the international retail real estate alliance, X Team International.

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Retail Networking Made Better

BY Katherine Boccaccio

Networking isn’t new, but in this day and age of emails and texts, the idea of face-to-face business-building has taken on new importance.

Retail Live!, the series of retail real estate single-day networking events approaching its third year, used the idea of one-on-one interaction between tenants and landlords, with a particular emphasis on servicing the retailer participants, as its launchpad — and has found great success. Founded by Stacey Gilham, principal for Dallas/Austin-based Edge Realty Partners, the Retail Live! series of regional networking events has seen attendance and retailer participation grow as much as 50% since its inception.

“Retail Live! is different from your traditional tradeshow,” said Gilham, “in that we put retailers and shopping center owners together in a one-day setting conducive to making deals, and we add in entertainment and additional networking opportunities. It’s not a high-pressure environment, and attendees seem to respond well to the idea that deal-making doesn’t have to be stressful; it can actually be fun and effective.”

Retail Live! features multiple regional events each year (see sidebar for 2014 schedule); retailers are the exhibitors, and their tables are visited by an attendee base made up of shopping center owners, developers, brokers and property managers. The fact that retailers are not charged for exhibiting is a huge plus, as is the targeted attendee base. “I have found many real estate opportunities at Retail Live! and have met people I otherwise would have missed by not exhibiting,” said Victoria Chastain, CLS, senior site selection manager for Jos. A. Bank Clothiers.

Chastain, who is based in McKinney, Texas, has participated in five Retail Live! events to date, and says she will attend all future events in her territory.

“It is a wonderful venue that hearkens back to how real estate tradeshows used to be run many moons ago,” she said. “Through Retail Live!, I am made aware of real estate opportunities that might not be published, and I have access to more effective deal-making and networking, and to more market-specific intelligence.”

Sponsors benefit, as well. According to Brett Sheets, senior VP leasing for Phoenix-based American Realty Capital Properties (ARCP), his company participates in four Retail Live! events each year, and sees them as an opportunity to meet clients face to face.

“Because the events last four or five hours, they are easy to attend and they allow us to get in front of our retail clients in a casual setting,” Sheets said.

Growth by acquisition: Retail Live! announced late last year that it had acquired the 16-year-old, Florida-based Retailer One on One event — and that purchase has opened up an important market for Retail Live!. “Our objective from the inception of Retail Live! has been to become a national company providing a first-class commercial real estate networking event,” said Gilham. “Acquiring Retailer One on One, and thereby putting us solidly in the state of Florida and the Southeast Region, goes a long way toward helping us to achieve that goal.”

For information about registration, scheduling, hotel accommodations and more, visit retaillive.com.

Retail Live! 2014 Schedule of Events

Feb. 6: Chicago (Westin Chicago Northwest)

April 2: Los Angeles (Hilton Orange County)

April 17: Orlando (Hilton Orlando)

Aug. 21: Austin (Hyatt Regency Austin)

Fall (day TBA): New York City

To register, visit retaillive.com.

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