The New Normal?
Year five and, once again, too few square feet in ground-up shopping center construction to rank the “Fastest-Growing Developers” as has been the Chain Store Age tradition for the 20 years prior.
Today, developers seem fated to redevelop and expand existing centers, develop 300,000-sq.-ft. to 600,000-sq.-ft. outlet centers and perhaps add an occasional grocery-anchored infill center.
Will it ever return to normal? Some developers say no and have converted to value-added acquirers, who buy distressed properties and reposition and manage them.
After the 1990 commercial real estate depression, some developers despaired of ever building another shopping center. As we know, their despair was unfounded. Landlords like the current market, where they can raise rents without losing tenants. But retailer demand for space is building. Sooner or later, ground-up development will kick back in.
It may already be starting. Take a look at the stellar work turned in by the Top Developers of 2013. And, just as we did over the last five years, we have arranged the companies alphabetically and highlight one or more 2013 projects from each. All new developments and expansion projects were completed between Jan. 1 and Dec. 31, 2013.
CBL & Associates Properties
As always, CBL has worked its way into the thick of the development scene with new projects and renovations spanning 718,000 sq. ft.
In July 2013, CBL and joint-venture partner Horizon Group Properties opened The Outlet Shoppes at Atlanta, a 370,000-sq.-ft. center located in Woodstock, Ga., just north of Atlanta.
Ninety-seven percent leased at opening, the center is expected to draw more than 4 million visitors annually from a three-state area.
The site can accommodate an additional 30,000 sq. ft. of outlet shops, plus restaurants and additional retail on seven outparcels.
In November, CBL opened a 46,000-sq.-ft. expansion to Cross Creek Mall in Fayetteville, N.C.
Cullinan Properties charged onto the Top Developer list with two projects opened in 2013: The Levee District at East Peoria Downtown in East Peoria, Ill., and the Streets of St. Charles in St. Charles, Mo., just north of St. Louis.
The Levee District opened 239,443 sq. ft. Anchors include Costco, Target, Gordmans, Ulta Beauty and Ross Dress for Less. The mixed-use project will eventually span 500,000 sq. ft. and include hotel, civic, office, retail and restaurant space.
During 2013, Streets of St. Charles opened 24,878 sq. ft. of space in a mixed-use building with Tucanos Brazilian Grill, MassageLuxe, Streets of St. Charles Dental, Prasino and Five Guys Burgers and Fries.
EDENS made another appearance on the Top Developers list in 2013 with nearly 560,000 sq. ft. of new space. Two notable expansion projects illustrate the company’s continuing innovations in 2013.
The Mosaic District, EDENS’ innovative, Silver LEED for Neighborhoods urban creation in the Washington, D.C., suburbs, added new restaurants like Matchbox and Cyclone Anaya’s Mexican Kitchen as well as unique local retailers such as Sip & Swirl, Courage.b and Palace 5ive.
Opened in late 2012, The Shops at Stonefield in Charlottesville, Va., created an intimate shopping experience that connects to nearby neighborhoods. During 2013, EDENS added to the experience with new retailers and restaurants, including Pasture, Parallel 38, Orvis, Mincer’s University Imprinted, Altar’d State, and Alex and Ani.
Kimco Realty Corp.
New Hyde Park, N.Y.
Kimco maintained its customary spot on the Top Developers list in 2013 by adding a total of 1,639,791 sq. ft. to its portfolio. That total included an extensive redevelopment at the Richmond Shopping Center in Staten Island, N.Y.
The project included transforming an aging 102,000-sq.-ft. Kmart into a new 142,000-sq.-ft. Target, and adding an 8,000-sq.-ft. Miller’s Ale House. Additional credit tenants that opened at the center in 2013 include Old Navy, Five Guys, Five Below and Bank of America.
The new tenants coupled with renovated exteriors running throughout the center, including Pathmark’s exteriors, have revitalized the entire site and improved the stability of the recurring net operating income (NOI) and cap rate.
RD Management LLC
New York City
Consistently ranked among the nation’s largest privately held real estate development and management organizations, RD Management brought 603,755 sq. ft. of new shopping center space on line in 2013. Two notable developments include Orangeburg Commons in Orangetown, N.Y., and Target Shopping Center in Glenville, N.Y.
At Orangeburg Commons, RD Management built a new 51,823-sq.-ft. Stop & Shop supermarket, while developing and opening a new 129-room Marriott Residence Inn Hotel.
At the Target Shopping Center, which opened in 2012, RD Management added 31,816 sq. ft. of space and brought in several national retailers, including Sleepy’s, VisionWorks and GNC, along with a number of regional tenants.
Top Developers mainstay Regency Centers opened up 858,107 sq. ft. during 2013, including the 325,325-sq.-ft. Grand Ridge Plaza in Issaquah, Wash.; the 89,654-sq.-ft. Shops at Erwin Mill in Durham, N.C.; and the 341,411-sq.-ft. East Washington Place in Petaluma, Calif.
Anchored by Safeway and Regal Cinemas, Grand Ridge Plaza is the only major retail center to serve Issaquah Highlands, a master-planned community near Seattle.
The Shops at Erwin Mill, anchored by Harris Teeter, is part of a larger mixed-use project encompassing two city blocks of retail, hotel, office and residential space serving the Duke University and Durham markets.
East Washington Place is a power center anchored by Sprouts, Target, HomeGoods, T.J. Maxx, Dick’s Sporting Goods and BevMo. The eco-friendly project is LEED Silver Certified.
Simon Property Group
Simon opened a massive 3,370,000 sq. ft. of new and redeveloped space in the United States, Canada, Japan and South Korea during 2013.
Domestically, Simon redeveloped the 750,000-sq.-ft. Shops at Nanuet in Nanuet, N.Y., and the 580,000-sq.-ft. University Town Plaza in Pensacola, Fla.
Simon also expanded Sawgrass Mills in Sunrise, Fla., Seattle Premium Outlets, and Orlando Premium Outlets–Vineland in Orlando, Fla. Expansions ranged from 110,000 sq. ft. to 165,000 sq. ft.
The company also opened five new Premium Outlet centers, including St. Louis Premium Outlets and Phoenix Premium Outlets in Chandler, Ariz. Both centers feature about 350,000 sq. ft.
Internationally, Shisui Premium Outlets opened in Japan; Toronto Premium Outlets opened in Canada; and Busan Premium Outlets opened in Busan, South Korea. Square footages ranged from 235,000 to 360,000.
Bloomfield Hills, Mich.
Taubman brought its outlet center brand to the 2013 Top Developers list. The 308,000-sq.-ft. Prestige Outlets Chesterfield is an upper-moderate fashion outlet mall in Chesterfield, Mo., just 20 minutes from St. Louis.
With approximately 70 fashion-focused retailers and a collection of popular restaurants, the open-air, village-style property creates a shopping destination for locals and visitors alike.
The center features a family-focused environment, dog-friendly hospitality and access to the Monarch Chesterfield Levee Trail, which is built atop a levee designed to protect Chesterfield from the Missouri River when it floods.
The project created approximately 750 construction jobs and more than 800 permanent jobs.
Tri-Land Properties brought two shopping centers encompassing 318,157 sq. ft. of space to market during 2013: The 140,461-sq.-ft. Fridley Market in Fridley, Minn., and the 177,696-sq.-ft. Ten Quivira in suburban Kansas City, Mo.
Tri-Land acquired Fridley Market in 2006 and implemented a redevelopment that downsized a 104,000-sq.-ft. Cub Foods to 62,736 sq. ft., moved Fridley Liquors into a new 10,500-sq.-ft. space, renovated 61,000 sq. ft. of space and added McDonald’s on an outparcel.
Tri-Land also purchased Ten Quivira in 2006 and implemented a redevelopment plan there. Today, a new 64,736-sq.-ft. Price Chopper anchors the center. Inline retailers include Prairie Point Quilt & Fabric Shop, Thai Home Place, Go Big Skill Toys, Saints Pub and Jimmy John’s.
Westfield marched onto the 2013 Top Developers list with 1,158,000 sq. ft. of new and redeveloped space. One of the most notable Westfield projects completed during the year was the $37 million redevelopment of Westfield Valley Fair in San Jose, Calif., in the heart of Silicon Valley.
The 99,000-sq.-ft. project included a new, upscale dining terrace, elegantly redesigned center court and a newly enhanced Luxury Collection. The Luxury Collection area of the center is now home to premier brands such as Nordstrom, Tiffany & Co., Louis Vuitton, Cartier, Prada, Burberry, Miu Miu, Salvatore Ferragamo, David Yurman, Tory Burch, Apple, UNIQLO, Zara, Michael Kors, Hugo Boss and Montblanc.
The Woodmont Co.
Fort Worth, Texas
In its second appearance on the Top Developers list — following last year’s debut — The Woodmont Co. completed two significant projects in 2013.
The first was a continuation of the Chimney Rock power center in Odessa, Texas, in the heart of what has been the fastest-growing Texas market. Following the addition of 54,361 sq. ft. of retail in 2012, Woodmont brought on another 64,023 sq. ft. this year. Academy Sports + Outdoors, Best Buy and Marshalls anchor the center.
Then there is St. Louis Premium Outlets, a 351,532-sq.-ft. outlet center with 90 stores. Woodmont built the center in partnership with Simon Property Group, which owns the Premium Outlet brand.
Chestnut Hill, Mass.
WS Development redeveloped 407,751 sq. ft. of space spread among three properties during 2013. The properties include the 300,000-sq.-ft. MarketStreet Lynnfield in Lynnfield, Mass.; the 400,000-sq.-ft. THE STREET in Chestnut Hill, Mass.; and a 44,000-sq.-ft. building at 234 Berkeley St. in Boston.
WS calls the MarketStreet at Lynnfield its most significant project of 2013. It was the redevelopment of a property formerly owned by the Colonial Country Club. Whole Foods Market and Kings anchor the development, which features lululemon athletica, Hot Mama, J.Crew, Sephora, Shoe Market, Pottery Barn and many others. The ongoing project is currently developing an additional 100,000 sq. ft. of shops and restaurants.
Supply Chain Responsibility
Devastating sourcing and supply chain disasters, including the Bangladesh factory collapse in April 2013, have increased the push for retailers and other businesses to implement sustainable and responsible practices across the global supply chain. Tamara Saucier, VP industry – retail solutions, GT Nexus, discussed the topic, and proactive measures retailers can take, with Chain Store Age.
What can retailers be doing to ensure ethical and sustainable supply chain practices?
The challenge is in knowing where your goods are being made and who’s making them. This is a struggle due to the complexity of multi-tiered supply chains, but there are steps retailers can take to improve the visibility and traceability of the movement of goods throughout the production life cycle, from origin through delivery. Visibility means different things to different companies, but for the sake of ensuring ethical and responsible production of goods, visibility means knowing who every party is in the supply chain starting with raw materials, and tracing the steps in the production cycle to ensure compliance. Doing this from thousands of miles away is difficult.
Where should they start?
The first step is to connect all of the trading partners on an automated, electronic network that enforces workflows and procedures and ensures that the right parties are creating the goods with the right materials, labor and working conditions. It can be a challenge to mandate suppliers to log in to a system and report their steps or milestones in production. But we’ve found that by tying payments to the system, there’s a completely different perspective from the suppliers. By connecting all trading partners in a cloud environment that automates the orders, invoices, documents and payments, retailers have a fighting chance of obtaining visibility into the supply chain to ensure ethically and sustainably produced goods.
Are consumers’ purchasing habits being influenced by how ethical or sustainable a retailer is?
Yes, today’s consumers are tuned in to where goods are made like never before. They want the best possible deal, but they also want to feel good about where the product is coming from and how it has been made. More consumers are demanding responsibly produced goods, and companies that fail to demonstrate ethical production are seeing their brands and stock prices impacted.
What should retailers keep in mind when they are trying to create a more sustainable and ethical supply chain?
It’s important for retailers to remember that suppliers and trading partners are part of the brand and that they can’t be separated. Retailers should have a vested interest in the health and success of their suppliers — sometimes squeezing the last dime out of suppliers is a short-sighted approach. Instead, retailers should find new ways to partner with suppliers to ensure their brand is healthy. For example, leading retailers are offering early payment programs to suppliers to assist in delivering access to capital. A truly collaborative approach is a win-win situation for all parties.
Are there any retailers that come to mind that are doing a good job of making their supply chains lighter?
Companies like Patagonia and Levi Strauss & Co. have well-publicized efforts to do no harm to the environment. Levi has programs that drastically reduce water amounts used in production of its clothes, and Patagonia has marketing campaigns that tell customers NOT to buy their products unless they really need them.
Patagonia also has tools that allow consumers to track the carbon footprints of their products. It’s one thing for a company to talk about sustainability, but consumers really embrace a brand when they are able to put their money where their mouth is.
What tools or technology can facilitate retailers’ efforts in producing and sourcing goods more responsibly?
Tools that deliver visibility and accountability within the production of goods are making an impact. A retailer is in a good position to enforce responsible production policies if they are able to see where goods and inventory are in the supply chain, know each party that touched the goods in the process, and track and manage the delivery of goods to minimize shipping miles and carbon footprints.
Since its passage in 2010, the Affordable Care Act (ACA) has been the subject of intense political debate and a source of anxiety for many retailers. While most of the attention has focused on the law’s health benefit requirements, there is little doubt that the ACA will also influence workers’ compensation costs, which are often the second highest expense for retailers after payroll. By taking steps now to understand and manage how the ACA will likely affect costs, payroll, and claims filings, retailers can lessen any potential negative impacts.
Probably the most predictable outcome of the ACA is that the number of individuals in the United States with health insurance coverage will increase. Proponents contend that this increased access to care will result in a healthier society and ultimately help curb rising workers’ compensation costs. In reality, however, the result is more likely the opposite.
For example, as the number of individuals seeking medical treatment rises, it has the potential to put additional stress on a healthcare system that is already short on doctors. This is particularly troubling as it relates to specialists and the potential for delays in obtaining diagnostic tests and scheduling surgeries and other procedures. Longer periods of disability and complications as a result of such delays would ultimately drive workers’ compensation costs up.
At the same time, proponents of the ACA say that because more people will have access to health care, there will be a reduction in comorbid diseases and disorders among individuals. To be sure, comorbidities can complicate workers’ compensation claims and have been shown to result in higher-than-average benefit payments. However, there is no significant evidence to support the contention that an employee is healthier and less likely to file a workers’ compensation claim simply because he or she is insured. For example, data from the Centers for Disease Control and Prevention indicate that heart disease remains the leading cause of death in the United States and that the percentage of Americans with a high body mass index has steadily climbed over the last 50 years — two trends that are not confined to the uninsured population.
In addition, greater access to care is also unlikely to reduce cost shifting, as some proponents have claimed. Retailers have long been concerned that non-work-related injuries are being shifted to the workers’ compensation system. While an uninsured employee injured outside of work may be tempted to file a workers’ compensation claim in order to receive benefits, there is still the temptation to shift non-work-related injury claims to the workers’ comp market due to the higher reimbursement rates and lack of deductibles and co-payments. Not only is it clear that the ACA will not result in every American having health insurance, these financial incentives will continue under the new law.
On a more positive note, the industry’s shift to quality care and better patient outcomes as a result of the ACA do have the potential to offset rising workers’ compensation costs. Traditionally, the healthcare industry’s focus has been on volume: more patient admissions, tests and procedures translated to higher revenues. Post-reform, however, the industry has shifted its focus to improving standards of care and achieving better patient outcomes.
If this transition results in less emphasis on costly procedures, which often produce questionable results, workers’ compensation costs could be reduced. Although it remains to be seen whether the standards of care developed under the ACA for group health care would be enforced under workers’ compensation, this is a promising development for retailers.
Another area under the ACA that retailers need to remain aware of has to do with premium refunds. The ACA allows insurers to rebate premiums to employers that have better-than-expected performance with their healthcare programs. Employers can either refund such premiums back to their workers or use them to offset future premiums. The National Council on Compensation Insurance (NCCI) has indicated that if premium refunds are given to workers, this would be considered payroll under workers’ compensation premium calculations.
Retailers need to keep this in mind when deciding what to do with healthcare premium rebates that may be received.
Until the ACA has been fully implemented, the full impact of the law remains unknown. However, retailers can take steps now to lessen any potential negative consequences. These include:
- Increasing efforts to identify medical providers that can provide the best quality care for injured workers, and taking the necessary steps to ensure the workforce has access to these providers.
- Carefully managing the approach to healthcare premium rebates.
- Closely monitoring any shifts in injury claims away from group health to workers’ compensation.
- Remaining committed to loss control efforts.
Mark Walls is senior VP and workers’ compensation market research leader for Marsh USA, the world’s leading insurance broker and risk adviser.
The ACA will influence workers’ compensation costs, which are often the second highest expense for retailers after payroll.