The Retail Outlook is Brightening, But Don’t Ignore Cost Control

A new season and strong signs of a continuing recovery in consumer spending have the retail real estate management industry in an upbeat mood. We’re optimistic too, but at the same time, our long experience tells us not to neglect operating efficiency and cost control even in a positive climate. Here are some of the ways we achieve both of these key goals:

Managing Vendors: Yes to Bidding, No to Bundling

Levin holds costs steady for high-end retail property management services (sweeping, landscaping and snow removal) by close control of vendor contracts. Our contract renewals are usually contingent on suppliers maintaining current fee levels. We are always prepared to bid out an assignment if a vendor’s price or quality does not match our expectations. When we do call for bids, we present very specific requirements. At the top of our list is superior service and responsiveness. And we realize that the best provider of these must-haves may not be the lowest bidder. Levin enjoys a unique advantage in vendor selection, because of our large portfolio of properties in a relatively concentrated area. This concentration enables us to save money through economies of scale.

With few exceptions, we’re not fans of bundling. Yes, you absolutely can save money by contracting with a single provider for retail property management services like snow removal, sweeping and landscaping. However, few vendors will excel in all three of those. Rather than compromise quality in any area, we go with the vendor who delivers top quality work in each niche. That usually means more than one supplier. This winter, responsiveness to the need for snow removal and attention to pipes and drains was critical and we were glad to have the right suppliers focused on those special seasonal needs.

Having multiple contractors also provides a system of checks and balances on overall property maintenance, with individual contractors reporting any shortcomings they observe in the overall condition of the premises. Our ultimate goal is to balance cost savings with quality, and we have found that bundling places too much emphasis on the savings side of the equation. At Levin, we approach this industry practice with great caution.

Retail Real Estate Trends We Like: Recycling, Re-lamping, High-Tech Alarms

Right now commercial retail real estate is awash in trends. We’ve identified three winners. The first is aggressive recycling. Levin has committed to recycling programs at many of our centers, which has lowered trash removal costs significantly. For example, we went to single-source recycling (where the hauler separates recyclables from rubbish) at one property where we have a large trash removal contract. As a result, we saved roughly $13,000 on maintenance last year.

The second trend we like is re-lamping. We’re increasing the use of LED lighting in the common areas of many of our shopping centers. At one property, we recently re-lamped an under-canopy section, replacing 150-watt lamps with new, 34-watt LED fixtures. That translates into savings of nearly 120 watts per lamp on 16 fixtures that are lit 12 hours each day. Additionally, the new bulbs should last about five years – about twice the lifetime of the older ones. Beyond that, the new fixtures look great and provide brighter illumination. Feedback from tenants has been very positive.

Radio-signal fire alarm panels represent a third trendy area we are exploring in some of our centers. Traditional panels are monitored by phone. This newer technology communicates through radio waves, eliminating the need for – and costs associated with – dedicated phone lines.

Looking to Control Costs? Don’t Ignore Upgrades and Renovation

Proper shopping center maintenance involves expense, but it saves money in the long run. Like anything else, if you ignore something that costs $500 to repair today, three years from now you may face a price tag double or triple that. Levin believes in dealing with maintenance issues before they become costly fixes. Roofs are a major consideration at any shopping centers. We conduct regular inspections and replace those at the end of their lifecycles in phases and in accordance with annual capital improvement plans. Parking lots are resurfaced frequently, and repaved regularly. With an eye on curb appeal, we repaint exterior doors and re-stripe parking areas each year, and analyze wear-and-tear on façades, signage, landscaping and other exterior elements. These are the maintenance efforts that uphold and enhance our clients’ properties and ultimately their competitive positioning.

Look for more observations from Levin Management executives in upcoming posts here at Retail Property InSites. Please join us and please share your comments about our posts or about your own management experiences in retail real estate.

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Robert Oliver ensures that the operation of each property entrusted to Levin meets the highest standards and remains within its operational budget. He directs the day-to-day activities of property managers at Levin’s 95 shopping centers (totaling more than 13 million square feet). He oversees the team’s training and professional development, aimed at providing superior procedures, direction and support for clients and tenants. Bob joined Levin in 2002 as a Property Manager and was elevated to his current position in 2013. With more than 27 years of industry experience, he previously oversaw property maintenance at South Street Seaport and Manhattan Mall. 

Managing New Property Assignments: Tenants & Contractors

Retail activity is gaining momentum commensurate with the strengthening economy, and, as you would expect, prospective tenants are seeking to lease in the most appealing, well-located and best-managed shopping centers. Since the beginning of 2014, we have secured a number of new assignments from property owners who want to position their centers for maximum advantage in this rapidly reviving market.

For commercial property owners, the key to riding this new and welcome wave is smart real estate property management that creates cost-effective solutions without compromising curb appeal or quality service. That’s a balancing act that we have mastered in our 60 years in retail real estate. We’d like to share with you some of the fundamentals we put into play in every commercial property management assignment we undertake.

Establishing Relationships: That Important First Step

It’s fun diving into a new property, but it’s also extremely work-intensive. The first and most important step is establishing relationships with the existing tenants. We never overlook this one. In many cases, management of the property has turned over for a reason. Our top priority is to determine what needs to change as we go forward and what needs to stay status quo.

Our property managers make time to sit with each tenant in our new property and discuss their experiences at the shopping center: what they like and what they don’t, what unresolved issues they may have that we can address and, also, what’s going right and shouldn’t change. This dialogue is the foundation of the long-term relationship we are building. But we don’t stop with just that initial visit. Our managers stay proactive in tenant outreach and make sure individual store managers know we are always available to discuss any issues as they arise. Levin has a vision of our managers that is unique in commercial property management. We see our managers as not just administrators but as “ambassadors” both for Levin and the property’s ownership.

Start Right with the Right Contractors

New assignments in commercial property management also come with specific administrative requirements, like transferring and reviewing utility accounts and negotiating service contracts. Strong contractor relationships are vital to the success of our clients and ultimately our own success. We work hard to establish these relationships on a firm footing right from the start. We might renew existing contracts or, if our analysis indicates a change is in order, we’ll explore options and seek bids from new suppliers.

Just as we have a unique vision of our managers as “ambassadors,” we have a unique vision of our contractors as “partners.” We see them not just as suppliers of essential services, but as our day-to-day eyes and ears, reporting tenant concerns, so that we can provide quick responses and resolutions. While our property managers are on site regularly, our maintenance, landscaping and snow removal teams often are the first to discover that something is amiss – such as a downed stop sign or a water leak.

Having partners on the ground was especially useful during the extreme weather in our Northeast region this winter. Because of their presence at the physical properties under our management, our contractors were able to alert us to snow-related issues before they turned into expensive repair projects or disrupted store traffic.

We’ll continue sharing our experiences in effective retail property management in our upcoming posts here at Retail Property InSites. Please join us and provide your comments about our posts or about your own management experiences in retail real estate.

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Robert Oliver ensures that the operation of each property entrusted to Levin meets the highest standards and remains within its operational budget. He directs the day-to-day activities of property managers at Levin’s 95 shopping centers (totaling more than 13 million square feet). He oversees the team’s training and professional development, aimed at providing superior procedures, direction and support for clients and tenants.  Bob joined Levin in 2002 as a Property Manager and was elevated to his current position in 2013. With more than 27 years of industry experience, he previously oversaw property maintenance at South Street Seaport and Manhattan Mall.

What’s Behind Our Six Decades of Success in Retail Real Estate?

Blog Post: By Joe Lowry, Director of Acquisitions & Business Development

1. We think like an owner.

It’s that simple. First and foremost, we care for your property as if it were our own. Levin Management is recognized for the quality of its third-party retail real estate services precisely because our approach to managing and leasing shopping centers is highly proprietary. Our clients, including individual owners, estates and trusts, institutional investors and fund managers, value the resulting hands-on, proactive strategies that flow from our ownership attitude. We believe that our proprietary approach is the core contributor to the continued increase in overall profitability for the properties in our 13 million-square-foot portfolio.

Names like Blackrock Realty Advisors, Clarion Partners, AEW and PNC Realty Investors turn to Levin because they know we are a trusted advisor, as well as the premier landlord-focused retail real estate services provider in the Northeast.

2. We tailor our approach.

Levin knows there is no cookie-cutter template for managing and leasing shopping centers. That’s why we develop a unique business plan for each property based upon its competitive position and its owner’s goals. Our 60-year track record of crafting strategies that drive positive results in diverse economic environments proves that our tailored approach always beats the template.

Levin’s portfolio is filled with a wide range of properties – from Main Street shops; to neighborhood, community, lifestyle and power centers; to enclosed malls and mixed-use projects – in New Jersey, New York, Pennsylvania, Virginia and North Carolina. And we’ve recently expanded into Massachusetts. We’re recognized industry-wide for our success in repositioning, retenanting and renovating retail assets – an expertise that has become particularly vital in today’s increasingly competitive retail environment.

3. We do our job so you can focus on yours.
We’re proud to be recognized as one of the nation’s leading retail real estate services firms. From leasing and property management, to accounting, construction management and marketing, we offer a complete range of services that ensure the most effective and efficient results for each property entrusted to us. Consistent results are among the reasons why so many Levin shopping centers maintain dominance in their markets, and why property owners turn to us, time and again, for the solutions that deliver superior results. Simply put, we provide a tailored, turnkey approach that enables owners and investors to focus on other things, like growing their portfolios.

4. We understand the acquisitions market.

With limited institutional-quality retail real estate coming to market in Levin’s primary area of operation, finding the right shopping center investments can be challenging. If your organization is in buying mode, we can help. We know our primary markets on a granular level. We source off-market acquisition opportunities based on our clients’ specific acquisition criteria, including core, core plus, value-added and opportunistic properties. Additionally, our in-depth knowledge of retail assets and trade areas enables us to provide valuable insight and guidance regarding a specific purchase or sale – from market rental rates, local demographics and traffic data; to information about competing and proposed retail properties; to assessment of a shopping center’s physical infra-structure and capital requirements, tenant roster and upside potential. This expertise is another factor that contributes to our unique position as leaders in the industry.

Look for news and observations from Levin Management executives in upcoming posts here at Retail Property InSites. Please join us and share your comments about our posts or about your own experiences and challenges in retail real estate.

About Joe Lowry: A 25-year industry veteran, Joe Lowry specializes in evaluating for-sale shopping centers and sourcing off-market retail investment opportunities for Levin Management’s select institutional clients and high-net-worth investors. He also spearheads marketing of the firm’s full suite of third-party services – including leasing, property management, accounting, construction management and marketing – to institutions, fund managers and private owners, including both existing and potential new clients.

Seeing the Surge in Retail Leasing: Five New Assignments in Five Months

The velocity of new retail leases is in acceleration mode and we at Levin are seeing big results. Since December, we have added five new assignments in retail real estate to our 95-property portfolio, presenting exciting new opportunities in some of the strongest markets in the Northeast. As retail leasing advisors, we are proud to have been chosen as the new leasing agents for three outstanding shopping centers and as property managers for two others.

Levin’s New Retail Leasing Clients

Holmdel Crossing, Holmdel, NJ: Levin is the exclusive leasing agent for this planned 140,000 square-foot retail development project situated on Route 35, one of the most heavily traveled roads in densely populated and affluent Monmouth County. The property enjoys both excellent visibility and extremely desirable local demographics. The population within a three-mile radius of the planned development exceeds 75,000, with an average household income of $102,862. Our initial focus is on the pre-leasing phase of Holmdel Crossing, with particular emphasis on attracting anchor and junior anchor tenants who will, in turn, drive the remaining tenancy.

According to Michael Cohen, our vice president of leasing, who is heading up the Holmdel assignment, the major goal in the first stages of this new center’s development is “to build value for this property while attracting top-tier tenants.”

Stafford Park, Manahawkin, NJ: This 350-acre mixed-use redevelopment project is located in a prime position at the intersection of Route 72 and the Garden State Parkway in Southern Ocean County. Levin is now the leasing agent for Stafford Park’s retail component, which consists of 400,000 square feet of retail space, with an additional 195,000 square feet (including several prime pad sites) slated for development in the near term. Anchor tenants are Target and Costco. The complex also includes such major retail brands as Dick’s Sporting Goods, Best Buy, Ulta and PetSmart.

Our director of acquisitions and business development, Joseph Lowry, says the assignment reflects Levin’s depth of expertise in third-party retail leasing services. “Our depth of expertise is particularly effective when it comes to spearheading larger developments and redevelopments. In cases where activity at a center may have stalled, we are well-qualified to come in and jump-start a project.”

Eatontown Plaza, Eatontown, NJ: On an ideal site at the busy intersection of Routes 35 and 36 opposite the Monmouth Mall, this 30,000-square-foot shopping center is poised for growth as the retail sector continues to heat up. Its current tenants include Men’s Wearhouse, The Vitamin Shoppe, Leisure Fitness, Beach Bum Tanning and Sprint. Levin is charged with marketing 7,700 square feet of its untenanted space and anticipates an influx of new retailers, who will bring increased attention to this property.

“Eatontown Plaza is a well-located smaller strip center,” notes Lowry. “The owner wanted a firm with a strong local presence involved in leasing the property. They especially appreciated the fact that our in-house construction management group can work seamlessly with our leasing team to handle interior fit-out work for new tenants.”

Levin’s New Property Management Assignments

Our extensive experience in retail property management has been recognized by two new clients who have selected us as their managing agents.

The Grove at Plymouth (formerly The Shops at 5), Plymouth, MA: Our first client in Massachusetts is located in one of the most historic and fastest growing sections of the state. Forty miles south of Boston on Long Pond Road, this 420,000-square-foot open-air shopping center, anchored by BJ’s Wholesale Club, TJ Maxx/Home Goods and Kohl’s, holds a leading position among the dominant retail destinations in a market with strong demographics (average household income $95,840, population 105,800). An average of 60,000 vehicles passes the location daily. Robert Carson, our executive vice president, notes that The Grove at Plymouth is owned by a current Levin client and cites the new assignment as “a prime example of how we expand our business by providing a high level of service to our clients and their assets, and we are ready to manage a client’s new acquisition in a new geography as needed.”

Festival Plaza, Edison, NJ: On Route 27 in the heart of a densely populated trade area, this 151,000-square-foot retail venue has two proposed 10,000-square-foot pad sites for future development, which Levin will also market. Key to Festival’s success as a destination for shoppers from significant distances is its H Mart Supermarket, a leading high-end Asian retail grocery brand. Other tenants in this well-trafficked shopping center include BBQ Buffet, Great Clips and China Trust Bank.

“Festival Plaza enjoys strong positioning in an infill location with excellent demographics,” notes Lowry. “H Mart Supermarket is a very strong anchor for the center. The property was completely redeveloped in 2011; the ownership did a tremendous job with the project. The incorporation of high-end finishes distinguishes it from the competition.”

Will the Surge in Retail Leasing Continue?

What’s ahead in commercial retail leasing? Levin is optimistic. According to Lowry, the retail market continues to gain momentum, particularly in the Northeast, where the bulk of our 95-property portfolio is based. “Regional and national tenants are expanding again,” he notes, “and credit has freed up somewhat for local retailers. As a result, we are seeing a marked increase in new leasing velocity, which is very good news for our clients. We also are seeing stepped-up demand for third-party retail services as landlords focus on repositioning and leasing up their properties.”

Look for news and observations from Levin Management executives in upcoming posts here at Retail Property InSites. Please join us and share your comments about our posts or about your own management experiences in retail real estate.

More Insights from our Fourth Annual Post-Holiday Retail Sentiment Survey

Mobile Tech and Retailing Continue to Meld, Creating Retail Real Estate Trend

In our last few blog posts, we’ve been sharing input from the store managers who participated in Levin’s 2013 post-holiday Retail Sentiment Survey. The Surveys are conducted three times each year and the analysis consistently reveals a depth of insight. In the past two posts, we shared highlights from this Survey, with the spotlight on holiday sales performance, year-to-year sales volume, the impact of December’s weather, in-store traffic, and peak selling periods in the 2013 holiday season – the latter pointing to an emerging retail real estate trend.

This post spotlights store managers’ responses to the continued integration of technology into the retail consumer experience and their plans for leveraging the mobile platform in their own brick-and-mortar environments in 2014.

As smartphones proliferate (well over half of U.S. mobile subscribers are smartphone enabled, with that number concentrated among affluent adults) and as consumers integrate their phones into offline shopping, retailers are jumping on the mobile bandwagon. And they are not overlooking tablets, which are in the hands of one out of three Americans. Store managers in Levin’s portfolio are no exception to this move to mobile, with 54.9 percent of survey respondents saying they will add or increase the use of mobile technology in 2014.

Mobile brings retailers a variety of opportunities for customer service from offering checkout alternatives to obtaining product information and availability to couponing to geo-targeted mobile marketing. It’s fitting that these devices have earned the name “the silent salesperson.” Consumers are using smartphones as a research tool to find products, compare pricing and make purchases. A recent study by comScore/PayPal showed 55.0 percent of smartphone owners are doing so at brick-and-mortar stores, and retailers are beginning to leverage in-store mobile marketing to their advantage. Mobile is an area well worth watching, one that’s certain to impact retail real estate trends in 2014.

Survey Respondents Say the Big Picture Looks Bright

The attitude of store managers participating in our Survey reflects those of mainstream American businesses. The big picture looks solid, they told us. Stronger overall economic growth and greater fiscal certainty is bolstering consumer confidence and ultimately spending. Those factors are mirrored in a corresponding confidence among retailers who are showing a stepped-up interest in retail leasing from national, local and franchise companies across broad categories.

Our next Retail Sentiment Survey will be conducted in late May, gauging mid-year performance. We’ll be sharing the highlights with you here on this blog.

More Insights from our Retail Sentiment Survey

Holiday Sales Exceeded Expectations for Many but Year-to-Year Increase Declined: Outlook Remains Optimistic with Hiring Up, Expansions Planned

Our fourth annual post-holiday Retail Sentiment Survey revealed a depth of input from store managers in our 95 property, 13 million-square-foot portfolio of shopping centers. In the previous post, we shared highlights from this Survey, which is conducted three times each year, with a focus on sales volume and peak selling periods in the 2013 holiday season—the latter pointing to an emerging retail real estate trend. This post focuses on store managers’ feedback on 2013 vs. 2012 performance, volume of in-store traffic, the impact of 2013’s winter weather and the store managers’ optimistic outlook going forward.

2013’s Spike in Sales Volume Fell Short of Previous Year

Despite the fact that more than half the store managers in our Survey (57.3 percent) said their 2013 holiday season sales met or exceeded their expectations, the actual increase in the volume of sales was lower than realized in 2012. Sales volume, as reported by 51.2 percent of our respondents, was the same or higher for the holiday period than in 2012. However, in our 2012 Survey, a robust 65 percent of respondents reported an increase in seasonal volume over 2011. The decline is likely due, at least in part, to the fall off in 2013 holiday shopping traffic as reported by our Survey respondents. Only 49.4 percent of surveyed managers said 2013 traffic was the same or higher than in 2012. In the previous year, 61 percent reported a year-over-year spike in in-store traffic. And that brings us to that in-store traffic stopping Grinch: the weather.

Stormy December and Late Thanksgiving Crimped In-Store Traffic and Sales

Unusually severe December weather brought snow, ice and sub-zero temperatures to the locales of many of our respondents’ stores, keeping would-be shoppers at home, dampening sales and boosting e-commerce purchases. In addition to the weather, retailers got a double whammy with the loss of six shopping days due to a late Thanksgiving. Thanksgiving 2013 (November 28) fell at the latest possible point, delaying the official start of the holiday shopping season. In 2012, consumers had 31 shopping days and five weekends between Black Friday and Christmas Eve. In 2013, they had only 25 days and four weekends.

Optimistic Outlook, Hiring on the Rise, Expansion Plans. Potential Retail Real Estate Trends in the Making

Respondents indicated optimism fueled by an increase in full-year sales and confidence in a strengthening economy. Close to half of survey participants (49.4 percent) reported total 2013 sales equal to or above 2012. Their positive outlook is demonstrated by staffing increases and expansion plans. Over 30 percent (33.7) added staff for the holiday season, up from 26.6 percent in 2012, with 40.5 percent indicating they plan to retain these employees going into 2014. Another retail real estate trend may be in the making in terms of retail real estate leasing, as indicated by respondents who say expansion plans are on the table for 2014.