Observations & Conversations
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This is the sexiest centerfold you’ll find in any retail real estate trade publication!
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I f you want to close more deals in 2001, you have to keep the retail real estate industry posted on what you have to offer. To do that, turn the page and check out our centerfold! (Sorry, no nudes.)
If you’re in charge of site selection or represent retailers exclusively then every time you have space needs, fill out the retail expansion profile and fax it to us, or go online and post your chain’s expansion plans at www.property.com/profile.html. If you’ve got retail space for lease or sale, or acquisition needs, just fill out the space place form or go online to www.property.com/addlisting.asp. If you’re a broker, be sure to fill out the form to be listed in the 2001 Retail Real Estate Brokers Resource Guide (to see the 2000 edition online, go to www.property.com/brokers-guide/brokers-guide2000.htm). Not only will you get free publicity, but I bet you get some leads that turn into deals.
It was great to see everyone at the ICSC’s New York show last month. As I walked the convention, it seemed as though there was more friendship-building than dealmaking going on, though there were a few booths with people negotiating deals. Most of the existing space being shown was the same old stuff we saw at the 1999 convention. Not many retailers decided to come to the ICSC’s second largest show, partly because it costs too much, but the most important reason was that a lot of retailers don’t plan to open as many stores this year as they did in 2000. Also, I heard about a lot of retailers downsizing their real estate departments. I think this sentiment will be shared even more once everyone’s numbers from Christmas sales are tallied. Although our industry has been hurt by too much rapid growth and by cannibalism, we also need to put the blame on retailers’ skittishness in buying for the season. If you have little inventory, no sales help and a blah-looking store, then you don’t have a snowball’s chance in Hell at a good Christmas.
I think the biggest complaint I heard was about exclusive retail reps, after the usual whining about the stock market and the Presidential election. While walking the halls, here’s what we heard some of your fellow dealmakers say about exclusive retail brokers;
“The exclusive retail brokers have ruined the industry.”
“Networks like Chainlinks will be the cause of massive store closings and they’ll probably get hired to do the disposition work.”
“Being an exclusive for a landlord is fine, and that’s the way we’ve worked for the past 20 years. It’s only been recently that the brokers control the retailers and are making decisions on sites based on the commission -- not how well the store will perform.”
This is the stuff I can print, even after I promised never to divulge who said what. You should have heard the rantings, punctuated by four-letter words, that were spewed by frothing landlord-oriented brokers and developers. I believe that for smaller chains and extremely high-end retailers an exclusive broker can be the catalyst to growing the company by providing truly specialized knowledge.
Just last week, I talked to a regional home-improvement chain that is rolling out an upscale specialty store concept that needs the “Rodeo Drive” locations of the world. The real estate director called me in search of comparable rents for a certain market. My suggestion was to find a broker to represent the company, since she probably wouldn’t get return phone calls from the leasing agents from developers, because she has an “unknown” concept and more importantly because she needed information that an experienced boutique broker would have already compiled. As to why a national chain that pays at least market rent signs an exclusive agency is beyond me. If you’re a national chain that needs really low rent or needs big bucks for tenant improvement without a financial statement, or if you’re looking in urban markets, then it behooves you to enlist exclusive brokers, because you have to kiss a lot of toads before you find a prince of a site. In those cases, the broker really earns his/her keep.
I expect that some astute retailers’ boards struggling to keep Wall Street happy will reassess their relationships with exclusive brokers. Keeping payroll costs down in the real estate department will not be the issue -- it’ll be: Why did they open a store one mile from another store? ... Who approved that site?... And what were they thinking? (when it comes to light that more valuable real estate was passed over because the exclusive broker failed to present a site that wouldn’t pay a full commission). Next on the list of points for the board to address is: Who on the retailer’s payroll benefited monetarily from the broker relationship? I’d love to be a fly on the wall in those meetings. Another type of relationship that’s becoming noticeably less common is “preferred developer,” which in many cases is really a broker with a cooperative bank.
It should be an interesting year ahead of us. Thoughts of a recession are buzzing in most people’s heads and questions about the financial wherewithal of many “hot” retailers are being asked. Keep on reading The Dealmakers to stay on top of who’s doing what. Until next month,
Ann O’Neal
Publisher