By SCTWeek, Friday, December 13, 2013

Retail rents, values outperform other property sectors

Retail properties were strongest among property types worldwide in capital values and rents in the third quarter, rising 2 percent from the previous quarter and 8 percent year over year, according to CBRE Group. Returns in commercial real estate have been very strong relative to other asset classes, attracting institutional capital to the sector, says Raymond Torto, global chairman of CBRE Research. The limited number of assets available also helped boost growth, he says.

The firm’s global industrial capital index rose 1.4 percent versus the previous quarter, while its global office capital index rose 1.1 percent.

Retail rents outpaced other property types. CBRE’s index rose 1 percent relative to the previous quarter and 4 percent year over year. Meanwhile, office rents were virtually unchanged, and industrial rents improved less than 1 percent during the quarter.


By SCTWeek, Friday, October 25, 2013

Health care tenants a perfect fit for some centers

Health care operators provide a rich pool of potential tenants for shopping centers. But only properties that offer visibility, traffic access and branding opportunities will reap the rewards of the impending expansion of the U.S. health care industry, which is being driven by the Affordable Care Act, hospital decentralization and improved technology, said participants in an SCTLive web seminar on Thursday titled “Health Care Tenants Heal Troubled Centers.”

“Health care systems are looking for access to new patient bases, and they want to locate in the areas where people gather,” said Bob Gilbert, president of Columbia, Md.–based MedStar Ambulatory Services. Gilbert emphasized that firms such as his are not necessarily seeking to open shop in areas populated heavily with baby boomers and older consumers, but rather to locate to where they can draw new, well-insured younger customers. Medical tenants that require spaces measuring between 4,000 and 6,000 square feet are expanding most right now, according to Gilbert. Medical tenants usually seek four or five parking spots per 1,000 square feet of operating space, he said. They are also looking for cheaper locations, he said, though not necessarily ones with high vacancies. “We tend to look at retail centers that are being repurposed,” said Gilbert. “We’re still price-sensitive, because our prices are fixed for 90 percent of our patients.”

When trying to lure a health care tenant to a retail center, a leasing agent should learn to translate real estate jargon into health care jargon, advises Chad Pinnell, senior vice president of Columbus, Ohio–based Equity Inc., which advises hospitals and medical practices on their real estate needs. For example, demographics are less important to medical tenants than “payer mix” — which refers to the way patients pay for medical needs: by HMO, say, or through Medicare or Medicaid.

Health care tenants benefit landlords through long-term leases and relatively good credit, observed Robert Nadler, central regional president at Kimco Realty. Many regional dental clinics, dialysis centers and chiropractor offices are currently operating, Nadler said, and over time they will consolidate into national chains, making it easier for leasing agents to find tenants.

Appropriate retail co-tenancies are also crucial for attracting successful medical tenants, Pinnell said. Locating a health care clinic in the same retail center with a sporting-goods store and a vitamin store would encourage more cross-shopping, because consumers needing health care for sports-related injuries have a propensity to shop for sports equipment and nutritional supplements, Pinnell said. And anchors are less likely to take a dim view of co-existing with a health care center these days, now that they have seen the benefits of operating near health clubs, Nadler said.

As for the bumpy rollout of the Affordable Care Act and the way it could affect health care tenants’ expansion plans and credit, panelists advised shopping centers against taking a wait-and-see approach. “Act now,” Nadler insisted. “Expenses are only going to get higher for these operators.” The U.S. health care sector is projected to hit some $5 trillion in sales by 2025, and becoming a trustworthy partner to some of these operators now could pay off handsomely in the future, said Clay Marsh, M.D., a senior associate vice president for health sciences research at Ohio State Medical Center, in Columbus. “We have a good crystal ball for the growth of the health care industry,” he said. “It’s not like retail.”


By SCTWeek, Friday, September 20, 2013

California vacancy levels falling fast

A rebounding housing market is boosting the retail outlook in California, according to attendees at the ICSC Western Division Conference, which kicked off Wednesday. San Diego, site of the conference, is at the forefront of the state’s retail recovery. Developers are starting to build again to accommodate expansion-minded retailers that are having trouble finding locations, locals say. According to Marcus & Millichap, retail stock in San Diego will grow by nearly 1 percent with the addition of about 800,000 square feet of new space.

Despite the new construction, Marcus & Millichap is expecting that San Diego’s retail vacancy level will ease by an additional 70 basis points year on year, to 3.6 percent, for 2013. In Los Angeles Marcus & Millichap is projecting that vacancy will be about 5.8 percent for this year, the lowest since 2008 and a 50-basis-point improvement over 2012. An increase in blue-collar jobs is expected to spur even more improvement as retailers serving that population move into empty spaces at strip centers in the city’s outlying communities, according to the firm. Vacancy levels are easing also in the East Bay Area. Marcus & Millichap says vacancy levels there will probably dip below 6 percent for the first time since 2008, thanks to demand from expanding retailers and a reduction in new development. In Sacramento, meanwhile, job growth is outpacing the nation’s average and is set to help push the market’s retail vacancy level down 90 basis points year on year, to 8.7 percent, for 2013, Marcus & Millichap reports.

Home sales are up by some 15 percent from a year ago in Orange County, driving shoppers into stores for big-ticket purchases. Retail sales there surpassed prerecession levels at the beginning of 2012 and are set to balloon to some 20 percent above the recessionary trough by the end of this year, says Marcus & Millichap. In the fourth quarter of 2012, the Orange County retail market absorbed some 730,150 square feet, the largest increase since 2007, reports Jerry Holdner, vice president of market research at Voit Real Estate Services, in Newport Beach. “Another 68,621 square feet was absorbed in the first quarter,” said Holdner. The Orange County vacancy rate at the end of the first quarter was 5.53 percent, down from 5.9 percent for the year-ago quarter, according to Holdner. “As job growth expands, the retail market will continue to recover,” Holdner said. “I wouldn’t be surprised if the vacancy rate gets down to 5 percent within the next 12 months.”


By Luxury Daily, Friday, September 20, 2013

Contemplating the future of shopping malls

Samsung strikes a deal with the beleaguered Best Buy to subsidize its rent with a store-in-a-store initiative. Borders exits the mall and last-man-standing Barnes & Noble seems to become a living room knickknacks vendor with more book browsers than book buyers. Zappos Labs runs field research in malls and Facebook launches a commerce strategy – again.

 

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By SCTWeek, Friday, September 13, 2013

Dollar General to add stores after strong quarter

Dollar General is ramping up expansion plans after 22 consecutive quarters of growth, executives said on an earnings call. The Goodlettsville, Tenn.–based chain says it will open 650 stores by year-end. The company has already remodeled or relocated nearly 400 stores so far. “We continue to see significant, exciting opportunities for organic growth,” said Chairman and CEO Richard Dreiling. “We still have over 10,000 opportunities out there in the U.S. today for dollar stores.”

Dollar General reported same-store sales growth of 5.1 percent in the second quarter, thanks to accelerated store traffic. Total sales, meanwhile, grew by 11.3 percent year on year, to $4.4 billion.

The company’s recent success is attributable in part to the addition of cigarettes to its inventory. Dollar General began adding tobacco products in March and is now selling cigarettes at 10,500 of its nearly 10,900 stores. “We are seeing a significant increase in our traffic, and tobacco has been a key driver,” Dreiling said. “Our sales and our traffic are continuing to build each week, along with our customers’ awareness.” The increased traffic is attributable to market share gained from drugstores, supermarkets and mass merchants, Dreiling said. The company is projecting a same-store sales increase for the full year of about 4 to 5 percent.


By Los Angeles Times, Thursday, July 25, 2013

Dunkin’ Donuts will open 45 stores in Orange County and Los Angeles

Dunkin’ Donuts has signed agreements to open 45 new stand-alone Dunkin’ Donuts stores in Orange County and Los Angeles starting in 2015.

The stores, to be launched by four franchise groups, would be the brand’s only locations in Southern California not at a military base. That stop, which opened last year, is at Camp Pendleton north of San Diego.

On Thursday, Dunkin’ Donuts also dangled another titillating tidbit: that it may start opening several  “nontraditional” branches in the area over the next few months.

Such locations would spring up at colleges and universities, casinos, supermarkets, airports and travel centers, the company said.

 

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By SCTWeek, Friday, June 28, 2013

E-fairness will lead more etailers to physical stores

If web-based retailers are required to collect sales taxes the same way their brick-and-mortar competitors do, landlords are likely to have a slew of new tenants to choose from as these chains launch their own physical stores to stay competitive, experts noted at ICSC’s very first SCTLive event, on Tuesday in New York City. The Marketplace Fairness Act, which would mandate such a change, has already passed in the U.S. Senate and is now before the House of Representatives. Many web retailers are already anticipating the change and adjusting their delivery infrastructure and warehouses accordingly, said Kris Bjorson, international director at Jones Lang LaSalle.

“We expect in two to three years to see the same type of demand we’re seeing on the industrial real estate side come to the retail side, because e-commerce chains will have to begin interfacing with customers more directly to stay competitive,” he said. Huge online retailers such as Amazon.com are already sniffing around shopping centers, said David B. Henry, vice chairman, president and CEO of Kimco Realty. “We’ve all been approached by Internet giants that are looking for a better way to deliver products to their customers,” Henry said. However, renting to such online retailers won’t be fair to existing tenants until the sales-tax imbalance is rectified, Henry said. Amazon and other online chains will get even more serious about moving into shopping centers once their sales-tax advantage is removed, he added. For more from this panel discussion, watch our video report here.