Fast Casual Eateries are Giving Retail Real Estate a Healthy Boost

Retail Trend: Scramble for Small Restaurant Space Creates a Landlord’s Market
Millennial diners want their quinoa bowls in a hurry and that’s good news for retail real estate companies. Fast casual restaurants – the popular source of healthy, affordable fare – are hungry for 1,500 to 3,000 square foot spaces in shopping venues nationwide. They’re competing with each other and with nail salons, spas and downsizing retailers who are eying the same sized spaces, creating a hot market for retail leasing. Nation’s Restaurant News reports that this competition has “driven lease rates to astounding levels” and created a “landlord’s market.” (Read more: http://www.eater.com/2016/4/28/11523694/restaurant-real-estate) And Jesse Tron, spokesperson for International Council of Shopping Centers calls the current climate “hyper-competitive.”

Tenants in this niche within our leased and managed portfolio include Saladworks, Good Mood Restaurant and Bubbakoo’s Burritos. As tenant representative we work with Dig Inn, the hip, highly popular Boston-based chain, currently on the move into new East Coast markets. So, naturally, we’re staying focused on what’s happening with fast casual restaurants.

Efficient and Appealing, Fast Casual Tops the Industry in Growth and Sales Volume
Led by the rise of Chipotle and Panera in the early 90’s, fast casual fused the speed and convenience of fast food with menus featuring healthy fare. It’s a winning combination, growing the category 550 percent since 1990 and driving the annual growth of fast casual sales to 11.4 percent in 2015, double the rate of any other restaurant segment. Fast casual, which now comprises 7.7 percent of the industry, is expected to lead restaurant sales through 2022, as Millennial diners take healthy dining further with demands for food that is locally raised, according to sustainable and humane practices.(Read more: https://www.washingtonpost.com/news/wonk/wp/2015/02/02/the-chipotle-effect-why-america-is-obsessed-with-fast-casual-food/?utm_term=.cd1fb581cc35)

Consumer appeal lies at the core of fast casual’s success, but it’s not the sole factor in this segment’s growth. Operationally, the concept is amazingly efficient. Sit-down diners are served in under 8 minutes and 50 percent of orders are take-out. This means a high volume of business can be transacted in a space about one-third the size of the average casual restaurant.

National Brand vs. Local Favorite: Which One Gets the Lease?
Faced with tenants vying for space, managers of retail real estate find themselves
weighing a number of factors when awarding a lease. Fitting out a restaurant space
even one of modest size – is more expensive than a retail store or an office. Ventilation, special kitchen requirements, and local regulations spike construction costs. A successful fast casual establishment, however, can offset that initial investment, not just in rent but in driving shopping center visits which, in turn, attract more demand for leases.

The choice is often between an independent or regional chain and a big national brand. Both bring positive buzz but savvy landlords, especially in the case of shopping centers or malls, tend to choose big names. Brand recognition, a record of success and deep pockets tend to win out. Emerging retail areas in urban neighborhoods, where there may be resistance to chains, may be the exception to this trend.

What’s Ahead: Fast Casual – A Role in Reviving the Mall
As brick-and-mortar stores shutter or scale back, food and entertainment may breathe new life into malls and shopping centers. Ron Ruggles of Nation’s Restaurant News sees a rosy future for retail venues that provide an inviting mix of entertainment, food and shopping to create a community experience that online can’t match. Fast casual, with its Millennial appeal, will have a big role to play in this new environment that replaces transactions with experiences.
(Read more:
http://www.themarketmogul.com/implications-rise-fast-casual-restaurants-real-estate.)

Levin Retail Sentiment Survey Reflects Positive Outlook on 2016

Lower Gas Prices, Job Growth, and the Housing Market Will Bolster Sales this Year

Store managers in our 95-property, 13 million-square-foot portfolio told us they feel good about the year ahead during our annual January Retail Sentiment Survey. This is particularly good news considering that the poll was conducted at the outset of the current stock market volatility.

In fact, an impressive 68.1 percent of the survey respondents said they are optimistic about 2016. “We really are at a transitional time for retail, with factors like positive job growth, low gas pricing and the housing market uptick working in the industry’s favor,” noted Levin President Matthew K. Harding.

Mixed with the good news was some uncertainty about the specifics of 2016’s performance, with 20.5 percent of participants undecided about what exactly to expect. “The unseasonably warm fall and early winter, and what has become a longer –and therefore more diluted – holiday shopping season impacted sales for some retailers,” Harding said. “As such, it makes sense that our tenants are expressing some remaining uncertainty.”

Our survey mirrors leading industry sources, who are also predicting a respectable 2016 performance. Kiplinger anticipates retail will grow approximately 4 percent. Trading Economics expects 3.6 percent growth.

2015 Sales Showed Modest Upward Momentum Nationally

The U.S. Department of Commerce announced in January that 2015 retail sales were up only 2.1 from 2014 (for context, 2014 sales were up 3.9 percent over 2013). And the National Retail Federation reported moderate 2015 holiday season sales growth of 3.0 percent, down from its forecasted growth of 3.7 percent. Our survey, as well, showed modest momentum in both year-over-year and holiday sales.

Nearly 53.0 percent of survey respondents reported 2015 sales at the same level or higher than 2014. This figure is up from 51.7 percent and 49.4 percent reporting same/higher sales in our January 2015 and 2014 polls, respectively.

The majority of our respondents also reported a generally positive 2015 holiday shopping season, with 58.0 percent reporting sales at the same level or higher than 2014. And 57.0 percent reported that shopper traffic at the same or higher level than in the 2014 holiday season. While these figures are slightly lower than last year’s poll (63.6 percent reported same/higher sales; 60.0 percent reported same/higher traffic), they still outpace the prior year (50.6 percent reported same/higher sales; 48.2 reported same/higher traffic).

A Retail Real Estate Trend: Online and Bricks-and-Mortar Converging

Our survey and other industry reports, like RetailNext’s Retail Performance Pulse, reflected the strength of bricks-and-mortar retail during the holidays. In fact, the International Council of Shopping Centers’ Holiday Consumer Purchasing Trends Study revealed that 91 percent of consumers shopped in physical stores during the 2015 season. ICSC also reported that 32 percent of shoppers made purchases online and picked them up in physical stores; 76 percent bought additional items in the same or an adjacent store.

“We are witnessing a growing synergy between in-store and online purchasing, and its benefits for bricks-and-mortar,” Harding pointed out. “Increasing demand for this type of technology-driven, omni-channel retailing will play a big role in 2016. Bricks-and-mortar and online are converging. And it appears our tenants are gearing up accordingly.”

Looking Forward: More Than a Retail Trend, Tech is Driving Results

More than half (50.9 percent) of our survey respondents plan to add or enhance their tech-based marketing efforts in 2016 with mobile apps, social media, email and text messaging.

Approximately half indicated their company has changed its business model in response to the growth of e-commerce. The most popular adaptations include enhanced in-store services and incentives, added in-store pickup and returns option for online purchases, and generally increased collaboration between online and bricks-and-mortar. Among the retailers that have revised their business models, 40.6 percent reported a positive impact on sales.

Crystal Ball Time: What will 2016 Hold for Retail? New Stores and Right-Sizing

What’s ahead? “It remains to be seen whether the recent stock market shake-up will have a long-term impact,” Harding concluded. “We all hope to see a fairly rapid correction. Should that take place, the retail industry is likely to maintain growth momentum well into 2016.”

In some cases, this means new stores – good news for retail real estate companies like ours. More than one quarter (28.4 percent) of the store managers in our survey indicated their company planned additional locations this year. “We anticipate that smaller footprints will be the norm as retailers continue to right-size and make shifts to incorporate e-commerce into their operations,” Harding noted.

We also asked retailers if they observed shifts in the hiring climate as the unemployment rate continues falling. Their feedback indicates about 44.0 percent are noticing changes, most prominently in the areas of applications by fewer qualified job candidates and increased demand for higher starting salaries.

“U.S. unemployment inched down to 5.0 percent last month, and if this trend continues it will likely have a growing impact on retail hiring,” Harding pointed out. “This is an area we will be focusing on more closely in upcoming surveys.”

Levin’s next Retail Sentiment Survey will be conducted in June, reporting mid-year progress and exploring technology issues.

A Facelift Can Put Bricks And Mortars Ahead of The Game

Retailers May Be Neglecting Their Strongest Competitive Advantage

Digital technology has transformed our industry – some might say disrupted it – along with just about everything else in contemporary life. Retailers, over the last few years, have risen to the challenge of their online competitors with major investments in omnichannel. But have all those dollars poured into online come at the expense of the retailer’s biggest asset: the bricks-and-mortar store? This provocative question was recently raised by Antony Karabus, CEO of Hilco Retail Consulting, in a recent article in Women’s Wear Daily. He gave us cause for some thought.

Investing in Bricks: Is a Retail Real Estate Trend Emerging?

Karabus maintains that bricks-and-mortar retailers “consistently underestimate the enormous advantage they have relative to their ecommerce counterparts, in particular their physical brand assets.” A bricks-and-mortar store, he goes on to say, satisfies the consumer’s innate desire to interact with merchandise in an inviting environment. Yet, according to a survey of the CEOs and CFOs of top retailers conducted by Hilco, only 20 percent are investing capital in their stores. Forty percent of the stores in Hilco’s study, in fact, had not been remodeled in a decade.

The vast majority of retail sales still occur in stores rather than online. The most recent statistics from the U.S. Commerce Department show online sales accounting for 6.8 percent of total third-quarter retail sales. Online is growing at a steady pace, but Forrester Research projects that by 2018, it will still represent only 11 percent of total annual sales. Still, leading retailers remain fixated on tech – perhaps at the expense of their physical brand, which is the chief driver of revenue.

An Experience Technology Can’t Match…Yet

Steve Barr, U.S. Retail and Consumer Leader at PricewaterhouseCoopers, echoes Karabus’ views on the overlooked value of bricks. “There are reasons people are still going to the store – it’s accessible, people can see and feel the product, try on merchandise, see what a room set looks like. It’s a very visual experience that can’t be replicated through even the best online tools,” he told Retail Dive earlier this year. He added this caveat: “Retailers are going to need to adapt the physical store to stay relevant and compete with online retailers.”

Levin’s President Matthew Harding agrees that while a strong online presence is vital, retailers can’t afford to ignore their physical stores. “As a leading retail real estate company, we’re naturally concerned about the physical appearances of the tenants in the centers we manage. The look of a store is a valid concern for any retailer. Many of ours are doing an outstanding job. A good example is ShopRite. They’ve created high-quality environments for grocery buyers. Pier 1 Imports is another good example. I’ve seen some great interior and exterior remodeling of their stores. They’re driving more traffic because of their fresh, new look. Shoppers are drawn to novelty.”

Retailers Who Find the Right Balance Will Own the Future

Bricks and clicks need to be brought into balance, according to Karabus, who insists that success will come from serving customers “consistently at all touch points (online and in-store) however and whenever they want to interact with a retailer.” Bring stores up to meet the expectation of today’s savvy consumers, he urges. Merchants who do so will reap dividends. “The prize,” he predicts, “will be huge when retailers find the right balance of capital spending.”

U.S. Consumer Sentiment Bodes Well For Holiday Sales

NRF Projects Rise of 3.7 Percent over 2014; All Eyes on Black Friday

According to a recent NPD Group survey of 3,600 adults, U.S. shoppers are looking forward to the winter holidays this year. Eager to catch a break from “what’s going in the world” and wanting “to give to the less fortunate” are the main reasons given for the positive sentiments. Whatever’s behind their holiday outlook, 15 percent of those surveyed plan to spend more than last year and 16 percent plan to spend less (down from 20 percent in 2014). That’s the smallest gap between the two groups in the last three years. The glass looks half full as we head into the make-or-break season, and as a leader in retail real estate, we’re watching for the opening salvo – Black Friday – and what it might indicate for the final stretch of 2015.

Modest Rise in Holiday Sales Projected by Major Retail Trend Watchers

After a sluggish 2015, will retailers get a rush of spending in the year’s closing weeks? The National Retail Federation has projected an increase of 3.7 percent, totaling $630.7 billion in sales for November and December and slightly below last year’s 4 percent advance. Deloitte LLP is more optimistic, predicting an upward tick of “as much as” 4 percent. Alix Partners’ view is more sober at 2.8 to 3.4 percent. Whichever number eventually materializes, it seems that the retail trend toward bargain-hunting will continue, with buyers as the ultimate winners.

“Americans remain torn between their desire and their ability to spend. The fact remains that consumers still have the weight of the economy on their minds,” said NRF President Matthew Shay. Despite low energy prices and a strengthening job market, the economy is not in full recovery and not all boats have been lifted by the rising tide. Stagnant hourly wages at the lower end of the economic spectrum have restrained a substantial segment of consumers.

PwC describes today’s shoppers as divided into two groups: “survivalists” and “selectionists.” The border between the two is a household income of $50,000. Those below that mark will seek bargains this holiday season, planning to spend $631 less than last year. Those above, who are planning to boost seasonal spending by $1,331, will gravitate toward personal electronics and experiences (travel and entertainment). But, because of the power of the Internet, shoppers in both groups will be able to search for and find the best deals for almost everything on their wish lists, using dozens of websites with up-to-the-minute news on Black Friday specials.

Once a Retail Trend, Now a Retail Institution, Will Black Friday Bounce Back from 2014s Fall-off?

The winter holidays are a crucial season for many retailers, with the major chains dependent on November and December activity for as much as 30 percent of their annual sales. Black Friday, the unofficial opener to the season, holds special significance. A consistent winner for the past dozen years, Black Friday’s sales fell off 11 percent in 2014, with four-day total sales of $50.9 billion, down from $57.4 billion in 2013. This includes both in-store and online.

Amazon Will Open the Season on November 1, But Wal-Mart Will Finish on Top

No retailers are waiting for the day after Thanksgiving to launch holiday promotions. First out of the gate on November 1 will be Amazon with its “Countdown to Black Friday” promotion. From there, the frenzy will continue, peaking on Black Friday but continuing through the holiday weekend before slipping into online’s own Cyber Monday.

If Black Friday itself turns in a disappointing performance, trend watchers say, it will likely be the result of a time frame that has stretched from one day to two to now a full month. BestBlackFriday.com, a website that tracks seasonal retail activity, predicts that Friday sales will slip 3.3 percent to $8 billion. Thanksgiving Day will get a bump of 18.8 percent. Together, the two days will see online sales up 33.3 percent from 2014.

As Black Friday 2015 becomes retail history, promotion will continue to surge from Cyber Monday to Green Monday (the second Monday in December), all the way to the final holiday shopping week, when in-store sales are expected to spike. At the season’s end, retail watchers predict, Wal-Mart will emerge the big winner. Its multi-channel strategy includes their one-hour in-stock guarantee policy, online exclusives on a powerful website, and irresistible in-store pricing on the hottest holiday items.

Interested in more trends and predictions for Black Friday, visit: http://www.twice.com/news/statistics/top-10-black-friday-2015-predictions/58759.

A&P Bankruptcy Opens a New Era in Retail Real Estate

New Opportunities Ahead for Shopping Centers in Northeast U.S.

We recently saw the end of a long chapter in American retailing when the parent of the iconic A&P brand filed for Chapter 11. This is the second time in five years that the quaintly named Great Atlantic & Pacific Tea Company (now a division of Montvale-Para Holdings) has entered bankruptcy proceedings and it looks as though this is the end of the line. Once the Wal-Mart of its day, A&P created the supermarket concept in 1936, bringing a diverse inventory at low prices to a mass market and becoming the world’s largest retailer. There are many reasons for its demise, including a string of strategic blunders, and we can count on the media to deliver a full autopsy soon. But from my perspective, the primary failure of the 156-year old retailer was remaining static while the world was changing. A&P tried to retain its classic retailing model in the midst of a dynamic and robust competitive landscape of supercenters, dollar stores, convenience stores, and discounters. At the high-end, Whole Foods, Fresh Direct, and new concepts like Amazon Fresh and Blue Apron were staking their claims. In the middle, retailers such as ShopRite and Stop & Shop reinvented and modernized their stores. In an industry with razor-thin margins, the competitive squeeze was too much.

Whats Next for Grocery-Anchored Shopping Centers Post-A&P?

In a recent article, USA Today said “A&P’s biggest asset may be its real estate,” which includes A&P, Pathmark, Waldbaums, SuperFresh, Food Emporium, A&P Liquors, and Best Cellars stores. This puts the spotlight on the shopping centers of the Northeast region of the country, where most of these stores are located and where our portfolio is concentrated. It appears that Stop & Shop, Acme and Key Foods have struck deals on 120 of the locations. A&P has said it will close 25 stores, which leaves 176 on the block. Lots of retail real estate trends are in the making.

As leading retail leasing advisors, our Levin team sees the A&P bankruptcy as signaling a new paradigm. We’ve found that retaining competitive advantage following a change in a retail anchor tenant requires both strategic rethinking and capital infusion. Retenanting and repositioning is a constant factor in effective asset management. It’s part of the game plan for success in our dynamic retail real estate industry. Sometimes a bankruptcy is the driver, sometimes other factors are at play. Whatever the impetus, these are situations that present opportunities for reinvention and growth. And in a market that’s got plenty of post-recession momentum going, there’s cause for optimism in the face of anchor changes. It’s much too early to get specific about the effects of A&P’s passing, but the takeaway here is that one of the few things we can count on is change.

What’s Up for Retail in 2015: Watching the Trend Watchers

From OmniChannel Marketing to Augmented Reality, Predictions Abound

We have spent the month of January mulling over the predictions churned out in blogs, newsletters and the trade press regarding what the retail industry, and those of us in retail real estate, can expect to see over the next 12 months. For some of these, no crystal ball is needed – they are already becoming retail facts of life. Others seem a bit more cutting edge. And a few more read like the stuff of science fiction (but who knows?). Here are some of the visions that came across our radar in this opening month of 2015.

Already Here: Six Retail “Trends” that Will Continue

OmniChannel Retailing – Let’s change that name to just Retailing. Cross-platform merchandising is not the wave of the future but the state of the industry.

Boomers & Millennials – These two massive demographics will drive consumer behavior for decades. For the Millennials, that means MOBILE. This technology is essential to their lifestyle. Retailers and brands must use it effectively to survive. For aging Boomers, expect fitness centers and health-related services to continue to crop up in retail real estate nationwide.

Online Merchants Add Offline Presence – From hip brands like Warby Parker and Birchbox to the venerable Amazon, offline continues its bricks-and-mortar migration, with both pop-ups and established spaces.

Shopping as Experience – To woo consumers from their computers, retailers and retail real estate management will continue to add out-of-home excitement to the shopping trip in all kinds of creative ways.  Stores now are social gathering  places, centers for knowledge, learning more information, a place for fun, or relaxation.  The bricks-and mortar are wonderful places that can deliver experiences in a way that a website can’t.

Blurring of Sectors – From Ralph Lauren to Urban Outfitters, retailers are buying into the store-within-a store-model, serving up cocktails, coffee and more along with merchandise.

Pressure on Mid-range Retailers – High-end and value will continue to rule, squeezing retailers and retail real estate that focus on the mid-range shopper.

On the Horizon and Growing Fast

Big Data – It is bigger than ever, enabling savvy merchants to analyze everything from in-store traffic patterns to the purchase profiles of top customers. Ignore it at your own peril.

Smarter Security – Security breaches continue to make headlines and headaches, paving the way for sophisticated products like Apple Pay that eliminate credit or debit cards from transactions.

Social Networks as Shopping Platforms – Those “Like2Buy” links on Instagram and Twitter will get increased use in the coming year. Nordstrom and Target have jumped in already.

Good-Bye to Loyalty Programs – They are too commonplace to excite today’s consumers who respond to personalized offers instead. Retailers will have to try harder to keep shoppers coming back.

Localization – Inventory, store design and services tailored to the needs of specific markets are reaping results for AutoZone, Chipotle and Starbucks. More will follow in 2015.

Corporate Social Responsibility – Good behavior matters. A study by Cone Communications and Echo Research found that 87 percent of consumers globally factor a brand’s social concerns into purchase decisions. Smartphones let ethically oriented shoppers (often Millennials) check brands and retailers for fair trade practices or worker abuses.

Self Check-Out – Airport ticket kiosks and express checkout in hotels have accustomed  time-starved consumers to quick exits. Expect this technology to migrate from retailers like Home Depot and Costco to department stores.

Today’s Sci-Fi, Tomorrow’s Retail

Wearables – Cutting-edge retailers are eager to connect with the ever-increasing number of consumers sporting wearable gadgets like fitness bracelets and smart glasses. Barney’s is experimenting and Kenneth Cole has developed a Google Glass app.

Drone Delivery – Amazon has announced plans to test shipping by drone, while Google and DHL have already fielded experiments in drone delivery in Germany and Australia.

Augmented Reality – Virtual fitting rooms, mobile maps for in-store navigation, and interactive displays and windows are cropping up in retail venues nationwide.

RIFD (Radio Frequency Identification Devices) – These tiny microchips with embedded antennas can help with inventory management and theft prevention, as well as transmitting promotional messages to browsing shoppers. Some see a future with RFID chips embedded in jewelry or in forearms with links to bank accounts or credit cards for seamless transactions.

When January 2016 rolls around, which of the trends we’ve collected here will be widely adopted? Which do you think will take hold among shoppers and retailers? Time will tell.

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.

When Going Backward is Going Forward

melissa

Clicks-to-Mortar Continues as a Retail Real Estate Trend

When Bonobos’ founder Andy Dunn launched his online menswear business in 2007, he pronounced bricks-and-mortar stores officially dead. Within five years of predicting that retail real estate trend, Bonobos was offline as well as online with a unique take on bricks-and-mortar – Guideshops – plus branded boutiques in select Nordstrom stores. Other big e-commerce names like Warby Parker, Piperlime, Birchbox, Proper Cloth and even Etsy and eBay are now dabbling in the concept of offline venues.

Migration to Bricks-and-Mortar Sounds Like Good News for Retail Real Estate

The Los Angeles Times recently reported on the debuts of on-the-ground boutiques by some of the hippest names in online-only retailing. Among these are Nasty Gal, now in the Southland Mall in Hayward, Calif., and JustFab in the Glendale Galleria. Former exclusive onliners say the major drivers of this “reverse evolution” are their need to build brand awareness and the shopper’s need for a tactile impression of merchandise, something that can’t be duplicated online (at least not yet). Shopping is a social experience, especially among the coveted millennial demographic, they acknowledge, and a physical venue provides just that. And shoppers want to try before they buy –something that even the onliner’s promise of “free shipping both ways” can’t seem to overcome.

Clicks-to-bricks also delivers a positive financial impact. Dunn of Bonobos says that he cut his online marketing costs in half through his Guideshops and that the average in-store transaction ($360) was close to double that of Bonobos’ average online sale.

“Reverse Evolution” Results in a New Kind of Retail Real Estate Venue

Bricks-and-mortar descendants of e-commerce sites are anything but traditional stores and more hybrids of offline and online. This retail real estate trend is producing smaller “showroom” style shops (sometimes as small as 800 sq. ft.) with shallow, sample-based inventory. In-store purchases are often made via the retailer’s website to be delivered within 24 hours (for the almost-instant gratification consumers crave). Both sales associates and shoppers in these hybrids have access to multiple computers to browse additional options and features and place orders. Typically, the showroom stores closely reflect the branding of the retailer’s website – The Gap’s Piperlime, a fashion site featured on “Project Runway,” decks out its flagship SoHo showroom in the color palette and graphics of its website.

What’s Next for the Click-to-Mortar Retail Real Estate Trend?

Traditional retailers continue to strive for online success. E-commerce pioneers seek a footprint in the real world. What’s next? Will we see more online retailers launching not only in trendy neighborhoods like SoHo and LaBrea but in malls as well? One thing we can count on, it’s not going to be business as usual. What are your observations about this trend? Please share them with us below.

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About Melissa Sievwright

Melissa joined Levin’s marketing department in 2010 and was promoted three times in less than three years to her current management position as Assistant Vice President of Marketing. With a strong background in graphic design and marketing, she heads the company’s corporate branding efforts, implements promotional campaigns for select client properties, and supports the firm’s leasing team in marketing vacancies within the company’s shopping center portfolio. Her current “big picture” goal centers on helping Levin leverage opportunities resulting from the rapid evolution of online marketing and the increasing technological savvy of the commercial real estate community – to project an image that marries the firm’s rich traditions with its modern approach to doing business.

 

 

 

 

 

Supermarkets Are Strong Anchors For Today’s Shopping Centers


Retailers that serve the everyday needs of consumers, such as grocery stores, always have been reliable drivers of shopping center traffic, and the recent recession underscored their value as tenants. Now, as the economic environment grows more robust, this retail real estate trend continues, with well-located, grocery-anchored shopping centers attracting shoppers and commanding both investor and tenant interest.

With 23 of the 95 shopping centers in Levin’s portfolio anchored by grocery chain stores, we see this on a ground level. Tenants in centers for which we provide management and leasing services include major supermarket brand names like ShopRite, Stop ’N Shop, Fairway Market, Giant, Pathmark and A & P.

Although traditional supermarket chains face new competitive challenges within their own industry (from dollar stores, convenience stores and big box retailers) and from e-commerce, our experience indicates they will remain stable tenants and desirable anchors for three reasons:

1. Supermarkets are non-cyclical businesses. Grocers are purveyors of necessities. Consumers may trim their food budgets, eliminate luxuries and seek out bargains in hard times, but they must continue to visit supermarkets. Well-managed grocery businesses are better positioned to weather a downturn than virtually any other kind of retailer.

2. Supermarkets attract recurring traffic. U.S. consumers make an average of two trips to the supermarket weekly. Retailers that are co-tenants with grocery stores benefit from this regular exposure to the shopping public. And since one-stop shopping is popular in our time-crunched world, consumers are likely to combine a trip to the grocery store with visits to retailers in the same location.

3. Supermarkets face less competition from online shopping than other retailers. While the volume of online grocery purchases (usually for non-perishables) is growing, those same shoppers tend to continue in-store visits for certain items or to pick up the orders they placed through the store’s online option.

Levin Property Turn-Around Illustrates the Value of Grocery

The transforming power of the supermarket anchor tenant is illustrated in Levin’s recent reinvention of Post Road Plaza. Once the top performer in its trade area, the 40-year-old property had waned in popularity. Demographic shifts, a dated look and anchor tenant bankruptcies all contributed to the decline of this 260,000-square-foot shopping center. Levin was engaged as managing and leasing agent to restore Post Road Plaza’s market position and as construction manager to address its renovation.

Under Levin’s direction, a multi-disciplinary team was contracted and began the $15 million modernization process. Central to Levin’s vision of a restored Post Road Plaza was a brand name supermarket as anchor tenant. To our leasing team, Fairway Market, a popular Manhattan-based grocery store with an aggressive plan for expansion into the suburbs seemed perfect. And Post Road Plaza’s 75,168 square feet of space in affluent southern Westchester County was a perfect fit for Fairway as well. The cachet of the award-winning new anchor, a sought-after tenant throughout the region, helped draw national brands as tenants: Dave & Buster’s, Marshall’s Shoes, Lane Bryant and Smashburger. Existing tenants Modell’s and Dress Barn expanded into new prototypes and the revived Post Road Plaza was on its way to reclaiming the area’s top-performer spot.

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 and challenges in retail real estate.