Observations & Conversations
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Brokers are in a tight spot right now more than anyone, since there isn’t that much great space on the market and retailers are being very selective on new sites. |
Interesting days and never a dull moment. We’re
getting geared up for Vegas and I’ve been trying to get a good feel for what’s
happening in our industry on a national level. To be honest, I’m thoroughly
confused.
I talk to some retailers and they’re cautious, but they don’t have their heads
in the sand when it comes to making deals. Then in one conversation with a
menswear chain, it sounded like the sky was falling. The only chain that
everybody is speculating on is The Gap. I bet a friend $5 on The Gap’s future,
my money is on that they won’t file this month. In a conversation with a broker
that specializes in Newbury Street in Boston, he said that it’s the highest
vacancy rate he’s ever seen on the street. Seems as though tourist traffic is
down tremendously and high-end shops aren’t selling big ticket items. The broker
said the stores just can’t live on nearby office employees. I’ve heard that rent
averages about $75 psf and most of the stores were or are high-end. This broker
mentioned that he was concerned if The Gap would start closing stores, because
they are a major player on Newbury Street. I asked him what’s he doing to earn
his next commission check and he responded, “I’m just waiting it out.” I told
Ted about the conversation and his response was “I’d start working a new
street.” My sentiments exactly.
Most of the developers I talk with have no disastrous leasing situations, but it
will be interesting if there are hundreds of Kmart stores going dark in the next
few months. Over dinner, Ted and I were brainstorming about who would be a good
candidate for an 85,000 sq.ft. store that most likely will be going dark
shortly. The replacement tenant had to have a merchandise mix that would draw
customers on a daily basis. Candidly, we didn’t come up with a very long list.
Rent wasn’t the most important factor, tenant mix is. To complicate matters,
just about every major retailer is already in the market. The site is near a Wal*Mart,
Sam’s, Target, Home Depot, Borders Books, Linens ‘n Things, Bed Bath and Beyond,
Macy’s, Sears, JCPenney, Drug Emporium, Toys “R” Us, OfficeMax, Sports
Authority, Dick’s Sporting Goods, Circuit City, Best Buy, PetsMart, and there
are four regional supermarket chains in the immediate area, along with a Lowe’s
Home Improvement Center under construction. Most of the major furniture store
chains are dotting the highway within the shopping area, plus we wouldn’t be
interested in that use. Whoever fills this space will be a hero for the day.
Brokers are in a tight spot right now more than anyone, since there isn’t that
much great space on the market and retailers are being very selective on new
sites. But, I think brokers will be seeing more cash flow in the near future
with a cascading effect of landlords having vacancies with their dark anchor and
small shops because of a closed Kmart. As for the brokers that specialize in
high-end boutiques, maybe you want to expand your horizons and look at the other
side of the tracks, so at least you see some cash flow. The high-end retailing
has been the hardest hit. Sears tried to go after the high-end market in Canada
with it’s Eaton’s chain, but finally saw the light and surrendered. Here’s what
Sears’ Canada Chairman and CEO Mark A. Cohen said, "The notion that customers
see value in a top-drawer, high-priced, somewhat selective assortment is false,
they value very high levels of presentation and customer service but don't
exhibit any desire to pay for it." I think the real problem is that Sears
doesn’t run a good store for the middle-America market and probably doesn’t have
the expertise to run a high-end store either.
One lender I spoke with diplomatically told me that he’s not “hungry for retail
at this time and the only loans they’re placing in the retail sector are with
longstanding clients.” Several mortgage brokers complained that borrowers are
really shopping for loans in a climate where the lenders aren’t that
enthusiastic about pursuing the deal. Loans for triple net deals seem to be
moving along, but I wouldn’t want to be going for financing on a proposed center
without some really impressive leases in hand.
An interesting project I heard about has stores/service tenant office space and
residences above the store fronts and the developer is condoing the units for a
live/work space project. So far the response to the project has been good and
they are selling the units at a decent pace. From 1930 to the 1960’s this was
the norm in most cities, maybe a return to the old days will help cure some of
the ills in downtowns from coast to coast, however, most of the time cloning of
a bygone era doesn’t work. Plus you have to be competent at developing retail,
office and residential projects and there aren’t many developers with that broad
of a range of expertise. It will be enlightening to see how this pans out in the
next ten years.
I think Vegas will be a good show this year in spite of any mixed emotions about
the economy and if there is no earth shattering news. Most of the people I talk
with plan to go and hope to make a deal. We’ll be there in full force. Make sure
you send us info on your space for lease, centers for sale or acquisitions
requirements. It’s a first come, first serve basis when it comes to getting
press in The Dealmakers. You can fax the info to us at 609-587-3511 or email to
me at ann@dealmakers.net and I’ll get it to the Editor, Elisabeth Pena.
Now I’m going to make a blatant ad sales pitch. You really should promote your
company and sites at the convention. Of course, I think advertising with us
makes the most sense. Again this year, we’ll be doing a power package program.
This entails advertising in our pre-show, show and post-show issues. With the
power package, you get to be a part of a fax broadcast to about 8,000 decision
makers as part of our “A List of Dealmakers” and the fax gives a highlight of
the type of deals you’re looking to do, your phone number and a booth address if
you’re exhibiting and a message to call you to set up a meeting at the show.
Also, we email to about 30,000 decision makers the “A List of Dealmakers.” The
show issue is distributed to the attendees’ hotels rooms before the show opens
and circulated throughout the convention floor. The post-show issue helps
reinforce your ad message and the ad is hosted on our Web site www.property.com
as a “Hot Opportunity.” Some suggestions for you; when you’re putting together
your ad, include the hotel you’re staying at so those people can leave you a
message, your cell number so they can reach at the last minute and your booth
address, plus don’t forget your web address ... it’s the simple things that
often get overlooked. The Dealmakers will also be at the ICSC’s MidAtlantic
States Dealmaking next month in Washington, DC and then in July we’ll be at the
ICSC’s New England Dealmaking in Boston.
Our New England States issue will include the annual Retail Real Estate Brokers
Guide, the largest national directory of brokers specializing in retail real
estate. To make sure you’re listed, (it's free) contact Cathi Biederman at
609-587-6200 or send her email at cathi@dealmakers.net Check out the 2001 Retail
Real Estate Brokers directory online at
http://www.property.com/broker_guide/guide2002.htm
If we can help with your marketing needs in any of these issues, give myself, Lorri or Janet a call at 800-732-5856.
Also, join our email forums for daily leasing tips, sites for sale, etc. On page
13 of this issue, we printed the directions to subscribe - it’s free, so make
sure you sign up. Until next month,
Ann O’Neal, Publisher