Observations & Conversations
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All in all, the retail sector has been holding its own this summer. But whether we will have a good back to school and holiday season is still a big question. |
With all the news about companies misrepresenting
or totally fudging their financial health and a schizophrenic stock market, the
topic of “how’s business for you” comes up often in conversations lately. I
talked to David Bordsen of Peebles Department Stores and they are happy with
sales so far. Then later in the day I was gabbing with the owner of a 30-unit
chain of video stores and he was happy with business, too. A few days later, I
talked with the owner of a small regional chain of supermarkets and he was
pleased, too. Also, I talked with Billy Woodruff at Duckwall Alco, a chain of
general merchandise stores that takes second-generation space. Each of these
retail chains are looking to grow, and the commonality is that they want small
markets without too much direct competition, which isn’t that complicated since
not many chains understand how to make a good buck in small markets. I get calls
from owners of centers in sparsely-populated areas asking me if I know of any
tenants looking for small markets. The tenants are out there, but you just gotta
canvass markets of a similar size for leads. (Something most leasing agents
don’t want to do.)
On the subject of finding leads, a good friend in the business called and asked
“how did you find such and such retailer that I read about in the last issue?”
After I laughed and said “we made it up,” I then explained that we have
reporters and researchers on the phone day in and day out calling retailers to
see if they are looking to open more stores. Last month, we talked with over
1,000 people in charge of real estate for retailers. Quite an accomplishment
considering so many people were enjoying summer vacations. I always have to
laugh when I hear somebody whining that such and such retailer never returns
their phone calls, especially when they’ve only called three or four times. We
sometimes call a retailer every week for six months before they return our
calls. But, more often than not, when we finally get them on the phone they are
looking for sites. Our percentage of no return calls from exclusive brokers
however is higher than are calls placed directly to the retailers - not only is
it stupid, it’s just down right shameful when an exclusive broker doesn’t return
a call - it looks bad for the retailer that they would put the responsibility of
new store locations in the hands of someone so incompetent that they can’t
manage their time well enough to either return the call themself or have an
assistant return the call and do some screening. Half of the 1,000 retailers we
spoke to don’t plan to open new stores in the next year, but looking at it from
a positive point of view half of them are looking for sites. Of the 1,000 chains
we talked to, 75% operate 20 or less stores. And, although roughly 50% of them
have expansion plans on hold, the mom & pop chains are hot for new sites and
most of the ones we talked to that are expanding want less than 6,000 sq.ft. So
if you’ve got existing small shop space for lease, it shouldn’t stay vacant for
long. Also, retailers catering to ethnic markets appear to be faring well. This
month’s feature reports on several centers in Las Vegas that are well-leased to
merchants serving the Asian community. Retailers that understand their niche and
stick to it are definitely doing better than the stores trying to cater to
everyone with a mishmash of merchandise.
Most developers and brokers that I’ve spoken with in the past month are pretty
happy. At least no one I talked to is giving the keys back to the bank. Asking
prices on centers for sale are going up a lot or at the very least are becoming
less negotiable, since more investors are looking to park their money in real
estate rather than with their stock broker. Rents across the country are staying
steady with not much reductions or increases being seen. So, all in all, the
retail sector has been holding its own this summer. But whether we will have a
good back to school and holiday season is still a big question.
Apparel retailers are hoping with all their might to show healthy sales volumes
for the rest of the year, especially since there isn’t any new clothing trend
for teenagers or women. Restaurant chains are starting to see some slowdown in
growth, but some of this is a natural progression considering the huge growth
this segment has encountered in the past five years. The home furnishing
industry is going through some changes with manufacturers like Thomasville
taking the vertical retailing approach and opening their own stores. Sporting
good chains will start feeling the pangs of competition with the growth of
Galyan’s, REI, Cabella plus a few more strong regional chains that put as much
effort into their hard line merchandising as they do in apparel and shoes.
Several old gurus in retail are predicting that Sports Authority will be amongst
the first of the sport good chains to get burned. Electronics retailers are
doing okay, but don’t expect to see huge growth in store openings from this type
of retailer during the coming year.
A type of retailer that I’m coming across a bit more frequently is the 35,000
sq.ft. and up users that want third-generation space in secondary B and C sites
at little to practically no rent. We trying to compile a list of those types of
tenants and do some research for a future feature article in The Dealmakers.
Your help would be greatly appreciated, so if you know about such a tenant,
please tell us about them. Drop me an email at
ann@dealmakers.net, a fax at
609-587-3511 or give me a buzz at 800-732-5856. If we can get enough meat on the
bone, this could be an interesting article.
The next few months will be busy while we take our show on the road to the ICSC
Dealmakings. In September, stop by our booths in Palm Springs and in Philly.
(Should be interesting, since we have people going to the Palm Springs show and
taking the red eye back so they can also be at the Philly show. Maybe somebody
doing the scheduling at ICSC could cut the people that go to all the regional
shows a break and give us a few days in between events.) In October, we’ll be at
the shows in Chicago and Atlanta, so make sure you look for our booth and stop
by.
Until next month,
Ann O’Neal, Publisher