Positioning Retail Real Estate for a New Generation

February 4, 2019

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Levin Management Retail Outlook Survey Records Multiple Key Metrics at Historic Highs

Strong Holiday Season Caps Year of Solid Performance; Economy Expected to Drive Industry and Create Opportunity in 2019

NORTH PLAINFIELD, N.J., Feb. 4, 2019 – With multiple key metrics recording double-digit improvements over trailing averages, Levin Management Corporation’s (LMC’s) 2019 Retail Sentiment Outlook survey shows positive trending for shopping center tenants. The commercial real estate services firm today released the findings of its annual January poll of store managers within its 105-property, 15-million-square-foot portfolio.

A strong holiday season capped a year of solid performance, according to survey participants. Approximately three quarters (75.4 percent) reported 2018 holiday sales at or above 2017 levels, while shopper traffic met or exceeded 2017 levels for 71.0 percent. These statistics compare to trailing five-year averages of 62.9 and 61.6 percent, respectively.

2018 annual sales reached the same or a higher level year-over-year for 71.6 percent of LMC survey respondents, compared to a trailing five-year average of 57.3 percent.

“Based on our own Pre-Holiday Retail Sentiment Survey and other industry reports, we expected holiday and annual sales results to be positive,” noted LMC’s Matthew K. Harding, chief executive officer. “However, these dramatic jumps exceeded our expectations. In fact, the same/higher annual sales percentage is the strongest in our survey’s eight-year history.”

Harding notes that a healthy economy and improving consumer confidence helped spur the retail industry in 2018. He notes, however, that year-end stock market volatility may have influenced what would have been an even stronger performance for the sector. “We do anticipate that 2019 will be another healthy year for retail, however the pace of growth may moderate,” he said.

LMC tenants also anticipate good things to come in 2019. Just over 68.0 percent noted they feel optimistic about their stores’ performance in the coming year, and 27.7 percent say their companies expect to open additional locations in the coming months.

“We are pleased to see a strong sense of optimism conveyed in this year’s Outlook survey,” Harding said. “And the fact that more than one quarter of our respondents’ organizations plan to grow their brick-and-mortar presence is another positive sign of retail progress and profitability.”

AN EVOLVING INDUSTRY

Harding credits retailers – both within the LMC portfolio and industry-wide – for this current and near-term improvement. “Retail is embracing change,” he noted. “This sector must constantly evolve to survive and thrive. That adage is truer today than perhaps ever before in our increasingly digital world.”

In fact, 57.9 percent of LMC Outlook survey respondents indicated their company has adapted its business model in response to the growth of ecommerce. That percentage – another new high – is up more than 20 percent since 2015, when LMC first asked its tenants whether they were making ecommerce-related changes.

The single-most incorporated change – embraced by 63.3 percent of LMC survey respondents who have adapted their business models – centers on increased training and focus on customer service. “You cannot replicate the personal touch in an online environment, and physical store retailers are working to leverage that advantage,” noted Melissa Sievwright, LMC’s vice president of marketing.

Other high-ranking enhancements (incorporated by more than 50.0 percent of respondents who have made adaptations) include increased use of technology-centered tools to assist customers in-store, increased use of technology-centered marketing tools to reach customers outside the store, and increased in-store services and incentives.

“The bottom line is that tenants are using multiple, diverse tools and techniques to distinguish their brands,” Sievwright said. “And it is working. In our 2019 Outlook survey, 68.2 percent of respondents who have adapted their business models said they are seeing the benefits in terms of sales and in-store traffic.” That’s the largest percentage recorded to date and compares to a three-year trailing average of 48.9 percent.

LMC asked tenants what driver they feel will have the biggest impact on their retail business in 2019. The greatest percentage (42.9) selected the economy/consumer confidence. Others cited shifting consumer expectations and shopping patterns (20.8 percent), ecommerce growth (16.3 percent) and evolving technologies (9.8 percent).

Many respondents see strong opportunities for prosperity in 2019, particularly in the areas of increased traffic and the engagement of new customers, a continued forward-moving economy, and the introduction of new product lines and services. “Undoubtedly, the way people are shopping – and what they expect from their shopping experiences – is changing,” Sievwright said. “Today’s ‘connected’ consumer really wants it all, and we are so encouraged by how our retailers are responding to that. In short, our tenant base is a great reflection of this industry’s resiliency and potential.”

LMC’s next Retail Sentiment surveys will be conducted in May, exploring year-to-date performance and technology issues, and in October/November, gauging expectations and plans for the holiday season. For more than 65 years, the North Plainfield, N.J.-based company has served as a trusted single-source commercial real estate services provider for institutional and private owners. LMC today maintains a diversified, retail-focused portfolio in the Northeast and Mid-Atlantic states. The firm’s capabilities continue to evolve with new technologies, efficiencies and sustainability-focused initiatives to serve a new generation of properties, investors and tenants.

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