Winter 2015: More Challenges Ahead For Real Estate Property Management

Tips on Dealing with Snow and Other Seasonal Woes

Whether you consult the meteorologists at Live Weather Blog and The Climate Prediction Center or rely on the oracles at The Farmers’ Almanac, the winter of 2015 does not look like a pretty picture (unless you’re a fan of those old Currier & Ives prints of snow-covered New England villages). Though the outlooks from the professional weather watchers vary in terms of just how tough things will get, they all agree on one thing: snow is in the future for many areas of the US, including the Northeast, home to most of Levin’s managed properties. Many of us have already gotten a preview of what could lie ahead and we’re concerned about just how much havoc upcoming winter storms will wreak on real estate property management budgets.

Managing Snow Removal The Wild Cardin Retail Real Estate

Our own EVP Bob Carson said it best in a recent article in Commercial Property Executive that projects property management costs for 2015. After offering a number of insights on cost centers and controls, he concluded, “The real wild card in the retail business tends to be snow removal.” And then he predicted that for this essential service “overall costs will increase over last year, but the rates will stay the same.” Good news and bad news. (Reader Alert: Check out “Price Tag Preview” in Commercial Property Executive for a roundup of industry viewpoints, including more from Bob Carson at www.cpexecutive.com/property-types/office/office-costs-at-a-glance-2/1004105832.html)

After more than 60 winters of real estate property management in the Northeast, Levin has learned a few things about snow management. And we’re ready for 2015. As a leader among retail real estate companies, we know the importance of keeping the properties we manage accessible to shoppers and our walkways safe (note: insurance coverage for slips and falls are on the rise). Here are a few of our proven strategies for managing the challenges of the cold season.

 

A Winter Weather Model for Predicting Costs

Be your own local forecaster. Our property maintenance and management team tracks local snowfall over five-year periods and uses those statistics to create a predictive model for the upcoming winter’s accumulations – and for our budgeting. It’s not exactly meteorology, but we’ve found it a useful (and surprisingly accurate) planning tool.

Even Though Its Winter, Dont Bundle Up

Typically, decision makers in real estate property management bundle services such as landscaping, sweeping and snow removal into a single contract. It’s one-stop shopping, and generally it saves money. What’s not to like? Plenty. Our experience has shown that few if any suppliers excel at delivering all three of those key services. It’s worth spending a bit more, we’ve found, to get peak performance in each category. Levin’s ultimate goal is to balance cost savings and quality, and bundling tends to compromise quality in favor of cost, which, in our view, is a bad bargain. Our properties weathered last winter beautifully because we had individual contractors working in their areas of expertise.

Having multiple contractors delivers another advantage: the critical eye on the ground. The different vendors servicing our properties keep a competitive watch on another’s work and let us know if something is not up to our standards, often spotting potential problems before we do.

One last thing about contracts: get them finalized at least six months before you’ll need the service. For example, we renew or award our landscaping contracts in January and begin planning spring then. The same time frame applies to winter services. Lead time allows you to make your selection with a minimum of pressure and sometimes with less competition for top-quality vendors.

Remember: Its Not Just About Snow

Sure the white stuff has to be plowed and disposed of, but keep an eye on the condition of the entire property in the winter months. Your maintenance squad needs to keep roof drains and water outlets cleared to avoid ice floes. Sprinklered vacant spaces need sufficient heat to avoid frozen pipes and flooding. Our property maintenance and management team and our contracted suppliers monitor these throughout the winter season, especially after big storms or during periods of intense cold.

Winter 2015 may deal more than one wild card your way. Planning and preparation are the best ways to come out with a winning hand.

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About Robert Oliver

Bob 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.

Will Falling Gas Prices Pump New Life Into Retail Sales?

Retail Trend Watchers Predict Upcoming Surge in Consumer Spending

Across the U.S., drivers are doing the happy dance at the gas pump. And they’ve got cause for celebration. Between September 25, 2014 and January 5, 2015, the average price of gas fell every single day, dropping nearly a full dollar from July levels and delivering a reported total savings of $50 billion to consumers in the fourth quarter of last year. But where will all those dollars go? Retailers have high hopes for a first-quarter surge and the retail real estate industry is optimistic about what’s next.

Retail sales for November, just four months into the gas price decline, saw a gain of 0.4 percent. December brought some good news with non-store holiday sales (indicator of online purchases) growing 6.8 percent according to the National Retail Federation. Restaurants and bars enjoyed a gain of 0.8 percent over their November performance, while food and beverage stores, pharmacies and other health and personal care stores reaped higher sales. Full year figures for consumer spending show retail sales rising 4 percent for the year. Considering the massive savings in energy, some wonder if the numbers could have been higher.

Steve Barr, retail and consumer sector leader at PricewaterhouseCoopers, suggests that the picture might have been even better except for the “the conflicted consumer” factor. These are the cautious shoppers who may still have been struggling to balance cost of living expenses with recent gas savings. But with the added factor of the strengthening national economy and continued low energy costs, this conflicted consumer may soon feel much less conflict.

Consumer Confidence Is Gaining Traction Fueling Retailers Optimism

“It’s a no-brainer. It’s going to be a better year for the consumer in 2015,” predicts Paula Campbell Roberts, consumer analyst at Morgan Stanley, citing the $80 billion dollars in savings from lower gas prices projected for Q1 of 2015. Terry Lundgren, Macy’s CEO and Chairman, agrees. Addressing the National Retail Federation earlier this month, he said, “I think we’re in a place right now where consumption can return back to what we’ve seen in the past.” So with an additional $550 to $750 in their wallets during the coming year, Americans may be about to go on a long-delayed shopping spree.

Younger Demographic and Lower-to- Middle Income Households To Benefit Most

Households with lower-to-middle disposable incomes will feel the biggest economic boost from cheaper gasoline. This includes members of the large 18-34 demographic, who are inclined to spend even when their budgets are tight. This group may lead the anticipated retail spending surge. In a recent National Association of Convenience Stores Survey, a third of the 18-34 year old respondents said they would use their gas savings to make more discretionary purchases beginning in January.

Rising Wages and Employment Help Brighten the Retail Outlook

The American Automobile Association, whose Daily Fuel Gauge recently reported gasoline at $2.08 per gallon, predicts that low prices will remain stable for the first half of this year, with a moderate rise post-summer. The price-per-gallon is expected to remain under $3.00. That mid-year uptick in gas prices should be offset by rising wages and declining unemployment in a recovering national economy.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, sums it up. “Consumers real disposable cash flows are surging, confidence is high and rising and the labor market is recovering at an astonishing rate.” That’s good news all around, especially for retail real estate.

 

Blink Fitness Opens at Clifton Plaza in Clifton, N.J.

Retail Real Estate Trend Predicted Earlier This Year Is Materializing Fast

Blink Fitness recently celebrated the grand opening of its newest New Jersey location at our Levin-managed Clifton Plaza in Clifton. The affordable fitness chain occupies 15,000 square feet of newly constructed retail space at the 80,000-square-foot shopping center.

Fitness Centers Boost Health of Members and Retail Real Estate Companies

Early this year, the business media – including Forbes, industry bloggers and even the ICSC – predicted that fitness venues in shopping centers would be among the top retail real estate trends for 2014. They were on the money, especially with Blink. The off-price brand is on the move across our tri-state area, offering health-conscious members a low-cost workout.

Managers of retail real estate benefit too, when tenants like Blink move in. Fitness centers deliver the sought-after “experience” component that gives shopping venues an edge over online merchants. And fitness is one of the few businesses that can be relied on to draw steady traffic, even in an increasingly online-oriented world. Traffic from gym goers is decidedly steady, with 44 percent of members going to work out at least 100 times per year. Fitness centers are open to members every day of the week, with 4 to 7 p.m. as prime time, delivering potential customers to adjacent tenants, especially those offering services or merchandise related to health, fitness and lifestyle.

Fitness centers like Blink Fitness appeal to shopping center management for an additional reason and an important one. Their model does not require the expensive build-outs that their high-end cousins need in order to accommodate pools, saunas, steam rooms and other spa-style amenities.

This retail real estate trend toward low-cost fitness centers in convenient locations, which began during the recent economic slowdown, shows no signs of stopping. Health club memberships stand at more than 41 million and the demographics are expanding beyond the traditional 18-34 age group to include the fast-growing 50-plus population, who have embraced exercise as the key to weight management and longevity. Blink Fitness, which is in an aggressive expansion mode, typifies this trend.

Fast-growing Fitness Chain Joins a Stellar Tenant Line-up at Clifton Plaza

With more than 36 locations now open across the tri-state area and memberships starting as low as $15 per month, Blink Fitness is on target to achieve its corporate goal of creating healthier communities by giving virtually everyone the opportunity to incorporate fitness into their daily routine. Blink gyms are clean and modern with top-of-the-line cardiovascular and strength-training machines, easy-to-use, self-guided workout menus and a friendly, supportive staff.

The Blink Fitness brand is a perfect fit with other tenants at Clifton Plaza. Co-anchoring the shopping center is a 24,000-square-foot Big Lots and a 14,000-square-foot Dollar Tree. National and regional tenants include Work ‘N Gear, GameStop, Radio Shack, Angel Tip Nails & Spa, Bruno’s Pizza, Sally Beauty Supply, Valley National Bank, and a recently opened Dunkin’ Donuts.

For more on the growth of fitness centers, check out these recent articles in Sourcing Journal and National Retail Tenants Association (NRTA) online.