Mid-Year Survey Shows Sales Up, Expansion Underway and a Tech-Driven Evolution in Progress

Outlook for Retail and Retail Real Estate Is Bullish

The results of our annual mid-year Retail Sentiment Survey are in and theres positive activity on virtually every front. The survey queries managers within our 95-property, 13 million-square-foot shopping center portfolio regarding key performance indicators.

Solid Growth in Sales Reported Is Mirrored by U.S. Commerce Department Stats

More than half (52.9 percent) of our respondents reported sales at equal or higher levels than at the same point last year. This percentage is notably higher than both the mid-year 2014 and 2013 polls, in which 42.9 and 43.7 percent of participants, respectively, reported the same or higher year-over-year sales. This increase aligns with U.S. Commerce Department numbers that put May 2015 retail sales 2.7 percent higher than the previous year. Taking a longer view, the National Retail Federation, predicts industry growth reaching 4.1 percent in 2015.

Heres more good news. Retailers are in expansion mode. Nearly one third (31.1 percent) of our survey respondents reported that their companies have or will open new stores this year. This is the highest mid-year percentage in the four years for which comparative Levin survey data is available. And it looks like a retail real estate trend in the making. National Real Estate Investor this month reported that U.S. chain retailers nationwide have stepped up plans for new locations over the next 12 months, citing an RBC Capital Markets study.

Our Survey Show Retail Marketers Growing More Tech-Centric

Matthew K. Harding, our president, calls the survey results great news for both retail and retail real estate. He notes that the feedback provides some interesting insights related to retailers use of technology in marketing, and their ongoing adaptation to consumer shifts driven by e-commerce.

Not surprisingly, a majority (78.4 percent) of our respondents work for companies that are actively using technology in marketing. More than half of these (53.9 percent) said they have upped their technology-centered strategy year over year.

We asked about specific technology being employed in-store to provide incentives or conveniences for shoppers. The most popular tech tools reported included mobile apps for discounts, loyalty points and/or rapid payment (used by 61.2 percent); post-sale online surveys (used by 47.8 percent); and free Wi-Fi (offered by 41.8 percent). The use of mobile by shoppers has been a rising retail trend for some time. A recent McKinsey & Company study confirmed just how pervasive the practice is. McKinseys report indicates that of the 60 percent of Americans with smartphones, 80 percent use them when shopping in a store, to check product reviews and specifications, and to compare pricing.

Queries about tech in marketing were a big part of our survey and the responses indicated that omnichannel marketing is here to stay. More than three quarters (76.4 percent) of respondents say they incorporate social media into their marketing mix. Nearly as many (72.3 percent) use email. Other popular tactics include Internet advertising (41.9 percent), text messaging (27.7 percent), and SEO optimization like Google AdWords (11.5 percent).

Social Media Is the Dominant Force in Retail Marketing Today

Social media has moved rapidly from a retail trend to an almost universal practice. With that in mind, we drilled down into specific platforms being used by our tenants. Heres what we found:

  • 91.9 percent use Facebook.
  • 39.7 percent use Twitter.
  • 33.1 percent use Instagram.
  • 27.9 percent use Google+.
  • 17.7 percent use Pinterest.
  • 10.3 percent use Groupon/Living Social.
  • 9.6 percent use Foursquare.

Facebook, Twitter and Instagram have remained the top three platforms across a full year of surveys. And it appears our tenants are not alone on the social media bandwagon. A CNBC article noted the trumpeting of social media triumphs appears to be a growing trend among retail companies. The author notes that in recent earnings calls, Dollar Trees CEO reported connecting with 2 million customers via Facebook, YouTube, Twitter and Pinterest during the first quarter, while Whole Foods co-CEO announced his company has surpassed 4 million followers on Twitter.

Retailers Are Finding Opportunities in New World Shaped by E-Commerce

The growing popularity of e-commerce has made an undeniable and significant impact on bricks-and-mortar stores, Harding noted. Yet the conversation has shifted from survival to opportunity, and our survey results indicate that retailers with physical stores are rethinking their approaches and capitalizing on opportunities to meet changing consumer needs and desires.

In fact, more than one third (37.3 percent) of our survey respondents reported adapting their business model in response to the growth of e-commerce. Of these participants:

  • 61.3 percent have added in-store services and/or incentives.
  • 46.7 percent have incorporated in-store pickup and returns options for purchases made online.
  • 42.7 percent have altered store inventory (fewer in-stock SKUs, larger quantities of popular items, etc.).
  • 41.3 percent have increased collaboration between online and bricks-and-mortar operations.
  • 17.3 percent have altered their store prototype (i.e. smaller store size or increased focus on showrooming, etc.).

Are these adaptations working? Of the respondents who have made operational adjustments, 52.1 percent have seen a benefit in terms of sales and/or in-store traffic. At the same time, 30.9 percent said they dont know yet.

The fact that more than half of these retailers have seen positive results is encouraging and may tie directly to the reports of increased year-to-date sales and expansion plans, Harding said. It also seems there are some unknowns as retailers continue to blaze this new path. This makes sense, and it will be interesting to see how the numbers shift in future surveys.

Our next Retail Sentiment Surveys will be conducted in early November, gauging pre-holiday optimism, and in January, measuring new year expectations, and of course, spotting retail real estate trends. Look for those results here.

RECon 2015 Takeaway: Retail Real Estate is on the Rise Again

Keen Appetites for Value-Added Investment Set the Tone for Annual Las Vegas Gathering

With 35,000-plus attendees thronging last months ICSC RECon event in Las Vegas, it seems safe to say that commercial retail real estate is roaring back from the Great Recession in a big way. Its not just the number of attendees that impressed us but the amount of new blood among them and the intense deal-making mood that pervaded the convention center.

Solid Retail Fundamentals Are Driving the Market on Multiple Levels

Yes, weve seen more attendees at past RECons (the record is 50,000), but weve never seen one of these shows with more capital aggressively chasing deals. Frothy would be a good word to describe the acquisition-oriented activity. The big institutional investors, many of whom we advise, were in a bullish state of mind and on the hunt for high quality, core retail assets as well as core plus and value-added retail properties. In addition to dominant grocery anchored centers, power centers and properties that feature category leading brands and credit tenants are in strong demand.

Ground up development was also drawing its own healthy slice of investor attention. For the first time since the slump began, there is a pipeline of significant development money, which is good news for the construction management team at Levin. Behind all this investor interest is the growing strength of retail fundamentals, particularly in the top-tier markets, which are typically the under retailed, high barrier to entry markets as well as the growth markets.

RECon, As Usual, Reveals Retail Real Estate Trends: Mixed Use, Hot Markets, New Retail restaurant and Entertainment Concepts and Smaller Footprints for Big Box Tenants

Trend watchers always like to keep a sharp eye on gatherings like RECon, scanning the scene for the next big thing. The 2015 event yielded some hints about new industry directions, most of which have been evolving for some time. The biggest driver of change in retail; online shopping, is now a firmly entrenched consumer habit and retailers and retail real estate owners and managers continue to struggle to pry people away from their screens and back into bricks-and-mortar venues. So we see both new retail development and renovations to existing shopping centers that include new restaurant and entertainment concepts, cinemas, and event spaces joining the line-up of traditional retail stores. Mixed-use development is also a focus. Experimentation is the name of the game here, as developers search for the right mix of retail, restaurants, entertainment, residential and/or office uses, and tackle the subtle nuances of pedestrian traffic patterns and tenant positioning. Success in mix use, many are finding, depends on the dynamics of the individual market and thats not something that lends itself to a template or formula.

The retail real estate sector is nothing if not dynamic, and change tends to involve responses to new trends. Wal-Mart and Target, for example, are adjusting to unique environments, particularly the dense urban markets as well as to continued competition from the extreme discount grocers and dollar stores with smaller footprints and new concepts. Expect to see the continued rollout of The Wal-Mart Express convenience stores and The Neighborhood Markets, with emphasis on groceries.

All in all, RECon 2015 was a testament to the resiliency of our industry and a cause for optimism. We are on a roll!

Four Retail Real Estate Trends Aim to Score with Shoppers

Can You Corner Grab While Theme Parkifying and Side Selling? 

There are some new buzzwords in the retail real estate world that you’ll want to add to your business vocabulary. As might be expected, they’ve got an edgy quality that gives a new gloss to trends you might have seen stirring for a while in one form or another. In a recent interview, Dave Weinberger, vice president and director of engagement for the brand agency CBX (www.chainstoreage.com/article/four-2015-retail-trends-you-havent-already-heard-about) introduced four of these: Corner Grabbing, Re-Booting, Side Selling and Theme Parkifying. All are driven by brick and mortar retailers’ ongoing need to lure shoppers away from their computers, while squeezing out more sales per square foot of space. What interests us about them is that, unlike many of the current trends in the spotlight, they are about retail space, rather than technology.

As Banking Automates, Corner Spots are up for Grabs

As consumers flock to online transactions and ATMs, banks need far less space than in the past. As they reduce their square footage, often moving out of large prime locations, other businesses are moving in. Drug stores, which now offer an inventory beyond prescriptions and health-related products, including grocery and household items, are hungry for both increased space and prime location. Whether that space is in a shopping center, strip mall or urban block, look for a CVS, Walgreens or another top brand to be ready to grab a vacant corner in this retail real estate trend. Their aim is to make a trip to the drug/convenience store as easy and shopper-friendly as possible and to compete with both online and the grocery store.

Rebranding, Rebooting and Relocating

With adaptation as the key to brand survival, re-booting is the name of the game. A reboot can mean an entirely new brand vision for a new market (think Eileen Fisher and Timberland) or a change in physical location for better access to the primary customer base. Weinberger cites Juicy Couture’s decision to shut down all its current locations with new ones slated for the brand’s re-launch this year. Independent bookstores, long imperiled by Amazon, are finding new life through relocation. Rizzoli, one of mid-town Manhattan’s last book stores, closed its doors in 2014 to an outcry from readers and preservationists. It is rebooting though, joining other independent booksellers in a more affordable, reader-friendly location downtown. Others in its category have rebooted to Brooklyn looking for lower rents and avid readers, who want to browse among real books instead of on a website.

Side Selling: New Retail Channels Rising

Retail is everywhere today: in traditional stores, in pop-ups, on laptops and mobile devices, in parks and public spaces. Weinberger predicts that this retail real estate trend will grow stronger in the coming year as brands and retailers see the value of partnering with entities that offer good demographics and high traffic, like college campuses. Meanwhile, fitness centers and spas will continue to move into health products, equipment and clothing. Have you noticed that your doctor or dentist is now offering health-related items? More of that may be on the horizon as businesses of every kind look to go beyond their basic services and get more out of their investment in their professional or retail space.

Theme Parkifying: Looks Like Everybody Wants to Be Eataly

Today’s Theme Parkifying is not the type of mall-based phenomenon launched by Mall of America in 1992 with skating rinks, ferris wheels and other diversions in an oversized mall environment. It is a single store that brings together under one roof, not just merchandise but entertainment, information and engagement on a big scale – all integral to one category of interest. The New York City branch of Eataly is the best expression of the trending retail-based theme park, with its 50,000 square feet of space encompassing seven sit-down restaurants, cooking schools, bookstores, curated products and staff of food mavens. It attracts 8,000 to 10,000 “guests” each weekday. No wonder it is known as a “funhouse for foodies.”

Eataly may have set the theme park bar to a dizzying height, but that has not stopped many upscale grocery stores from finding inspiration in its multifaceted appeal to food lovers. Grocers have been experimenting with in-store restaurants for a decade, beginning with the food court concept. Lately though, the higher-end brands have become what is being dubbed “grocerants,” moving up to table service in selected stores, along with wine and coffee bars, craft beers and cooking classes. Shaw’s, Wegmans, Whole Foods, Hy-Vee, Publix and Schnucks are among these “grocerants.”

This looks like a retail real estate trend with legs. One recent report in USA Today calls in-store restaurants “One of the fastest growing segments of the grocery industry.” Will we see retailers in other categories moving into vacant big box stores to create theme parks around specific sectors: children, wellness, pets, outdoor recreation? Stay tuned.

A New Generation of Tenants Revives Retail Leasing

Todays Movers and Shakers Succeed with New Approaches

With demand for retail leasing from national, local and franchise companies heating up in the Northeast, it’s a good time to take a look at the movers and shakers defining the next generation of tenancy. Though these companies span a range of categories, they all share a bold new vision that combines technology with creative approaches for reaching consumers. We’ll be covering their tech side in a later blog. For now, let’s focus on who’s coming on strong in mid-2015 and what they’re doing.

Meet the Up-and-Comers in Retail Leasing 2015: Fast-Casual Eateries, Affordable Gyms, Small Grocers and Off-Price Retailers

We’re seeing a surge in leasing activity from a number of retailers looking to establish or expand a footprint in our market area. Here’s what’s been coming our way this year:

  • Only a limited number of big supermarket chains  are adding locations at present (with some exceptions, such as ShopRite, Stop & Shop and Whole Foods in New Jersey). However, we’re seeing leasing activity from an assortment of smaller stores like Save-A-Lot, Trader Joe’s and Fresh Market.
  • No-frills fitness concepts like Blink, Retro Fitness and others continue to expand rapidly in our marketplace.
  • Off-price retailers enjoy a wide demographic appeal, making them extremely popular and driving expansion into new locations. Chains such as Dollar Tree, Five Below, T.J. Maxx and HomeGoods continue to gain traction.
  • Fast-casual eateries like Chipotle Mexican Grill and Noodles & Company are on the move, too. And Starbucks is enjoying a growth spurt, thanks to their free-standing stores with drive-thrus.

A Few Trouble Spots Continue to Cloud the Retail Leasing Picture

While the retail picture looks bright, a few sectors continue to feel pressure from consolidations and bankruptcies. Chapter 11 announcements by Radio Shack, Wet Seal and Cache were among the most newsworthy so far this year.

Some attribute Radio Shack’s decline to the impact of e-commerce on the entire electronics sector. Yet, some retailers in other “easily poachable” areas, like office supplies, have met the online challenge by right-sizing their bricks-and-mortar presence with smaller footprints and fewer in-store SKUs. A good example is Staples, which is thriving, having successfully trimmed its stores to the 15,000-square-foot range. Adaptation like this is essential, as we saw in one of our recent Retail Sentiment Surveys.

The Outlook for Retail Leasing Companies Is Good

As demand strengthens, vacancies are declining, boosting rents at quality properties. Spaces left by retailers that didn’t survive the downturn are backfilling quickly with tenants in the active categories mentioned above. A diverse range of service businesses are also signing leases. That means much of the prime space has been absorbed – and what remains commands higher prices. In spite of rising rents, well-located shopping centers with strong tenant mixes and curb appeal continue to draw retailers.

At the same time, demand is building for retail real estate in secondary positions (either because of location or other fundamentals). Landlords are becoming more creative in their approach to leasing these shopping centers, considering a variety of potential uses for their space.

Entering the heart of 2015, we are optimistic about what we’re seeing. While we will likely hear of additional bankruptcies and consolidations within categories – facts of life for our industry – those retailers that are adapting will continue to do so with success. We look forward to seeing the creative ways they’ll leverage opportunities within today’s dynamic retail leasing landscape.