Focus on: RECon
Last year, Las Vegas was flooded with 25,000 retailer and shopping center executives in search of positive news and a few stray deals.
At this year’s International Council of Shopping Centers’ annual RECon event, held May 22 to 25 at the Las Vegas Convention Center, deal-making took top billing. And that’s just part of the good news.
Attendance was up 20%, ICSC said, and talk of expansion was rampant. In fact, Subway announced just prior to the convention that it aimed to open another 2,000 locations prior to yearend — and an army of the chain’s dealmakers stormed Vegas to forge real estate deals from coast to coast.
“Activity was definitely robust at RECon this year,” said Mitchel S. Friedman, senior VP, New York City-based RCS Real Estate Advisors. “There is still some caution out there. But, in general, most people were optimistic about where we are in the economy and where our industry currently stands.”
On both the retail and shopping center fronts, growth was the watchword. Among the new projects unveiled at the show was a major downtown Philadelphia redevelopment, by locally based Pennsylvania Real Estate Investment Trust (PREIT).
“We are launching a comprehensive redevelopment of The Gallery, an urban infill project in downtown Philly comprised of three city blocks,” said Joseph Coradino, president of PREIT Services Inc. and PREIT-Rubin. “We will completely transform the existing retail mall and potentially introduce additional uses. Key to the project will be food and entertainment,” he said.
Other projects introduced at RECon this year included Madison Marquette’s huge southwest Washington, D.C., waterfront development The Wharf, which encompasses 27 acres of land and 24 acres of water with some 3 million sq. ft. of new retail, residential, office, hotel and cultural components. “This area has long needed an overhaul, and that’s what this will be,” said Kurt Ivey, senior VP marketing and corporate communications for Madison Marquette. Groundbreaking is slated for 2012 with a first-phase opening in 2015.
Not all the projects unveiled at RECon were large-scale, but they were significant nonetheless. St. Paul, Minn.-based Paster Enterprises bought a former Circuit City location in Minnetonka, gutted it and is introducing the area’s first Whole Foods Market, a 33,000-sq.-ft. space slated to open in fall 2011. Walgreens’ new prototype opened April 4 at Paster’s Mendota Plaza, in Mendota Heights, Minn., and a prototypical Aldi’s will open at Crystal Shopping Center, in Crystal, Minn.
In fact, such grocers as Aldi and Whole Foods Market are representative of the entire spectrum of the category that is finding success both in the recession and its aftermath.
“The supermarkets are looking to continue their growth,” said Andy Graiser, co-president of Melville, N.Y.-based DJM Realty, a Gordon Bros. Group company. “The sporting goods category and the dollar stores are poised for continued growth as well. But what we’ll see is not new development, but rather growing into surplus real estate,” he said.
The Baker Katz commercial brokerage team, based in Houston, concurred. “We’re not hearing much at this show about new construction,” Jason Baker said. “And of the new projects being unveiled, most are smaller projects and not the large-scale developments,” Kenneth Katz added.
And that’s no surprise, really, if you understand the market. “What we expected to see at RECon 2011 is exactly what we’re seeing,” said Greg Maloney, president of Jones Lang LaSalle Retail, Atlanta. “The positives are that retailers are expanding more, and the open-to-buy lines of credit are improving. On the negative side, the recovery is still slow, and many of the economic fundamentals need to show improvement before we can expect to see dramatic recovery.”
Turning to the Cloud
While 2011 may be half-over, there is still plenty of time to incorporate the right technologies to streamline retail operations by yearend. Chain Store Age spoke with Jay Yanko, managing principal of Verizon Retail & Distribution, about some top technologies for lowering costs and upping efficiencies.
How can a retailer decide which technologies will lower costs, maximize efficiency and create value?
It’s not an easy question. I can tell you that we’re seeing many retailers turning to the cloud. Even with ambiguity around an exact definition, the cloud is a key way for retailers to streamline their IT operations. Previously, the cloud was a symbol on a diagram, a way of representing the communication infrastructure between two systems that were not on the same local network. Today, it is a universal term used to describe billions upon billions of dollars of infrastructure — computers, routers, switches, copper, fiber — operating systems and applications that make up and operate the Internet.
How does the cloud help retailers?
Cloud allows for the centralization of operational systems and aggregation of metrics from disparate business processes. This creates a more efficient and costeffective deployment of systems and people, as physical and logical functions can be pushed up the technology stack. The cloud also allows instrumentation, such as sensors and other business intelligence tools, to gather information about and monitor lower-level operations and then make their outputs more visible to decision-makers. New technologies, centralization and services enabled by cloud allow for new business processes to be conceived, implemented, managed and monitored.
How else does the cloud help centralize the management?
First, the cloud means lower levels of integration with store-level systems because integration is intrinsic in the development and deployment of centralized systems. This reduces the effort required to connect to and gather store-level metrics and aggregate functions and provide better, timelier reporting. Centralized systems delivered as services also lend themselves to op-ex models. That becomes important as many retailers look for ways to shift their balance sheets. And lastly, centralization reduces the complexity of integration for systems and data as it is much easier to integrate a few systems based on services, rather than thousands of distributed systems.
Are there some key functional areas where retailers can take advantage of the cloud to centralize operations?
Absolutely. There are four main areas where retailers can centralize the management of IT operations: point of sale; task and workforce management; digital media management; and customer analytics.
To elaborate on digital media management, it is important to note that central management of content in the cloud minimizes work at the region or in-store. It also creates a consistent brand feel and awareness across stores.
For instance, retailers can tailor media experiences that are customized for the brand, season, time, weather, location and customer demographics. The issue, of course, is that this calls for high bandwidth. High-quality digital media is comprised of large files that need to be distributed to many locations for display. While bandwidth and timing of content delivery are concerns, they can be managed by scheduling delivery at low-network usage times and by only delivering updates and not complete refreshes.
Customer analytics allows for click stream in the real world. It provides the brick-and-mortar equivalent of click-stream data. When combined with click stream and central POS, this offers a complete view of consumers across all channels. Once again, video means high bandwidth, which can be overcome with systems that perform the analysis in the store and only aggregate the analytics information centrally. This increases the store footprint a bit but also provides on-site repository of video that can be repurposed for loss prevention.
Any final thoughts or recommendations for retailers?
All retail technologies out there certainly create challenges for retail IT professionals. The technologies we talked about today help cut through the noise. One thing to note is that all of these solutions are either consumer facing or a way to understand the consumer better, or a combination of both. Because at the end of the day, it’s all about the customer
Green Building Options
Blain’s Farm & Fleet knows all too well the misconception about conventional construction versus construction with a metal building system. In fact, the chain’s director of engineering, Neal VanLoo, recently was challenged by an architect when building a new store.
“The architect was against using a metal building system because he thought the design would be a square, fixed-dimension tin box,” VanLoo said. “We had to sit down and review the plans with him in order for him to realize the benefits of a metal building system.”
VanLoo said Blain’s Farm & Fleet exclusively uses metal buildings for new construction. (The Janesville, Wis.-based retailer made the change because of flexibility, economics, delivery and quality.) Its new 114,500-sq.-ft. store in Verona, Wis., is a good illustration: The building is a metal building system with a standing-seam metal roof. The walls are insulated precast concrete panels, split-face block, and horizontal and vertical architectural metal panels.
Sustainability is important to Blain’s Farm & Fleet, whose Verona store has high insulating values, skylights and clerestory windows. Its metal building system plays a key role in its green construction. Steel, the primary material in a metal building, is the most recycled and recyclable building material. Plus, the array of available choices for walls and ceilings means that insulating values can soar with a metal building.
“For those seeking LEED accreditation, steel can help achieve that goal,” explained Chuck Haslebacher, chairman of the Metal Building Manufacturers Association (MBMA). “The steel members of a metal building are engineered specifically for each building and then shipped to the construction site. Along with no wasted materials, this offers customization, a quick construction period, and the capability to erect a building year-round.”
Despite the benefits of metal buildings, there is a perception that a conventional building design is the most economical and permanent choice. Haslebacher disputed the notion and explained that with current steel-building solutions, owners and developers receive the building package from a single-source supplier.
“A metal building from a single source can offer a faster, consistent and more efficient construction life-cycle cost,” he said. “The products reach the job site faster, and engineering costs are typically lower than conventional engineering. And metal building systems are permanent structures lasting 60 years or more.”
They are also very versatile, according to Haslebacher.
“The versatility of a metal building system allows many other exterior materials to be used,” he explained. “The steel frame bears most of the building load, so the exterior finish can be brick, glass, masonry, EIFS, insulated steel wall panels or other options. With these materials, the distinctive look can be created to express a retail corporate image.”
A good example is the Ace Hardware in Boone, Iowa. The store is a metal building construction. The builder/steel erector R.H. Grabau Construction, Boone, used a combination of glass split-face block and special insulated embossed panels. The subtle colors were chosen to create a contrast with the Ace Hardware sign for aesthetic appeal, as well as long-term durability from the elements. A metal roof and wall system were also incorporated to create an energy-efficient package.
INTERIOR: On the interior, metal buildings provide easy adaptability, with the steel spans allowing for creative and interchangeable interior designs.
“When one tenant moves out and the new one wants a different layout, the wide-span configurations of a metal building allow spaces to be reshaped and remodeled,” Haslebacher said. “Also, the metal building provides flexibility for mechanical additions and interior electrical layout alternatives.”