Real Estate Rebound
As a nation, and a world, of retailers watch for any and every sign that the economy is improving, there are plenty of experts that express cautious optimism that a turnaround is in the making.
Chain Store Age talked with Ivan L. Friedman, president and CEO of New York City-based retail real estate advisory firm RCS Real Estate Advisors, about the indicators he is seeing that support an economic lift in retail real estate.
CSA: The news is filled with mixed signals about where we are in terms of an economic rebound. Are there indicators that retail real estate is rebounding?
Friedman: I would say retail real estate is cautiously rebounding. We’re seeing the moderate to upscale retailers opening stores at a much slower rate than we’ve seen in past years. They are gradually returning to the market and being very selective about their real estate. On the other hand, value retailers are robustly opening stores and continue to expand because they’re seeing the highest levels of comp sales increases. Since the end of 2009, they have been taking advantage of the good real estate that’s out there at good prices and the willingness of landlords to consider reasonable rents.
CSA: What are the most telling indicators of the current state of retail real estate and how would you summarize where we are right now?
Friedman: Right now, outlet centers have stronger comp sales than traditional malls. The outlets are getting more interest from retailers looking to expand. Landlords are raising rents in the outlet locations to try to offset the lack of interest they’re getting for traditional mall spaces. I would say that where we are right now is in a holding pattern. Until we see how the holidays go, we won’t really know where we are or where we’re headed.
CSA: What should retailers be focused on for the rest of this year and first quarter 2011?
Friedman: Retailers should be focusing on their renewals. This continues to be an opportunity to optimize occupancy costs for any remaining portion of their portfolio that is underperforming.
CSA: What about landlords? What should they be focused on right now, and how can landlords and tenants most effectively work together?
Friedman: Landlords need to stay focused on keeping tenants and not be too emboldened because of retailers’ improving profitability. Retailers have set occupancy targets, typically based on a percentage of sales, as a function of their business model. While we’ve seen sales rise slightly in the first half of the year, we have to remember that sales decreased last year by double digits. The increases this year have not come close to making up for the decreases retailers suffered. So, I think it’s important that landlords be realistic about just how much retailers can afford in rent. Retailers just aren’t going to sign up for more than they can reasonably afford.
CSA: Looking ahead, do you think the recessionary climate of the past 18-24 months will reshape the retail real estate landscape and, if so, how?
Friedman: For the foreseeable future, there’s not going to be a lot of development. We have enough space in existing regular-priced malls for more tenants. There might be a few new developments here or there, but nothing significant will be happening. So, I think that we’ll see landlords evaluating their poorer performing malls and investing in general upgrades of both their tenancy and their facilities. From the retailer side, I think they’ve gotten pretty good at controlling their inventory, payroll and occupancy costs so we’ll see them continue to run lean.
Kmart launches Smart Sense
HOFFMAN ESTATES, Ill. – Kmart announced the expansion of its brand portfolio with the introduction of the Smart Sense line, its new Kmart brand that includes a wide range of items including everything from snacks and beverages, to oral care, paper products, household cleaners and over-the-counter medications. The quality of the Smart Sense line is comparable to that of national name brands, and on average costs 20% less, according to the company.
"With the introduction of the Smart Sense line, Kmart is looking to offer a more affordable Kmart brand product assortment that will rival the quality of more nationally recognized brands," said Mark Snyder, chief marketing officer, Kmart. "While the Smart Sense line will offer the everyday essentials, Kmart is also taking it a step further by providing unique products that you wouldn’t typically expect to see under a store brand."
The Smart Sense line currently consists of hundreds of products available in Kmart stores and the product line will expand to more than 1,200 items by early 2011, the company reported. Kmart said it will also support the Smart Sense line launch through multiple communications channels, including advertising, coupon offers, merchandising displays, sampling, digital marketing and event marketing.
In addition to the introduction of the Smart Sense line, a new look has been created for many other Kmart brand products, the company reported. The brighter and more vibrant packaging has been designed to capture the "colorful thinking" Kmart is demonstrating through its new product and brand announcements. In addition to the Smart Sense line roll-out, Kmart is also introducing products in a re-launch of its other exclusive brands, which include, Little Ones baby care products, Champion Breed pet care products, Image Essentials personal care products and VitaSmart vitamin products.
Target to open ten stores on 10/10/10
MINNEAPOLIS Target announced that it will open 10 stores across the country, resulting in the creation of more than 2,400 jobs.
The stores will open in the following communities:
* Sacramento East: 6507 4th Ave., Sacramento, Calif. * Simi Valley West: 51 Tierra Rejada Rd., Simi Valley, Calif. * Bakersfield Central: 2901 Ming Ave., Bakersfield, Calif. * San Jose North: 95 Holger Way, San Jose, Calif. * Azusa: 809 Azusa Ave., Azusa, Calif. * Salt Lake City: 1110 S. 300 West, Salt Lake City, Utah * Little Rock University: 420 S. University Ave., Little Rock, Ark. * Christiana: 800 Christiana Mall, Christiana, Del. * Flushing: 4024 College Point Blvd., Flushing, N.Y. * Braintree: 250 Granite St., Braintree, Mass.
“These new Target store openings will help support local economies and make life easier for our guests by creating new jobs, spurring development and providing the utmost in convenience and value,” said John Griffith, EVP property development for Target. “We are looking forward to deepening our relationship with guests in communities across the country.”
As part of the grand opening celebrations, Target said each store will contribute to its community by initiating a local grant program, contributing to the United Way, donating food to Feeding America and product to the local Goodwill chapter and encouraging team members to volunteer their time to serve their community.