RECon Report: New times, not end of times, for physical retail
As the International Council of Shopping Centers shut the doors on its RECon show in Las Vegas this week,Chain Store Ageasked top brokers and third-party managers for their take on the temperature of physical retail. Not quite sick, not quite well, but certainly out of rehab and hard at work on recovery, was the general diagnosis.
“I heard someone this week make the comment that, when you start to see more site plans, that’s the sign of health in the industry, and I think there were more,” said Dave Cheatham, president of X Team International and president of Phoenix-based Velocity Retail Group.
“New projects are being developed, new stores are being developed,” he said. “So many people in this business are affected by development.”
Several industry experts made the point at conference sessions and in-person that, with the advent of the REIT, developers are forced to appease investors and play it safe with grocery-anchored, necessity-based acquisitions and projects. The exception is the risk-leveraging multi-use center that blends residential, office, and retail.
“Huge projects — and there are not very many of them — are like a stock fund. You don’t want to put your toe in the water with one stock,” said Avison Young Principal Spencer Bomar.
Beginning to ignite a recovery, however, are independent developers with some cash without ties to Wall Street that are funding opportune projects. They are reliant upon new food and entertainment concepts and new thinking from traditional retailers to make a go of them.
“The burden is on the retailers to identify expansion markets. They are more heavily dependent on technology to analyze demographics and they call us and say, ‘Hey, we have an opening in this particular trade area,” Cheatham says. “It’s much more powerful when the retailer says, ‘This is the hotspot’ instead of the developer.”
Bomar said there are four types of retailers in the marketplace today: Those that are simply failing. Those that have valid concepts, but concepts that need tweaking. Successful chains like Home Depot that are maintaining status quo and waiting for a leader to guide the way. And leaders like Target that take a chance and break the mold.
“Target for decades was a 128,000-sq.-ft. box. Now, with its flex concept, there are urban Target stores that are 18,000 or 30,000 sq. ft.,” Bomar said.
A shift in generational influence finds both retailers and shopping center developers in a period of tremendous uncertainty, maintained Anthony Buono, chairman of CBRE’s Global Retail Executive Committee.
“There’s a lot of activity among an emerging breed of people in the business who are art-influenced and wide open to curation. These are the people responsible for the design districts,” Buono said. “They are 23-to-40-year-old professionals who are putting forth new ideas with more fashionable, global views.”
Even the much-ballyhooed Warby Parker should be put on notice to emerging retailers such as Gentle Monster, a Korean import known for fashion-forward eyeglass frames and stores resembling SoHo art galleries, Buono asserted.
Look, also, for tomorrow’s retail stars to emerge from the most unlikely of places. Bomar points to Alabama’s Billy Reid, a new darling of the designer set.
“Who would have thought one of the coolest new clothing designers would be from Florence, Alabama?” Bomar, himself a native Alabaman, poses. “But Muscle Shoals has gotten hip, and when a tornado hit, Reid did a commemorative t-shirt and now he’s popping up everywhere.”
Though spirits were hardly ebullient at RECon, it was clear the industry was no longer in denial and that the brick and mortar recovery was underway. Just don’t be surprised if it’s an extended recovery.
“The secret sauce is not quite there just yet,” Bomar said. “There are developers with some money and great reps doing some good things, but they’re stand-up doubles and the occasional slide-in triple. No grand slams.”
Office supplies giant still weighing takeover offer
Staples Inc. has rejected a buyout offer.
The company turned down a takeover offer from Cerberus Capital Management, saying it was too low, Bloomberg reported. However, another private equity firm, Sycamore Partners, is still in the running to acquire Staples.
The bid from Cerberus valued the retailer at more than its current market value of about $5.8 billion, according to Bloomberg.
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Starbucks looks to boost minority businesses, train youth in two new locations
Starbucks is keeping good on its latest national initiative.
The coffee giant said it will open a store in Dallas, in spring 2018, and Trenton, New Jersey, later this year, as part of its program to invest in at least 15 underserved communities across the U.S. by 2018. To date, Starbucks has opened six similar stores, including in Ferguson, Missouri, central Phoenix, and East Baltimore.
In Dallas, Starbucks will join the ongoing redevelopment of the iconic Red Bird shopping district in the southern part of the city. The store will be focused on creating economic opportunities by hiring locally, providing in-store training opportunities for youth, and working with local minority owned businesses. The store in Trenton, located downtown, will have a similar mission.
Starbucks plans to work with local women- and minority owned contractors for the construction of its upcoming Red Bird store, and is evaluating minority owned suppliers in southern Dallas for a locally sourced product to feature in the café.
The Red Bird Starbucks will be the first in the Dallas metropolitan area to have a unique in-store training space. Working with a local nonprofit organization, Starbucks will provide southern Dallas youth the opportunity to take part in a free multi-week job skills training program – based on Starbucks own customer service curriculum. When trainings are not in session, the room will be available for local groups to use for meetings and dialog – serving as a vital hub for members of the community.
With regards to the Trenton locations, Starbucks said it is currently evaluating local minority-owned vendors in the community to supply product for the store, and nonprofit organizations in the community to support its in-store job training program for opportunity youth.