Shawn Massey, CCIM, SCLS

Part Two: How do you have sex with a porcupine? Very carefully!

This is part two of a series of my reflections on the Tennessee Valley Economic Development forum on retail recruitment that was held September 29th, 2012 on navigating the retail waters.

 What retail development trends are affecting the market?

It was said by one of our panelists that retail development today is like having sex with porcupine which you should do very carefully I have been told.

 Note:  It is critical that stores make a comeback – It is still where the majority of transactions take place.

1. Diversification of anchors – With more backfilling taking place it is not unusual to see different anchors than we are used to seeing in the same center.

 An interesting observation during the forum was the comment by Allen McDonald of “What is a Shopping Center today?”  We know that beyond the diversification of retail anchors is the backfilling by non-traditional uses such as Universities, Charter Schools, and Libraries etc. into our centers across the country.   One of the best examples was 100 Oaks Mall which the entire second floor was leased to Vanderbilt University.  It is reported that the retailers in the center have been doing extremely well since Vanderbilt opened for business.  

 2.  Increasing reliance on “Barbell Retail.”  Consumers are allocating dollars on either end of the price continuum.  More centers mix developments today with both value oriented stores and higher end stores

 3.  Resurgence of the Factory Outlet center.

 4.  Pause in new development in favor of redevelopment or repurposing centers. Retail development will continue to be slow with a single tenant and a few smaller strategic developments taking place.  In most cases it is much cheaper for a retailer to go in an older center that has been repurposed than for a developer to build a new center for that same retailer.

 5.  The supply/demand equation will strengthen for Landlords and we will see rising rents and higher occupancy rates.

 Because of lack of new development product the demand for space is actually    very good.  Historical low delivery of new center development

 6.  Interest rates will remain low – This may depend on outcome of Presidential election in November.

 7.  Small service retailers will continue to grow.

 8.  Freestanding retail development has outpaced shopping center development over the past few years and will continue for a few more at least.

 9.  Construction Costs are rising for the retailers in terms of higher tenant improvement costs and developers are seeing higher costs for shell construction.

 10.  We will see smaller store from both anchors and junior anchors!  A very insightful observation from one of the panelists summed it up best.  “These smaller stores are no different than a mom and pop who have to make money to stay open.”  Retailers will need to become more efficient in their design and merchandising, as well as, storage of goods in order to lower costs and remain competitive. 

 11.  A nagging dilemma is how both a developer and a community who have been effected by Wal-Mart’s move to the other end of town in a small community deal with the left behind space? 

 Part 3 will focus of how retailers are choosing locations these days and Part 4 will focus on what retail development agencies can do better to attract retailers to their communities! 

 I hope you will check out future weekly commentary at

www.RetailRocksintheMidsouth.com.   If you enjoy the commentary please subscribe online.

 Cheers,

 Shawn

 Shawn Massey, CCIM, SCLS is a partner with The Shopping Center Group a 3rd party retail real estate advisory firm in their Memphis office, an adjunct professor in the graduate real estate program at The University of Memphis, in 2013 Shawn will join the faculty of the Homburg Academy teaching on-line real estate classes world-wide and is also co-founder &Chairman of the Board for the Memphis Business Academy charter schools (K-12th grade) in the Frayser area of Memphis.  

For all your retail real estate needs (tenant representation, landlord representation and property, investment & land sales) I hope that you will choose The Shopping Center Group and me to represent you and your business.  We understand that representation is a privilege and that you have a choice!

The opinions expressed in this post are entirely my own.  They should not be considered the opinion of The Shopping Center Group, LLC in which I am associated.

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One comment

  1. John D. (Don) Jones /

    Shaun, these comments, quotes, suggestions are helpful to the governemnt section as well as the private. Thanks, don.

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