REAL ESTATE

Simon takes electric vehicle charging to next level

BY Marianne Wilson

Simon is helping customers charge their electric vehicles faster than ever before. It has installed an ultra-fast electric vehicle charging system at its San Francisco Premium Outlets.

Simon has installed an ultra-fast electric vehicle charging system at its San Francisco Premium Outlets, in Livermore, Calif. It is California’s first location for EV systems featuring super-fast recharging speeds up to 350 kilowatts (kW) from Electrify America. As part of its ongoing sustainability strategy, Simon teamed with Electrify America to open 10 DC fast chargers at San Francisco Premium Outlets for public use.

The charging site features eight 150 kW chargers and two 350 kW chargers. The 350 kW chargers are capable of recharging an electric vehicle at 20 miles a minute providing 200 miles of vehicle driving range in just 10 minutes.

“We are delighted to be the first location in California to offer EV owners the fastest charging option available in the U.S.,” said Jamal Porter, West Regional VP of management for Premium Outlets. “Our customers expect a premium experience and these fast chargers offer the latest technology to provide a convenient, reliable and quick recharging experience.”

The 10 Electrify America chargers are co-located with 20 Tesla Superchargers making San Francisco Premium Outlets one of the nation’s largest multi-standard fast charging sites.

In addition to San Francisco Premium Outlets, Electrify America will install charging systems at Simon locations nationwide including 17 centers in California, with 95 additional chargers.

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JLL: High-profile transactions driving retail investment in 2018

BY Marianne Wilson

A strong holiday season is expected to help control mall vacancies in early 2019.

That’s according to the Q3 U.S. Retail Investment Outlook, which was released Wednesday by JLL at the International Council of Shopping Centers New York Conference. Retail transaction volume totaled $56.9 billion year-to-date at the end of the third quarter, the report said. Volumes were paced by two major deals this year: Brookfield’s purchase of GGP in Q3 and Unibail-Rodamco’s purchase of Westfield earlier this year. As a result, year-to-date investment sales grew by 36.1%, by far the largest growth rate of any property sector so far this year.

Aside from the boost in mall transaction volume due to the high-profile transactions, urban retail assets were the other property type to mark an increase in liquidity thus far in 2018, with volumes rising by 7.8%. Outside these major transactions, liquidity for individual non-core mall assets remains limited, with these assets often fetching double-digit cap rates. This is true of all retail however, not just the mall sector, as mounting bankruptcies are leading to some softening in overall fundamentals.

“The sector has shown steady fundamentals and growth this year overall with vacancy compressing nationally to 4.5% in the third quarter,” said Naveen Jaggi, president of JLL Retail Brokerage and Capital Markets. “As is typical for this time of year, bankruptcies are starting to increase, and we expect that to slow down overall volumes somewhat as investors will wait on sidelines. That said, developers have done a good job of managing pipeline activity as construction starts slowed by 11.1% from the same quarter last year. This, coupled with what should be an incredibly strong holiday shopping season, should help easily control vacancy in early 2019.”

New York and Los Angeles led primary market investment, with 35.7% and 18.3% growth in transactions, respectively, including assets from those major acquisitions. Grocery was one of the better performing sectors, with momentum in non-gateway primary and secondary markets that are experiencing notable employment growth, with Seattle, Northern New Jersey and Atlanta leading the way in the third quarter.

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Yaromir Steiner on the shrinking middle class

BY Yaromir Steiner

Despite a decade of sustained economic growth, retail turbulence persists. Consolidation, closures, and realignments. The emergence of new retail concepts. The clash between brick-and-mortar, online, and mobile retail channels. All this has contributed to a feeling of uncertainty across the industry.

Media and analysts attribute this turmoil to the impact of online and mobile sales. Experts suggest brick-and-mortar retail is overbuilt by 20%. While conventional wisdom suggests a connection between these issues, I believe it’s an incomplete explanation for what’s really happening. More stores are opening than closing. Research from IHL Group shows that “North American retailers will open 12,663 stores and close 8,828 stores in 2018, for a net increase of 3,835 store locations.” Discussing excess retail space requires important context.

Most excess space is in traditional malls, a struggling sector comprising 15% of the market. In other words, this isn’t industry-wide oversupply, it’s supply-and-demand imbalance. Power centers and grocery-anchored centers are in higher demand than ever. Asymmetry is an issue, but it’s not a crisis. Imbalance also offers a silver lining: a better understanding of the power of well-executed mixed-use projects. A carefully curated retail mix enhances corollary uses.

What’s behind so-called shifting consumer demands? The biggest issue is a dramatic decrease in available discretionary income, which can be directly attributed to a shrinking middle class. The trend is alarming.

Between 1945 and 1980, the bottom 90% of Americans claimed 70% of all declared income. Beginning in the 1980s, changing economic policies had altered income distribution. By 2015, that bottom 90% claimed around 50% of all income—a 20-percentage-point reduction! That decrease largely came from those who traditionally spent a large portion of their paychecks on retail. Meanwhile, the top 10 % have boosted declared income by more than 65%, but their increased retail spending is comparatively minimal.

Against that backdrop, the rise of discount retailers makes perfect sense. Like an ocean liner, industry momentum takes time to change course. The ‘80s and ‘90s saw continued construction, even while middle-class demand waned. With 10-year leases standard, it’s easy to see how outdated brick-and-mortar concepts kept going forward until marketplace gravity exerted its inevitable tug.

Middle class shrinkage is harder on traditional retailers than it is on online competitors. Digital accounts for just a fractional percentage of all retail sales, and the impact of digital dollars is more complicated than is often portrayed. Online-only brands rarely compete directly with brick-and-mortar, and some competitive losses are offset by brick-and-mortar brands enhancing their own online and mobile platforms. With traditional brick-and-mortar brands getting better at price-matching, streamlined delivery, and convenient pickup, true omnichannel retail is moving from theory to practice with remarkable speed.

The current of innovation flows both ways. Growing numbers of acclaimed online-only successes now recognize that they need brick-and-mortar locations to maximize their potential. Lifestyle brand Marine Layer, shoe startup Allbirds, and mattress retailer Casper are recent examples. Formerly online-only brands creatively leverage brick-and-mortar locations, with “showroom” or fitting room concepts—using physical locations to connect with new markets and audiences.

As this “channel-neutral” approach spreads, it’s become clear that Amazon isn’t killing traditional retail. It’s prompting it to evolve. Online and in-line aren’t in competition. Indeed, they are increasingly interwoven.

Excluding mail-order and brick-and-mortar online numbers, true online-only sales account for around 4% of overall retail sales. While that may double in the next decade, the impact should be negligible.

Retail developers should proactively adapt to new demographic and industry realities. New consumer-facing technologies make it easier to shop brick-and-mortar. Target and Walmart have been reorganizing themselves as essentially in-store distribution centers. Last year, most of Target’s online holiday sales shipped from stores, not warehouses. It’ll be interesting to see how that store-network model evolves alongside the very different Amazon warehouse model.

Retailers are identifying their function as efficient merchandise distributors and/or suppliers of unique/customized experiences. This emerging self-awareness inspires new concepts and forces retail developers to adjust their thinking about the environments they create. From fluidity and uncertainty comes inspiration and innovation. The future is bright and exciting—for those who embrace change.

Yaromir Steiner is the founder and CEO of Columbus, Ohio-based Steiner + Associates.

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