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.”
North Carolina mixed-use center to rise up around new Ikea
Ikea announced last week it would build a new location adjacent to a CBL property outside Raleigh, and this week CBL announced it would capitalize on that occasion to transform its Cary Towne Center into a mixed-use project.
CBL has been working with the town of Cary — an affluent and growing community in the Research Triangle — to start the zoning process to allow the construction of a multi-phase renovation of the property. Plans call for a mix of high-end retail, dining, entertainment, residential, office, and green space.
“CBL is thrilled that IKEA has chosen Cary Towne Center for its next potential location in North Carolina,” said Stephen Lebovitz, president and CEO of CBL. “Cary Towne Center is ideally located, and there is strong demand to elevate the center to the next level.”
The Cary market area holds some 170,000 residents with average household incomes above $90,000.
This is the second big project destined for Cary. Last month, Columbia, South Carolina-based Columbia development announced plans to erect a 2-million-sq.-ft. multi-use project called Eastern Cary Gateway.
PREIT puts two malls on the market
PREIT’s mall-pruning program picked up during the retail real estate industry’s big RECon show.
As the show floor opened in Las Vegas, the Philadelphia-based company announced it had put up for sale Logan Valley Mall in Altoona, Pennsylvania, and Valley View Mall in LaCrosse, Wisconsin. PREIT reported it had received unsolicited interest in these properties and was willing to dispose of them to increase its cash position.
"To date, we have successfully sold 16 lower-productivity malls as part of our non-core property disposition program. With these additional dispositions, we are taking further action to strengthen our portfolio amid a challenging retail climate," said CEO Joe Coradino in a statement.
Disposing of these assets, the company estimates, will ratchet up its average portfolio-wide sales by $10 per square foot.