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.