Shawn Massey, CCIM, SCLS

Weekly CRE and Retail Article Round Up – March 18, 2013

I hope you enjoy this weeks articles.
From the ICSC
New stores still a key growth strategy, retailer CFOs say
U.S. expansion remains a key growth strategy for retailers in 2013, according to a CFO survey from consulting firm BDO. Some 30 percent of the respondents said expansion would be their priority this year, followed by improvements to merchandise assortment (24 percent of respondents) and investing in e-commerce and mobile commerce (22 percent.) “The opportunities abroad and online are clear, but retail executives still believe that U.S. stores are a core part of the business,” said Ted Vaughan, a BDO partner for retail and consumer products. “In addition to investing in existing stores, we’re also seeing several online brands introduce storefronts for the first time as they look to appeal to shoppers who want to see and try on merchandise in person.”
Nearly a third of the respondents said they plan to make overall advertising and promotions their biggest investment, almost 30 percent said they will invest most in e-commerce, and about a quarter said store redesign or remodeling will command the largest share of capital expenditure.
Some 34 percent of these CFOs pointed to government fiscal uncertainty as the biggest risk to business over this next year, while 32 percent cited competition and consolidation. Supplier issues—foreign and domestic—are among the big risks according to 16 percent of respondents, while 12 percent named breaches of data, and 6 percent mentioned geopolitics and natural disasters. The BDO Retail Compass Survey of CFOs is a national telephone survey conducted by research firm Market Measurement.
Walgreens plans first net-zero-energy store
Walgreens announced plans to build what it calls the first “net-zero-energy” store in the U.S. — meaning that the store will produce energy in amounts equal to or greater than what it consumes. The company says it will achieve this by means of solar panels, wind turbines, geothermal technology, energy-efficient building materials, LED lighting and ultra-high-efficiency refrigeration. “We are committed to reducing our carbon footprint,” said Thomas Connolly, vice president of facilities development, in a press release. “We are investing in developing a net-zero store so we can learn the best way to bring these features to our other stores. Because we operate 8,000 stores, our pursuit of green technology can have a significant positive impact on the nation’s environment.” The store’s location in Evanston, Ill., near the company’s Deerfield headquarters, will make it easier for Walgreens’ engineers to measure performance for a year to see if the store really does reach net-zero-energy usage. The engineers estimate the store will use some 200,000 kilowatt hours of electricity per year while generating about 256,000 kilowatt hours.
Retail centers big contributors to municipal tax coffers
Retail centers make a huge impact on local economies, according to new research from ICSC. In 2010, the most recent data available, shopping centers were responsible for generating some $35.6 billion in local sales taxes, according to ICSC Research. This is on top of the $127.1 billion in state sales taxes the industry generated that year. “These are not incidental sums and go toward myriad services at the local level,” said Christopher Gerlach, ICSC’s director of public-policy research. In 2010 combined state and local shopping center sales taxes accounted for 12.8 percent of total state and local tax revenues in general, nationwide. “This is impressive, given that there are five states with no state sales tax, and 18 states, including Washington, D.C., with no local sales tax,” said Gerlach. “Of course this percentage varies, depending on states.” Arizona, Nevada and Tennessee, for instance, are heavily reliant on sales taxes to fund government operations (upwards of 20 percent of total revenues), whereas Alaska, Wyoming and the District of Columbia are much less so (less than 5 percent).
Cities hungrier than ever for retail development
Hundreds of municipalities are emerging from the economic meltdown only to struggle with slimmer budgets in the face of closed stores and spending-shy residents. Little wonder that economic development officials are in pursuit of new retail blood to compensate, flocking to ICSC meetings and other deal-making venues in record numbers. “Municipalities are putting more emphasis on retail recruitment today because they know they need quality of place to make their communities more vibrant,” said Lacy Beasley, a municipalities consultant in the Nashville, Tenn., office of retail-advisory firm The Shopping Center Group. “They see it not only as a very necessary tax generator, but as a foundation for community growth.”
The municipalities section at RECon 2013 — titled the Cities of the World Pavilion — will play host to a record number of exhibitors this year, coming to hold a sort of international retailer “casting call.” This is the kind of thing that cities need to be doing, says Beasley. “Especially with retail being the fastest-changing and most dynamic of the sectors,” she said. She would know, having worked with 42 towns across four states, helping to enhance their retail rosters — and their tax rolls. Rural areas have been hit particularly hard by store closures and online retail, she says, and they need brick-and-mortar retail to help recover tax revenue.
Successful retail recruitment spurs other community improvements, argues Keith Sellars, CEO of the Washington, D.C. Economic Partnership. “With the job market hit so heavily, cities are also looking to retail as a source of job creation,” Sellars said. “Retail positions are great entry-level jobs for citizens who may not have acquired other skill sets yet.” The D.C. Partnership has become an annual fixture at RECon and is looking this year to build on the momentum of February’s ICSC Mid-Atlantic Idea Exchange, where its representatives juggled 45 meetings. Competition for retail has grown acute, Sellars says. Recruiters “have definitely upped their game, so we really need to be prepared when we meet brokers and developers to give them value for their time,” he said.
Cities have seen a marked increase in the formation of public-private partnerships to grease deals in recent years. “Retailers’ margins have been squeezed, and they’re looking to municipalities to help them out,” said Beasley. But cities that want to grow their retail tax base need to create a business-friendly environment first, she says. “They need to understand the demand versus the constraints they have put on retailers,” said Beasley. If restrictions are too difficult, retailers may decide to relocate down the road in some other municipality, she says. “Cities that show a progressive effort toward planning development will ultimately increase their sales tax and their property values as part of a strong, overall gain in revenue,” she said. “It’s a delicate balance.”
ICSC, Trepp to launch shopping center benchmark report
Commercial real estate analytics firm Trepp is working with ICSC Research on an analysis of U.S. shopping center income and expense. The data, which will be available to ICSC members, is based on Trepp’s database of 20,000 properties and a survey of shopping center owners and management firms. “We are excited about this collaborative effort between Trepp and ICSC,” said ICSC President and CEO Michael P. Kercheval, “because of two factors: Both the scope and the flexible delivery of this research and analysis will be an unprecedented value-add for our membership.” ICSC has provided access to Trepp’s monthly reports to its 58,000 members since 2009. “This was a natural extension of the relationship between our organizations,” said Trepp CEO Annemarie DiCola. “Having forged a relationship over the last several years, the value proposition of developing this analysis was a logical next step,” DiCola said. The survey will launch in mid-April. Once the analysis is completed, ICSC members will be able to get a report comparing their properties to national averages.
Farmington Hills, Mich.–based Ramco-Gershenson Properties Trust bought Clarion Partners’ 70 percent stake in 12 shopping centers in Florida and Michigan, totaling 2.2 million square feet, for $151.9 million in cash and $104.9 million in assumed debt. Ramco-Gershenson already owned the other 30 percent of those properties, which were part of an ongoing joint venture between the two firms, called Ramco/Lion Venture. The centers’ anchors are a mix of supermarket and discounter tenants — including Bed Bath & Beyond, The Fresh Market, Publix, Ross Dress for Less, Save-A-Lot and T.J.Maxx.
Walnut Creek, Calif.–based Loja Real Estate sold the 345,700-square-foot Downtown Pleasant Hill (Calif.) Shopping Center to an undisclosed buyer for $100 million. Tenants include a Bed Bath & Beyond, a Century Theaters cinema and a Lucky supermarket.
Phoenix-based Cole Real Estate Investments paid Oak Brook, Ill.–based Inland Private Capital Corp. $12.4 million for an 100,800-square-foot retail property at 905-915 E. Golf Road, in Schaumburg, Ill. The building, located near Woodfield Mall, is leased to Bed Bath & Beyond and Golfsmith.
• Dick’s Sporting Goods is launching a new retail concept based on Field & Stream magazine. Dick’s is set to open two Field & Stream stores this year, starting with one in Cranberry Township, Pa., this fall. These Field & Stream stores will sell hunting, fishing, archery and camping equipment. “Dick’s Sporting Goods originally began as a bait-and-tackle shop,” President and COO Joseph H. Schmidt told investors. “The Field & Stream store will build upon both brands’ heritage to provide an excellent customer experience for outdoor enthusiasts.” Dick’s acquired the intellectual-property rights to the Field & Stream trademarks in the hunting, fishing, camping and paddling categories last September. The magazine itself is still owned by publisher Bonnier Group. The retailer will also open 40 Dick’s Sporting Goods stores, one Golf Galaxy store and two True Runner stores, as well as remodeling 75 Dick’s stores. The company operates about 600 stores in total. Companywide same-store sales for 2012 grew by 4.3 percent year on year.
• E-commerce in the U.S. will generate some $231 billion in sales this year, up 13 percent from last year, according to research firm Forrester. E-commerce already accounts for about 8 percent of total U.S. retail sales and is expected to outpace brick-and-mortar stores over the next five years, reaching about $370 billion by 2017, Forrester says. By then, e-commerce will account for roughly a tenth of total U.S. retail sales.
• A&P is cashing in some of its real estate. The Montvale, N.J.–based supermarket chain says it has about $130 million worth of deals pending, including leasehold sales and sale-leaseback transactions relating to “a few non-core store locations.” The chain disclosed none of those locations. A&P operates about 300 stores across six states under the A&P, Best Cellars, Food Basics, Food Emporium, Pathmark, Superfresh and Waldbaum’s banners. “This opportunity to unlock substantial real estate value from some of our owned and leased properties will provide additional liquidity as we continue to execute on our strategic initiatives and invest in our stores for growth,” CEO Sam Martin said in a press release.
• The Houston-based Men’s Wearhouse clothing chain says it is seeking a buyer for its 97-store K&G discount menswear chain. K&G’s same-store sales for the fourth quarter fell 5.7 percent, while its fiscal 2012 net sales were off 2.4 percent from a year ago, to $365.9 million. Men’s Wearhouse operates about 900 Men’s Wearhouse stores and nearly 100 Moores stores.
• Commercial mortgages fared better through the credit crunch and the recession than any other class of loan held by banks and thrifts in the U.S., according to a Mortgage Bankers Association analysis of FDIC data. Banks and thrifts charged off some $212 billion of single-family mortgages, $205 billion of credit-card loans, $95 billion of commercial and industrial loans, $85 billion of construction loans and $72 billion of other types of loans from 2007 through 2012. By contrast, these lenders have charged off only about $41 billion worth of commercial mortgages over that same period.
• Irvine Co. Retail Properties replaced all the common-area lighting at its 35-year-old University Center, in Irvine, Calif., with LED lamps, making that one of the first shopping centers in the country to be lit completely with a state-of-the-art lighting-control system and energy-efficient technology. The shopping center is the first of what Irvine Co. anticipates will be a portfoliowide LED conversion of the common-area lighting at all its properties. The $750,000 retrofit included replacing nearly 800 lamps and bulbs with LED fixtures, some designed specifically for Irvine Co. The process took eight months, and the new lighting has already yielded about 51 percent in savings on lighting-related expenses, which, the firm says, gets passed on to tenants, in the form of lower common-area-maintenance charges.
February retail sales up 1.1%
March 13, 2013 WASHINGTON — The Department of Commerce reported that retail sales for the month of February rose by 1.1% seasonally adjusted month to month.
The newly released figures include nongeneral merchandise categories, such as automobiles, gas stations and restaurants; excluding those, sales rose 0.7%, while rising 0.5% unadjusted year over year. The National Retail Federation noted that sales beat estimates as consumers adapted and adjusted spending in response to higher gas prices and the payroll tax increase.

Consumer Spending Took a Step Back in February
March 13, 2013, First Data Corporation, a global leader in electronic commerce and payment processing, released its First Data SpendTrendanalysis for the full month of February 2013, compared to February 2012.
SpendTrend tracks same-store consumer spending by credit, signature debit, PIN debit, EBT, closed-loop prepaid cards, and checks at U.S. merchant locations.
Dollar volume growth slowed to 4.6 percent year-over-year compared to January’s growth of 6.2 percent.
Unemployment rate at 7.7%, lowest in more than four years
March 8, 2013 American employers accelerated the pace of hiring in February, adding nearly a quarter of a million new private-sector jobs and helping push the unemployment rate to 7.7%, the lowest in more than four years.
The gain of 246,000 private-sector jobs – far surpassing Wall Street estimates of 160,000 to 165,000 – marked the fourth time in five months that the nation has added more than 200,000 jobs.
Apparel Stores
Christopher & Banks narrows Q4 loss
March 14, 2013 Minneapolis — Christopher & Banks Corp. narrowed its fiscal fourth-quarter loss as the company received a boost from an extra week of sales and cut costs.
The retailer posted a loss of $4.1 million for the 14 weeks through Feb. 2, compared with a loss of $53.2 million in the 13 weeks the year before. Revenue was up 10%, to $116 million from $105.6 million. Same-store sales jumped 18.5%.
Earnings heat up at Hot Topic
March 14, 2013 CITY OF INDUSTRY, Calif. — Teen retailer Hot Topic reported net income in the fourth quarter of $12.1 million, or 29 cents per share, compared with net income of $9 million, or 21 cents per share, for the fourth quarter of fiscal year 2011.
Total sales for the fourth quarter of fiscal 2012 increased 11% to $233 million compared with $209.9 million for the fourth quarter of fiscal year 2011. Total company comparable sales increased 2.6% for the fourth quarter of fiscal 2012. For the fiscal year of 2012, the company reported net income of $19.5 million, or 46 cents per share, compared with a net loss of $1.8 million, or 4 cents per share, for fiscal year 2011.

Men’s Wearhouse narrows Q4 loss, K&G for sale
March 14, 2013 Unable to recover from a slow start to the fourth quarter, Men’s Wearhouse reported a 1% same store sales increase and a worse than expected loss of 7 cents a share. Men’s Wearhouse had previously lowered its fourth quarter expectation in early December 2012 when it report third quarter results and noticed that November sales were not trending well. Weakness was blamed on Hurricane Sandy in the Northeast, the distraction of a presidential election and debate over national fiscal matters, all of which were said to depress traffic to Men’s Wearhouse stores. Accordingly, the company’s original fourth quarter guidance for earnings in the range of 12 cents to 15 cents a share was lowered to a range that envisioned a profit of 1 cent to a loss of 5 cents a share.
The company’s Canadian brand, Moores, accounts for 11% of our total company sales and produced a worse than expected same store sales decrease of 5.5%. The K&G unit accounted for 16% of our total fourth quarter sales and had a comp decline of 5.7%.The company is now looking to unload the K&G division to focus on its core Men’s Wearhouse and Moores brands and has retained Jefferies & Co. to evaluate strategic alternatives.
Sales take a dive at Aeropostale
March 14, 2013 NEW YORK — Aeropostale reported that net sales for the fourth quarter decreased 1% to $797.7 million, from $808.4 million in the year ago period. Fourth quarter comparable sales, including the e-commerce channel, decreased 8% compared with a 7% decrease for the corresponding 14-week period of the prior year. Fourth quarter comparable store sales, excluding the e-commerce channel, decreased 9%, compared to a decrease of 9% for the corresponding 14-week period of the prior year.
The company reported a net loss for the fourth quarter of fiscal 2012 of $0.7 million, or 1 cent per diluted share, compared with net income of $26.1 million, or 32 cents per diluted share, for the fourth quarter of 2011.
Express Q4 profit tops Street; outlook weak
March 13, 2013 Columbus, Ohio — Express said its fourth-quarter net income rose a better-than-expected 6%, but its full-year projection for earnings came up short as the retailer provided a weak outlook.
Express, similar to many other retailers, had less traffic in February, as higher taxes and rising gas prices cut into shoppers’ discretionary spending.
Profits up at Urban Outfitters
March 12, 2013 PHILADELPHIA — Net income rose to $83 million at Urban Outfitters for its fourth quarter from $39.26 million in the year-ago period, on strong same-store sales and higher revenue.

Total company net sales for the quarter increased 17% to $857 million. Comparable retail segment net sales, which include comparable direct-to-consumer channel, increased 11% for the quarter, while comparable-store net sales were flat. Comparable retail segment net sales at Free People, Urban Outfitters and Anthropologie increased 37%, 11% and 7%, respectively. Direct-to-consumer net sales surged 44% and wholesale segment net sales grew 22% for the quarter.
Discount Stores
Target to open 14 in-store health clinics
March 14, 2013 New York — Target is expanding its retail clinic presence in the Chicago area, according to the Chicago Tribune.
The retailer plans to open three in-store health clinics — two in the suburbs and one in the city — in the Chicago area, the report said. Construction is scheduled to start on May 28, and grand openings are planned for Aug. 18. The Target on Division Street, scheduled to open in October, will also have a clinic. Target is planning to open 14 new clinics around the country, for a total of 68, the newspaper reported.
Drug Stores
More CVS/Pharmacy Stores on the way
March 12, 2013 SAN FRANCISCO-LandMark Retail Group recently opened three CVS/pharmacy stores in San Francisco. In the past 12 months, the firm has completed 13 stores throughout California with plans to open four more this year.
The firm tells that the four other stores this year will be located throughout the State. For the three norcal stores, the first is located at 351 California St. at the southeast corner of California and Sansome streets. The lot totals 11,553 square feet and the building totals 9,009 square feet. The total project cost nearly $2.1 million. The store opened after just five months of construction.
Home Improvement & Office Products
Kirkland’s Q4 results tops Street
March 14, 2013 For the period ended Feb. 2, Kirkland’s earned $14.3 million, compared with $15.2 million a year earlier.

Revenue rose 9% to $162.9 million from $149.1 million, helped by an extra week in the period. Same-store sales fell 2.6%.
Aaron’s opens 32 stores
March 13, 2013 Atlanta — Aaron’s, a lease-to-own, announced the recent opening of a combined 32 new company-operated and franchised stores in 17 different states and two Canadian provinces.
The announcement follows a strong growth year for the company in 2012, which included the opening of its 2,000th store in the Bronx in September.
Fiesta Restaurant Group lowers 2013 sales guidance
March 14, 2013 Fiesta Restaurant Group Inc., parent to the Pollo Tropical brand, on Thursday joined a small chorus of restaurant companies reducing sales guidance for 2013, citing economic pressure.
The Addison, Texas-based Fiesta lowered its same-store sales forecast for Pollo Tropical revenue, advising that revenue at units open at least a year would rise 3 percent to 5 percent, down from the earlier guidance of a 5-percent to 6-percent increase.
Restaurant sales remain pressured
March 13, 2013 As fourth-quarter earnings season comes to a close and restaurant companies provide outlooks into 2013, warnings on sales softness continues.
Driven by a drop in consumer spending, mainly because of increased payroll taxes and rising gas prices, February sales were challenged, according to restaurant securities analyst Andy Barish at Jefferies Group Inc.
Survey: Chick-fil-A leads fast-food industry in customer service
March 13, 2013 Waban, Mass. — Chick-fil-A, Dunkin’ Donuts, Sonic Drive-In, and Little Caesar’s earned the top spots in the fast food sector of the 2013 Temkin Experience Ratings. At the other end of the spectrum, KFC and McDonalds were the lowest-rated fast food restaurants. The fast food industry earned the second highest average rating out of 19 industries, falling only behind the grocery sector.
McDonald’s same-store sales fall in February
March 8, 2013 McDonald’s Corp. reported a 1.5-percent global same-store sales decrease for February, which included a 3.2-percent negative calendar shift when accounting for a 29th operating day for Leap Year last February.

Excluding the calendar shift, global same-store sales would have risen 1.7 percent, the Oak Brook, Ill.-based company said.
Dollar Stores, Warehouse Club & Other Retailers
Buckle Q4 net income rises 9%
March 14, 2013 Kearney, Neb. — The Buckle said that its fourth-quarter net income increased 9%, topping Wall Street expectations.
For the quarter ended Feb. 2, the retailer earned $61.4 million, up from $56.1 million in the same quarter last year. Net sales for the 14-week quarter ended February 2, 2013 increased 7% to $360.6 million from net sales of $337.1 million for the prior year 13-week fiscal quarter ended January 28, 2012. Same-store net sales for the quarter were flat.
Michaels Stores Q4 profit rises 15%
March 13, 2013 Irving, Texas — Michaels Stores said its fourth-quarter profit rose 15%, boosted by higher sales.
For the three months ended Feb. 2, the company said net income rose to $112 million, up from $97 million in the year ago period. Revenue rose 9% to $1.52 billion, helped by an extra week in the quarter. Same-store sales increased 1.7%, with a 2.3% increase in the average ticket.
Jo-Ann opens 800th store
March 13, 2013 HUDSON, Ohio — Shortly after Michaels reported Q4 sales growth, Jo-Ann Fabric and Craft Stores will officially open its 800th store on March 21 in Slidell, La.
“Reaching our 800th store is a testament to the hard work of Jo-Ann Team Members around the country, our customers’ passion for crafting and sewing, and their appreciation of our retail concept as a one-stop creative destination,” said Travis Smith, chief executive officer and president for Jo-Ann.
Costco Plans to Accelerate Openings
March 12, 2013 ISSAQUAH, Wash. — Costco Wholesale Corp. here said Tuesday it hopes to accelerate the number of warehouse openings to 30-plus over the next few years.

Richard Galanti, executive vice president and chief financial officer, said the company expects to open 28 locations this year — up from 20 in 2011 and 16 in 2012. Asked if Costco will go as high as 6% annual growth, he said 6% “is a little high, but given that we were at 3% and are now getting toward 5%, that’s a good sign.”
First Field & Stream Specialty Store to Open Fall 2013
PITTSBURGH, March 12, 2013, DICK’S Sporting Goods ,the largest U.S.-based full-line sporting goods retailer, announced today its specialty Field & Stream retail concept. Expected to open its first location this fall in Cranberry Township, Pa., Field & Stream will carry the best brands to meet the evolving needs of hunters, anglers and outdoorsmen.
Named for the iconic brand that for more than 140 years has been synonymous with outdoor experiences, the Field & Stream store will offer a vast assortment of outdoor equipment, accessories and services in hunting, fishing, archery, camping and more.
Costco sales, profits up again in 2Q
March 12, 2013 Second quarter sales increased 8% to $24.3 billion and profits, aided by a sizable tax benefit, increased 39% to $547 million, or $1.24 a share.
The surge is profits for the 12 week quarterly period ended February 17 was driven by a $62 million, or 14 cent a share, tax benefit that resulted from the portion of a special dividend payment made in December to participants in the company’s 401(K) program. Costco authorized a one time special dividend of $7 a share last year to return cash to shareholders in advance of a 2013 tax hike on dividend income.
Uniqlo to open second U.S. mall location
March 11, 2013 New York — Uniqlo, a division of Japan’s Fast Retailing Co., will open its second U.S. mall location, at Palisades Center in West Nyack, N.Y., on March 15.
The 24,000-sq.-ft. store will showcase Uniqlo’s complete offering of products for men and women, as well as its spring kids collection.
Foot Locker profits up in Q4
March 11, 2013 NEW YORK — Foot Locker’s fourth quarter profit rose to $104 million from $81 million a year earlier.
Sales jumped 14% to $1.71 billion, including the benefit of an extra week. Same-store sales rose 7.9%. For fiscal year 2012, which included 53 weeks, the company reported net income of $397 million, compared to $278 million a year earlier. Total sales increased 9.9% in 2012 to $6.182 million, compared with sales of $5.623 million last year. Same-store sales were up 9.4% in 2012.

Sales results mixed for Dick’s Q4
March 11, 2013 Dick’s Sporting Goods fell three cents short of analysts’ profit forecast in the fourth quarter thanks to a 1.2% same store sales increase partially caused by unseasonably warm weather and soft sales of big ticket items.
Sales for the 14 week period ended February 2, increased 12% to $1.8 billion compared to the 13 week period the prior year. The company’s consolidated same store sales increase of 1.2% was driven by a 54.2% increase in online sales, offset by a 2.2% decrease at Dick’s Sporting Goods stores and a 1.3% increase at Golf Galaxy stores.
Store Closure Strategies Still Overshadowing Expansion Campaigns
March 6, 2013 Announcements of store closures continue to outnumber planned store openings, according to the latest year-end results being reported by the nation’s largest publicly held retailers.
Major retailers such as Barnes & Noble, Best Buy and Sears, all announced store closures as part of plans to “rationalize” or “right-size” the number of stores. Sears Holdings even went so far as to tell its shareholders that disposing of assets was proving beneficial to the retailer and said last week it planned to continue shuttering locations that fail to produce acceptable financial results.
Introducing the Clarity Series: Prospecting
MSYapps: For Education, Finance and Real Estate
The Death of the American Mall and the Rebirth of Public Space
Investors Wary of Power Centers, Recommend Hold on All Retail Assets
The Slow and Painful Improvement of Shopping Center Fundamentals
Dick’s to open 40 stores in 2013 and debut Field & Stream format
The Future Of Retail [SLIDE DECK]
Walgreens to build first net-zero energy retail store
City creates retail incentive framework+
Young Broker Swears by Designations
Huddle House redesign spurs sales
Refreshed restaurants have seen sales increase upwards of 30 percent, CEO Michael Abt says
Get to know the #iTechLounge Speakers: Patrick Braswell, Ten Eight
Real Estate: Choose a Realtor You Can Trust

The Economic Story of 2013: Housing vs. Policy
Despite all of the gloom and doom talk about the potentially catastrophic impact of sequestration, the stock market continues to soar and February’s jobs report surprised most economists with unexpectedly strong job creation during the second month of the year. The economy added 236,000 jobs in February, while unemployment fell to 7.7%–its lowest rate since December 2008. This marks an increase from the average of 195,000 new jobs per month that the economy had in place over the last three months. It also brings us very close to the 250,000 per month level that most economists feel that the economy needs to meet on a sustained basis to make serious inroads into the nation’s still inflated unemployment rate. Construction employment posted its second month of strong increases—climbing by 48,000 jobs in February (this sector of the economy posted employment gains of roughly 25,000 new positions in January). And while a number of other sectors also saw growth (most noticeably manufacturing with 14,000 new jobs), this is where the story is.

The resurgence of the housing market vs. the economic drag created by poor public policy in Washington DC is almost certainly going to be the major economic story of the year. So far, the return of the housing market is winning—and I expect it to win in the long-term over the course of 2013. However, if you believe that the impact of sequestration is behind us now you are sorely mistaken. Unfortunately, both parties have not only failed (so far) in reaching any meaningful compromise on this issue, but they have both failed to give honest assessments of the impact of sequestration to the American people.

While the Democrats have continued to overestimate the impact of the major public sector budget cuts that kicked in on March 1st, the Republicans have veered in the opposite direction—far underplaying the impact. But there really is no way around it. The public sector is a major driver of the economy and if you are going to make cuts in public sector spending, there is going to be pain. This is not to say that cuts shouldn’t be made. They have to be made somewhere and as anyone trying to lose weight will tell you, “no pain, no gain.” But the problem with sequestration is that the cuts are being made in an unfocused, across the board and un-strategic way that both sides agree is dumb. And it is a simple, mathematical fact that these cuts will eventually result in the loss of hundreds of thousands of jobs. But not overnight.

And here perhaps is where the news is good. The President and Congress can still work out some sort of compromise that may lessen the impact of these cuts and that do not target essential and non-essential programs alike. But even a compromise will still mean a lot of lost jobs. Assuming this can be done, the debate then will be whether we are talking about a few hundred thousand or closer to a million people hitting the unemployment lines. And so, policy decisions (no matter which way they go), will continue to serve as a drag on the economy through the remainder of the year. But will this be enough to outweigh economic growth from the private sector? The answer to that question is probably not. But it will take a bite out of it. And though we may hit that ever elusive 250,000 new jobs number by next month, I suspect that come April’s jobs report we will finally start to see the impact of the sequester.
– Garrick H. Brown

Terranomics Top Five
Retail Sales in US Probably Advanced for Fourth Straight Month
Bloomberg 03.09

Mobile is the Future of Retail
Publishers Weekly 03.09
Economy added 236,000 jobs in February
Reuters 03.08

Store Closure Strategies Still Overshadowing Expansion Campaigns
Costar 03.06

U.S. Retail Vacancy Drops
Shopping Centers Today 03.05

The Big Picture
Food industry report shows consumers are moving out of economic crisis
Pizza Marketplace 03.08

The Department Store is Watching You
Atlantic 03.08

The national obsession with health & fitness is altering the landscape of shopping centers and strip malls
USA Today 03.06

The Death of the American Mall and the Rebirth of Public Space
The International 03.03

Retailer Roundup
The Competition Should Be Terrified of Forever 21
Business Insider 03.11

Best Buy Counts on Appliances for Sales Revival
Minneapolis Star Tribune 03.09

Best Buy VP Tells Consumerist Why the Company Can Still Compete
Consumerist 03.08

Nordstrom announces two new Rack locations for Chicago and Jacksonville
Chain Store Age 03.08

Kohl’s opens nine stores on Wednesday, 30 remodels on tap
Chain Store Age 03.06

Big Lots profit edges up in Q4; 50 stores on tap for fiscal 2013
Chain Store Age 03.06

New Walgreens planned for East Memphis
Memphis Business Journal 03.04

Ascena profit drops in Q2; to open net 60 stores
Chain Store Age 03.04

Grocery Grab Bag
Walmart in line to open 500 Neighborhood Market stores by fiscal 2016
Retailing Today 03.07

Report: Publix not interested in acquiring Harris Teeter
Chain Store Age 03.05

The Restaurant Review
Top 100 Best Restaurants for Service
Restaurant News 03.05

Le Duff America, Inc. Completes Acquisition of Mimi’s Cafe and Names New President
Restaurant News 03.05

Bruegger’s, La Madeleine, Brioche Dorée plan growth
Restaurant News Resource 03.04

Wendy’s Considers Closing up to 130 Restaurants
The Columbus Dispatch 03.01

M&A Mania
Private Equity Player Sycamore Turns Heads with its Retail Buying Spree
Dealbook 03.08

Sycamore Partners to acquire Hot Topic for $600 million
Chain Store Age 03.07
Walmart in line to open 500 Neighborhood Market stores by fiscal 2016
New restaurant proclaims ‘Midtown Is Memphis’
Memphis Real Estate Brokers Win CoStar Power Broker Awards
Net Lease Assets in Demand, and Cap Rates Continue Falling
Wal-Mart Says Its Smaller Stores Make Inroads
J.C. Penney And The Future Of Retail
Retail is dead!
At least, that’s how Marc Andreessen sees it. The entrepreneur and tech investor was recently quoted saying that all physical retail stores will die, succumbing eventually to the vast sea of online competition. According to Andreessen, there will be one way to shop for everything and that way will be e-commerce. It’s also fair to say, given that Andreessen co-founded Netscape and is invested in a number of online properties, that he might be just a little predisposed to this extreme position. Nonetheless, his opinion caused some unrest in the retail community and should be taken seriously.
On the other hand…
I have been a vocal proponent of a somewhat different future; one that includes both virtual and physical stores. You see, if I believed that humans shopped for no other reason than to acquire goods, I might be more aligned with Andreessen’s view but in fact, we don’t shop just to get stuff – any more than we go to restaurants purely for nutrition. In fact, we often shop to fulfill other deeper needs as well – the need to disconnect, to socialize and to commune – and at times to simply be out in public. Why else would celebrities brave the hoards of paparazzi to shop for things they could undoubtedly have delivered to them on a silver platter? The physical, human experience of shopping is in some ways of far greater value than the goods that come along for the ride. So, while shopping is a means of acquiring the things we want and need, it’s also a meaningful social activity that appeals to our deepest, human tendency to gather in tribes.
That said, I’m convinced that between the futures that Andreessen and I describe, lies the truth. But one thing is quite certain; that retail stores will be much different in the years to come than they are today.
But how different?
Regrettably, this is where the debate usually ends, with one side declaring brick and mortar retail dead and the other passionately defending its infinite existence. Rarely do we hear either side attempt to describe the specific ways in which stores are likely to evolve from what we see today. In other words, few seem willing to paint a picture the store of the near future.
So, I’ll take a shot at it, based not on what I foresee twenty years from now but rather based on what I see just around the corner and in front of me today.
And so…
These are some of the biggest changes I see to the concept of the retail “store”.
Less Take and More Make
Stores will increasingly become places that we visit, not simply to pick up mass produced articles but also to design and co-create special things with the personal assistance of experts. Whether it’s customizing a suit, building a one-of-a-kind notebook computer or designing the perfect bicycle, stores will be the point of collaboration and customization. These elements of customization will make for unique personal and physical experiences.
Less Product and More Production
With online players like Amazon prepared to ship just about anything we want in a matter of a day or two, our dependency on physical stores for mere distribution will continue to wane rapidly. Smart brands will have no choice but to, focus increasing amounts of attention on making their store spaces experiential brand starting points, with high production value. Stages where magic happens. Canadian sporting goods retailer Sport Check recently unveiled a concept store that might better be described as an adult amusement park for the sports enthusiast. Leveraging a variety of media and technology, the store has morphed into a wall-to-wall sporting experience. The store remains the most visceral expression of the brand essence.
Less Conversion but More Converts
The purpose of retail will no longer be to solely convert every customer into a buyer of goods but rather transform them into disciples of the brand itself. To begin a relationship – a dialogue that may play out in any number of buying channels; online, in-store, mobile or elsewhere. It doesn’t matter where purchases take place. What matters is that the consumer falls in LOVE with the brand and shares that love with others. The store maintains the potential to be that emotional center of gravity for the brand.
Less People but More Performance
The economics of online competition mean that brick and mortar discount merchants will have no alternative but to completely automate their store environments to remain cost-competitive – Walmart , for one, is already heading in this direction. At high-end merchants, stock clerks, cashiers and inventory counters will be the similarly replaced with technology. Front line salespeople, however, will be higher performing professionals who are paid considerably more money than today, and will be expected to literally sweep customers off their feet! These rare individuals will be intense believers in the brand, super-users of its products and co-creators with their customers. The era of the minimum wage clerk is giving way to the simultaneous rise of the robot at the low end and the Brand Ambassador at the high end.
Less Interruption and More Exchange
The current practice among retailers of asking for personal information only to annoy and interrupt with meaningless offers will give way as consumers garner more tools to filter out these useless overtures. Enlightened retailers, like Neiman Marcus, will appeal to their customers for a more overt exchange of value promising distinctly better, more customized and enjoyable experiences in exchange for relevant personal information. The transition is less about privacy and data and more about earned trust through performance. And the fruits of these data inputs will be almost immediately tangible to customers through clearly personalized services and product offerings, as data latency quickly becomes a thing of the past.
Less Established and More Ephemeral
Consumers, particularly younger consumers are developing an insatiable appetite for what’s new and next. Therefore, managing the same 100 stores in a mall for years on end simply won’t do anymore. Leases will shorten, new retail brands will evolve more quickly, old ones will die sooner and pop-up installations will rotate through the space. Change will be continual. The mall manager’s role will become that of editor and curator as the mall becomes a revolving door for new brands and concepts, in a relentless effort to captivate consumers.
Less Average and (Much) More Remarkable
In a contracting market, there will be increasingly little room for sameness. Ten retailers at the mall selling variations of the same clothing styles will soon become 5 retailers who absolutely kill it, with unique and remarkable collections. Average, forgettable experiences simply won’t pay the rent anymore and will be kicked to the curb by outstanding stores who bring something new and fascinating to the market.
So, is retail dead? Not a chance. If anything, it’s the very pervasiveness of online alternatives that is causing the best stores to rise out of the ashes of 30 years of mediocrity, ushering in what I, for one, believe will be the true Golden Age of the Store.
(Update) Coincidentally, a week after writing this post, Google announced that they would be opening physical retail outlets.
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Shawn joined the Memphis Office of The Shopping Center Group in 2003 and became a partner in 2008 to focus on shopping center leasing and tenant representation. He has a Bachelor of Business Administration and an MBA in finance and real estate from The University of Memphis. Prior to joining The Shopping Center Group, Shawn was a Senior Project Manager for Cingular Wireless (AT&T) and was responsible for real estate development management, construction and implementation for wireless antenna and tower infrastructure for Tennessee and Mississippi. He is adjunct professor at The University of Memphis where he teaches the masters level class in real estate development and sustainability. In 2013 in will be working with Homburg Academy and University teaching on-line commercial real estate classes internationally. He holds both the CCIM and SCLS designations. Shawn engages in tenant representation, third party leasing/sales, investment sale and development consulting in the retail sector.
He is the co-founder and Chairman of the Board for the Memphis Business Academy charter schools (K-12th grade) in the Frayser area of Memphis. He is currently the 2013 vice-president of the Memphis CCIM chapter, 2013 Secretary/Treasurer of the MAAR Education foundation. He has serve on various charitable organizations boards in Memphis including Habitat For Humanity, the Binghamton Development CDC Retail Committee and Youth Visions. He is a member of Christ United Methodist Church. His wife is Price Phillips and he has two children Amanda and Matthew.
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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