Friday, August 29, 2008
Thursday, August 28, 2008
Monday, August 25, 2008
Monday, August 18, 2008
U.S. retailers power up their rooftops
WASHINGTON, Aug 11, 2008 (UPI via COMTEX) -- Giant chain stores in the United States are jumping into solar power, trying to beat a year-end deadline for a federal tax break, retailers said.
Safeway, Kohl's and Wal-Mart are just some of the stores installing solar panels this year, The New York Times reported Monday.
Collectively, the effort could make an impact on the nation's dependence on coal-generated electricity. Wal-Mart, with 17 stores outfitted, could add about 23 square miles of solar paneling to the nation's power structure, the Times reported.
States with incentives -- California, New Jersey and Connecticut -- have the highest concentration of participants. However, in spite of costs -- solar electricity costing 27 cents per kilowatt hour, compared with 6 cents for coal -- Kohl's has outfitted 85 stores with panels and is aiming to include 43 more, the Times said. Macy's has 18 solar-panel outfitted roofs and expects to add 40 more by year's end.
"Green energy is now front and center in the minds of the business sector," Daniel Kammen, an energy expert at the University of California, Berkeley, told the Times. "Very soon retailers will have stickers in their windows saying, 'This is a green energy store.'"
URL: www.upi.com
Copyright 2008 by United Press International
Safeway, Kohl's and Wal-Mart are just some of the stores installing solar panels this year, The New York Times reported Monday.
Collectively, the effort could make an impact on the nation's dependence on coal-generated electricity. Wal-Mart, with 17 stores outfitted, could add about 23 square miles of solar paneling to the nation's power structure, the Times reported.
States with incentives -- California, New Jersey and Connecticut -- have the highest concentration of participants. However, in spite of costs -- solar electricity costing 27 cents per kilowatt hour, compared with 6 cents for coal -- Kohl's has outfitted 85 stores with panels and is aiming to include 43 more, the Times said. Macy's has 18 solar-panel outfitted roofs and expects to add 40 more by year's end.
"Green energy is now front and center in the minds of the business sector," Daniel Kammen, an energy expert at the University of California, Berkeley, told the Times. "Very soon retailers will have stickers in their windows saying, 'This is a green energy store.'"
URL: www.upi.com
Copyright 2008 by United Press International
Thursday, August 14, 2008
Developers Put Brakes On New Retail Developments
Market Correcting Forces at Work as Retail REITs and Developers Put Off New Retail Projects Until Demand Returns
One of the most prevalent trends we heard coming from the retail real estate investment trusts’ second quarter conference calls was their decision to put off planned new retail development until 2010 or later. In this story, we make note of this trend, citing specific examples of large retail projects that have been recently delayed and the reasoning many retail REITs gave behind making such delay decisions. The American Institute of Architects (AIA) last month released its Semi-Annual Consensus Construction Forecast. In it, the AIA noted, "The downturn in design activity that architecture firms have been reporting in recent months is projected to produce a mild decline in nonresidential construction activity this year, before turning down more significantly in 2009." However, the organization pointed out that this "modest drop-off" would be "significantly milder than the two most recent nonresidential recessions of the early 1990s and earlier this decade." The AIA predicts an 8.3% decline in retail construction activity this year, and another 9.9% percent drop in 2009. According to CoStar's Mid-Year 2008 National Retail Report (available to CoStar subscribers under the Market Reports headline when you log in to CoStar, or for purchase by non-subscribers by following this link), 142 million square feet of retail space was under construction at the close of second quarter; down 14.5% over the same time last year. http://www.costar.com/News/Article.aspx?id=702D33043A7921F7C0A3EC925B3E9382&ref=100
One of the most prevalent trends we heard coming from the retail real estate investment trusts’ second quarter conference calls was their decision to put off planned new retail development until 2010 or later. In this story, we make note of this trend, citing specific examples of large retail projects that have been recently delayed and the reasoning many retail REITs gave behind making such delay decisions. The American Institute of Architects (AIA) last month released its Semi-Annual Consensus Construction Forecast. In it, the AIA noted, "The downturn in design activity that architecture firms have been reporting in recent months is projected to produce a mild decline in nonresidential construction activity this year, before turning down more significantly in 2009." However, the organization pointed out that this "modest drop-off" would be "significantly milder than the two most recent nonresidential recessions of the early 1990s and earlier this decade." The AIA predicts an 8.3% decline in retail construction activity this year, and another 9.9% percent drop in 2009. According to CoStar's Mid-Year 2008 National Retail Report (available to CoStar subscribers under the Market Reports headline when you log in to CoStar, or for purchase by non-subscribers by following this link), 142 million square feet of retail space was under construction at the close of second quarter; down 14.5% over the same time last year. http://www.costar.com/News/Article.aspx?id=702D33043A7921F7C0A3EC925B3E9382&ref=100
Tuesday, August 12, 2008
Nickel and Dimed to Death
This article is from PlainVanillaShell. If you own a business, it will hit home.
Nickel and Dimed to Death
by Lynda Gutierrez
No one likes higher prices. But if you have to charge them, what’s the best way? One big hit? Or lots of little increments? It’s a tough call because the answer probably depends on who you ask. It’s like getting into a chilly swimming pool – some prefer to steel themselves and take the plunge all at once. Others would rather ease in, acclimating bit by bit. What’s ideal for one is torture for another.
Whichever form price increases take shoppers must be made to feel that they’re getting something to balance it – some tiny or random bonus (a little flower, a piece of candy, a sticker for the kids, an occasional price break, however small)…or just a little dollop of respect or rueful commiseration. They need something, anything, to ease the sense of ceaseless monetary assault. These days it’s like being swarmed by piranhas – each bite survivable but cumulatively horrifying.
Loyalties can make it through bad times intact as long as everyone feels they’re in the same boat. Shoppers will, or should, understand that retailers’ expenses must be covered. What they won’t accept is anything that appears to be disdain – or opportunistic gouging.
Just ask my mother. Two retail interactions. Both small, local retailers. One earned her goodwill; the other her enmity.
The good experience could easily have become a negative, or at least neutral, one. She’d picked out a large number of annuals at a local nursery, many to plant at the graves of family members. When the sales clerk quoted a delivery charge my mother demurred, saying she’d come back and pick them up in another car. When she did return, however, the owner not only insisted on waiving the fee but threw in four more plants of her choosing as well. She beamed with renewed sense that she was a valued and appreciated customer. There’s no doubt she’ll be back – and many along with her.
Not so with the other retailer. She’d had a question about the bill for a service call to fix an appliance bought there just over a year ago. The service call was remarkably pricey, but that was not the issue. It was the extra, hefty charge on the bill for 'expert advice' (which boiled down to "don’t overfill the dishwasher") – and a fuel surcharge of $5 (for driving four short blocks.) When she called to say that though she would certainly pay the bill, she felt that he might be doing himself – and his loyal, local (and many older) customers – a disservice with these extra fees. What followed was not regret, or commiseration, or even firm, polite distance; but instead a spew of bile that will no doubt cost the retailer more in the long run than he’ll make with hundreds of surcharges.
We’re all under pressure, retailers and shoppers alike. Things are going to cost more and no one is going to be happy. But managers and staff must constantly be on their toes to deal with the pain that they are, however necessarily, inflicting on their customers. Bad times don’t last forever. Bad feelings do.
Nickel and Dimed to Death
by Lynda Gutierrez
No one likes higher prices. But if you have to charge them, what’s the best way? One big hit? Or lots of little increments? It’s a tough call because the answer probably depends on who you ask. It’s like getting into a chilly swimming pool – some prefer to steel themselves and take the plunge all at once. Others would rather ease in, acclimating bit by bit. What’s ideal for one is torture for another.
Whichever form price increases take shoppers must be made to feel that they’re getting something to balance it – some tiny or random bonus (a little flower, a piece of candy, a sticker for the kids, an occasional price break, however small)…or just a little dollop of respect or rueful commiseration. They need something, anything, to ease the sense of ceaseless monetary assault. These days it’s like being swarmed by piranhas – each bite survivable but cumulatively horrifying.
Loyalties can make it through bad times intact as long as everyone feels they’re in the same boat. Shoppers will, or should, understand that retailers’ expenses must be covered. What they won’t accept is anything that appears to be disdain – or opportunistic gouging.
Just ask my mother. Two retail interactions. Both small, local retailers. One earned her goodwill; the other her enmity.
The good experience could easily have become a negative, or at least neutral, one. She’d picked out a large number of annuals at a local nursery, many to plant at the graves of family members. When the sales clerk quoted a delivery charge my mother demurred, saying she’d come back and pick them up in another car. When she did return, however, the owner not only insisted on waiving the fee but threw in four more plants of her choosing as well. She beamed with renewed sense that she was a valued and appreciated customer. There’s no doubt she’ll be back – and many along with her.
Not so with the other retailer. She’d had a question about the bill for a service call to fix an appliance bought there just over a year ago. The service call was remarkably pricey, but that was not the issue. It was the extra, hefty charge on the bill for 'expert advice' (which boiled down to "don’t overfill the dishwasher") – and a fuel surcharge of $5 (for driving four short blocks.) When she called to say that though she would certainly pay the bill, she felt that he might be doing himself – and his loyal, local (and many older) customers – a disservice with these extra fees. What followed was not regret, or commiseration, or even firm, polite distance; but instead a spew of bile that will no doubt cost the retailer more in the long run than he’ll make with hundreds of surcharges.
We’re all under pressure, retailers and shoppers alike. Things are going to cost more and no one is going to be happy. But managers and staff must constantly be on their toes to deal with the pain that they are, however necessarily, inflicting on their customers. Bad times don’t last forever. Bad feelings do.
Thursday, August 7, 2008
This Is A Story About How Economic Recessions Are Self Fulfilling or About Your Own Power to Create One or to Avoid Participating In One.
Recently, we have been hearing the following from some Tenants and Buyers: "My business is doing really well and we need to move and expand so we can continue to grow. However, the news is about how times are getting tough and I need to be careful. So, even though I know I should make this move, I am going to just wait. The media must know something that I don't." Kevin Close gave me this article and I thought some of you would appreciate it as much as I do.
The Hot Dog Man, and the Recession
Once upon a time, there was a good man, who had worked hard all his life. He disliked his work. It was not rewarding. His boss was never happy. But he worked hard. Until, one day, this man decided he had had enough, and he quit.
He just walked out. He went home and told his wife. She cried.
How are we going to send our boy to college”, she asked? The man thought for a minute and then said, “I will think of something”. After a while, he decided to do something he has always wanted to do. He would sell hot dogs on the street corner from a little hot dog cart on wheels.
He took his savings and bought a hot dog cart. His friends were not too sure about this. But the hot dog man started selling hot dogs on the street corner, in his hometown. They were good hot dogs. Best quality. Not cheap, but he charged enough to pay for them. Things went pretty well right from the beginning
People liked his hot dogs. He always made sure to have plenty of fresh ketchup and mustard and onions. Every customer got a smile with their hot dog.
He did very well, and soon more people wanted his hot dogs. More than he could serve. So he bought another hot dog cart. His son pushed the new cart. He made good hot dogs too.
And every one of the Son's customers got a smile and a thank you to go with their hot dog. The hot dog man made sure to teach his son about this. The two did well, and saved the money they made, until it was time for the boy to go to college. There was enough money to send him to school even if the hot dog man paid another young man to push the second cart.
“Give them a smile with every hot dog,” he told his first employee. It worked fine.
This gave him an idea. He bought a third cart and hired a second employee.
Every year the city grew and every year he added a few more carts. The hot dog man’s company did very well. Buns and dogs were coming in bigger trucks these days. He was glad the son decided to study business in college. Their hot dog company was hiring more and more people and getting bigger and bigger. It would be great when the son returned home with all that college education to help him manage it.
The big day finally arrived. The son came home from college. Dad was excited. Mom too. There was a BIG Party. Everybody came.
Then it was time to get to work. But the son was not interested in working in the hot dog company. He wanted to do something more grand. The hot dog man was sad.
But then he asked, “Can you just look over our books and give me some advice?”
“Sure”, said the son, while looking at his watch.
“Things are going pretty good”, said the hot dog man. He got the books and paperwork out to proudly show the son what they had become while he was gone.
The son looked things over and thought for a minute. Then he said, “Gee, Dad, you have an awful lot of hot dog carts. And Expenses.”
Then he asked, “Don’t you know a Recession is coming?”. The hot dog man did not know what a Recession was, so he asked.
The son explained what he had learned in college about Recessions. The hot dog man shook his head in amazement.
He thought things were OK, but his son was just out of college. The hot dog man had worked a lot of hours to pay for that college education. He thought surely the college people knew more about business than he did, so he listened.
The son said, maybe you should mothball a few carts this season…
So that is what the hot dog man did. After a month or so, sales were down.
The son and the hot dog man looked things over again. The son said they should cut advertising expenses a little.
The hot dog man was sure the son must know about these things, So that is what they did. Sure enough, sales went down.
A few months later the books were worse. The Son said profits were being squeezed by the Recession. He said they should buy a cheaper hot dog. Save a little money. So they did. Sure enough, Sales went down.
After a while the son looked again at the books. Again. He said, “Gee Dad, you’re not making much money. Maybe you should cut payroll a little. So they laid off a few employees. The ones who stayed on were not too sure what would happen next. They stopped giving a smile with every hot dog. And sales went down even more.
Things were gloomy until the hot dog man had a great idea. He called all his employees together. Even the ones that had been let go. He told them something like this. "Sometimes things are easy and sometimes things are hard. It's easy to lose your way when things are hard." He admitted that he had been scared by this recession.
Then he went on. "Things have been hard lately. BUT, we are going to go back to doing what worked before. We will buy a better hot dog. We will run a few ads. We will get all the carts out of storage. And everybody will have a job. I don't care what it costs." Only one thing", he added, "Ya gotta give every customer a smile with their hot dog". They promised they would. And so they did.
Sure enough... sales went up.
And they keep going up to this very day.
Copyright © 2006 Network for Growth Ltd. All rights reserved.Revised: 06 February 2006.
The Hot Dog Man, and the Recession
Once upon a time, there was a good man, who had worked hard all his life. He disliked his work. It was not rewarding. His boss was never happy. But he worked hard. Until, one day, this man decided he had had enough, and he quit.
He just walked out. He went home and told his wife. She cried.
How are we going to send our boy to college”, she asked? The man thought for a minute and then said, “I will think of something”. After a while, he decided to do something he has always wanted to do. He would sell hot dogs on the street corner from a little hot dog cart on wheels.
He took his savings and bought a hot dog cart. His friends were not too sure about this. But the hot dog man started selling hot dogs on the street corner, in his hometown. They were good hot dogs. Best quality. Not cheap, but he charged enough to pay for them. Things went pretty well right from the beginning
People liked his hot dogs. He always made sure to have plenty of fresh ketchup and mustard and onions. Every customer got a smile with their hot dog.
He did very well, and soon more people wanted his hot dogs. More than he could serve. So he bought another hot dog cart. His son pushed the new cart. He made good hot dogs too.
And every one of the Son's customers got a smile and a thank you to go with their hot dog. The hot dog man made sure to teach his son about this. The two did well, and saved the money they made, until it was time for the boy to go to college. There was enough money to send him to school even if the hot dog man paid another young man to push the second cart.
“Give them a smile with every hot dog,” he told his first employee. It worked fine.
This gave him an idea. He bought a third cart and hired a second employee.
Every year the city grew and every year he added a few more carts. The hot dog man’s company did very well. Buns and dogs were coming in bigger trucks these days. He was glad the son decided to study business in college. Their hot dog company was hiring more and more people and getting bigger and bigger. It would be great when the son returned home with all that college education to help him manage it.
The big day finally arrived. The son came home from college. Dad was excited. Mom too. There was a BIG Party. Everybody came.
Then it was time to get to work. But the son was not interested in working in the hot dog company. He wanted to do something more grand. The hot dog man was sad.
But then he asked, “Can you just look over our books and give me some advice?”
“Sure”, said the son, while looking at his watch.
“Things are going pretty good”, said the hot dog man. He got the books and paperwork out to proudly show the son what they had become while he was gone.
The son looked things over and thought for a minute. Then he said, “Gee, Dad, you have an awful lot of hot dog carts. And Expenses.”
Then he asked, “Don’t you know a Recession is coming?”. The hot dog man did not know what a Recession was, so he asked.
The son explained what he had learned in college about Recessions. The hot dog man shook his head in amazement.
He thought things were OK, but his son was just out of college. The hot dog man had worked a lot of hours to pay for that college education. He thought surely the college people knew more about business than he did, so he listened.
The son said, maybe you should mothball a few carts this season…
So that is what the hot dog man did. After a month or so, sales were down.
The son and the hot dog man looked things over again. The son said they should cut advertising expenses a little.
The hot dog man was sure the son must know about these things, So that is what they did. Sure enough, sales went down.
A few months later the books were worse. The Son said profits were being squeezed by the Recession. He said they should buy a cheaper hot dog. Save a little money. So they did. Sure enough, Sales went down.
After a while the son looked again at the books. Again. He said, “Gee Dad, you’re not making much money. Maybe you should cut payroll a little. So they laid off a few employees. The ones who stayed on were not too sure what would happen next. They stopped giving a smile with every hot dog. And sales went down even more.
Things were gloomy until the hot dog man had a great idea. He called all his employees together. Even the ones that had been let go. He told them something like this. "Sometimes things are easy and sometimes things are hard. It's easy to lose your way when things are hard." He admitted that he had been scared by this recession.
Then he went on. "Things have been hard lately. BUT, we are going to go back to doing what worked before. We will buy a better hot dog. We will run a few ads. We will get all the carts out of storage. And everybody will have a job. I don't care what it costs." Only one thing", he added, "Ya gotta give every customer a smile with their hot dog". They promised they would. And so they did.
Sure enough... sales went up.
And they keep going up to this very day.
Copyright © 2006 Network for Growth Ltd. All rights reserved.Revised: 06 February 2006.
Here is a great article from CoStar, an industry periodical we receive.
July 30, 2008
Written by Sasha M Pardy
Independent Retail Brokerages Move Fast To Outflank Market Downturn
Small Brokerage Houses Across the Country Report How They're Faring in Today's Rocky Retail Environment
Today's retail commercial real estate environment is certainly a challenging one. Consumers are strapped for cash and eliminating car trips to save gas. Retailers are going bankrupt, shuttering stores and pulling back or halting expansion plans. How are local/regional independent retail brokerage firms adjusting to the changed environment? CoStar Advisor put this question to the leaders of some of the leading independent retail brokerages across the country. CoStar Advisor: In light of retailer expansion pullback, is tenant representation accounting for a smaller part of the total retail brokerage income at your firm so far this year? Tom Londres, a principal at Metro Commercial Real Estate whose firm has grown to handle about 30 million square feet throughout Pennsylvania, New Jersey, and Delaware, said Metro's primary earning business lines through 2007 covered all four bases: tenant rep, landlord rep, investment sales and property management/construction services. "While our tenant rep side of the business over the last seven to 10 years has gone from our second most important line to first, that business is peaking. For the foreseeable future, landlord rep is going to be dominant. There are less retailers and the healthy retailers are doing less deals," said Londres. Jack Liberty is president and founder of Orlando-based Liberty Universal Management, a retail real estate firm that was founded in 1989 and leases, manages, or owns about 7 million square feet of retail property throughout Central Florida. Liberty's primary line of business is landlord representation, followed by 25% to 30% tenant representation. Liberty said that tenant rep fees at his firm are still accounting for just as much income as before the downturn. "Fortunately, our tenant rep clients are very motivated right now - at least the quality tenants that have unlimited resources are taking advantage of a tenant friendly market. The landlords are jumping on the deals because there's no longer a line 10-deep for each outparcel or in-line space." Bob LeFeber is a co-founder of Commercial Realty Advisors Northwest ("CRA"), a Portland-based retail real estate company founded in 1996. CRA brings in slightly more tenant rep income than landlord rep income. "Our income during the first six months of this year was about equal to the first six months of last year. While a number of our tenants have slowed their expansion plans, we also have some retailers seeing same store sales increases, particularly in the discount category. Not all regions of the country have been affected the same. The Portland market is still doing well, with vacancy around 6%, and is still under-retailed compared to national averages. (However) people are anticipating some reduction of income into the first half of 2009," said LeFeber. Mark C. D'Addabbo is president of Connecticut-based New England Retail Properties ("NERP"), said he expects income to be more weighted to landlord representation this year, but without a major decrease in tenant representation income. "Fortunately, the tenants we are working for continue to expand. Though we haven’t noticed an impact over the last 12 months, it might be a different story at this time next year." Marshall Mills is president and COO of The Weitzman Group, a regional retail brokerage firm with four offices in Texas and a retail listing portfolio of 44 million square feet at the core of the company's business. Weitzman also does a significant amount of tenant rep business that has yet to see a slump. “We're continuing to see our tenant representation business remain at a high level in Texas. We’re still seeing positive economic growth. So far, our major markets haven't really seen a significant impact beyond a slowdown in housing starts," said Mills. CoStar Advisor: How is production on the landlord rep side faring? "In the last 10 years, there's been less space and more demand. Over the last 12 months that has changed to less tenants and more space," said Londres. "Landlords are more in need now and are fighting over fewer deals. Up until the last six to 12 months, new development was full steam ahead; so now there is an onslaught of new space from centers that were in the planning stages years ago, plus there’s a lot of vacant space coming on. Landlords are responding by lowering rents, or offering free rent, more T.I., or flat rents." "We've picked up four to five centers already this year and see opportunity for 10 to 12 more. What better time is there for me to start calling landlords? If you're not doing something outside of the box, the opportunity is perfect right now for those who are," said Liberty. LeFeber says that CRA has maintained its landlord representation accounts, as there hasn't been much for new developments in the area to add to the pool. Leasing activity is slowing down, he says. And while the good news is that landlords are listening to CRA's recommendations to meet potential tenants in the middle, the bad news is, "A lot of our brokers are saying some tenants aren't moving on deals and there's been a hint of desperation from landlords," added LeFeber. In response, some landlords are advertising fee incentives to entice brokers to bring their tenants to their properties, said LeFeber. Mills said Weitzman has continued to gain new landlord representation accounts so far this year. In part, he says, because the company is very focused on creating "the right tenant mix” at its centers. In addition, Weitzman is seeing success in lease-up at mature shopping centers undergoing renovation. Rick Rivera is president and CEO of Los Angeles-based Centers Business Management ("CBM"), which was founded in 1987 and specializes in retail leasing and property management, has negotiated nearly 5,000 new leases valued in excess of $500 million in Southern California. Rivera said CBM's property management "has kept us ahead of the rest" because they are "in the trenches" daily with landlords and tenants that bring them opportunities. But on the leasing side, Rivera said, “Being in So Cal allows us to continue to do leases even in a slow economy because while our chain deals slow down, there are always mom and pop businesses that are opening stores -- and we do a lot of those leases," said Rivera. "The toughest part is landlords who have unrealistic expectations about their centers," added Rivera. "Landlords have bought properties based on expectations that are no longer realistic. The education process is tough." CoStar Advisor: How is your leasing staff having to work differently or harder than they were in the past couple years? "I would say if you're working six to 10 deals before; you're working 10 to 14 deals now to increase that closing ratio. Deals are taking longer to get done and while you can find two to three tenants deep for a space, five deep is tough. We're working 20% smarter and harder, shooting out more emails, making more calls, etc. We’ve always canvassed at least once a week, which is more important now because we can’t rely on phone generated revenue," said Liberty. The firm is having more frequent brainstorming and lead sharing meetings, too, said Liberty. CRA's leasing agents are "having to be more creative," said LeFeber. "We have to find those niche retailers that aren't intimidated by the current economic situation. While national retailers might have put expansion on hold everywhere, local tenants are only focused on this market. Our guys are here longer, doing more cold calling and definitely more brainstorming," he added. "Our leasing staff is definitely spending more money on marketing the properties. There's less deals coming through the front door. Deals are being made with intense effort to sway potential lessees from going to a competitive property," said Londres. "I think they are working longer hours and they're saying yes to business that they probably would have passed up a few years ago to; taking on more to get the same result," added Londres. CoStar Advisor: What other economic issues that are having an impact on your company / staff? "Operating costs continue to increase across the board. We just have to work smarter and harder to offset them," said Mills. "We represent tenants for half the country, so we're seeing an increasing cost on that business. We're still doing the same amount of tours, but getting fewer deals done. Flying is more costly and when you're doing that multiple times per month combined with other trip expenses and market fees not going up... Appetite for deals is down, yet cost of putting programs together is going up," explained Londres. "I've hired some temporary office help here and there during peak times, rather than adding another staff position to the payroll," said Liberty. D'Addabbo said economic pressures on consumers have had the effect of longer lease-up, "We might have retail space that would normally lease up in several months staying vacant for longer periods. Sometimes it's not even the economics slowing the deals down -- there may just be minimal activity in the market.” Where CRA has experienced the most impact it the lack of new developments, which has lessened its likelihood of earning new listings. CoStar Advisor: How is lease-up going at your new shopping center developments in comparison to older/established shopping center listings? "Our market is hitting the limit on number of centers that we can absorb unless there is a new onslaught of retailers. The older centers, unless they're jewels, are having a harder time because there are newer options out there for tenants. And, on the newer centers, rents are coming more in line with existing space -- the old $20 is now $16 at newer centers and existing space is $14. So tenants now can go in a brand new space for a close enough price," said Londres. "The biggest difference is on proposed developments in new growth areas. They're often delayed until the housing growth catches up with the retailers' requirements. We’ve seen retailers concentrate on in-fill and existing center locations as development slows," said Mills. D'Addabbo said that persistent and dramatic increases in construction costs, combined with lenders' pre-lease level requirements has had the effect of developers not being able to accept lower rents, as well as less new retail space coming on the market. "I believe you will see a good deal of the less expensive space leased to the smaller local/regional tenants," he added. In the Portland area, LeFeber explained, market rents for second and third generation space are nearly as expensive as new space ($20 - $30/psf range in comparison to $30-$40psf at new projects). "Top quality retailers continue to expand and can pay those higher rents," said LeFeber. "But, there's not a lot of them," he added, explaining that Portland has seen a pullback from the pool of franchisees that could afford higher rents, too. CoStar Advisor: How does being affiliated with a network help you, particularly during times like this? Liberty Universal is a member of the Retail Brokers Network. "It gives us a lot of booth recognition at ICSC Las Vegas and gives us a lot of presence at marketing events. We have regional presence and national connectivity now. We're a boutique company, but have 900 people working together around the country, without having to pay 13 layers up," said Liberty. The Weitzman Group is also affiliated with the Retail Brokers Network. "This nationwide network has always been valuable to us, and our affiliates are directing business our way," said Mills. CoStar Advisor: How does being "small" (at least in comparison to the national brokerage firms) help you? "We've always been able to make decisions quickly. Our landlords like that they can get the owner on the phone if they have a question. They know that we are entrenched in this market because we own our own product, so they really listen to when I tell them that if I were in their shoes I would do the deal, because I am in their shoes," said Liberty. "We have 75 people that live and breathe this region, so I think being 'small' really helps us because we can give very specific answers about our market, where the big guys deliver the big picture," said Londres. He added that Metro has retailer clients coming to them to evaluate their leases and that takes "accuracy and precision. Retailers are operating on razor thin margins and have to squeeze every penny. I've got SVPs of real estate at these retailers calling me, caring about a .50-cent difference where they didn't before. They need to know the cost difference in going across the street down to the penny. At the big firms; that's not their platform - they're not about every crumb," said Londres. "We have always felt that being small enough to work closely with our clients and each other in our offices has been a great advantage, as well as just focusing on So Cal. And, now we have access to the same tools the national brokerages have," said Rivera. "We aren't affected by what may be happening elsewhere in the country as much because we're totally focused on our market. I’ve talked to other managers of firms that maybe they feel they aren't getting the attention they should because their companies are worried about other parts of the country. Not having some national office questioning what decisions are being made may be an advantage. Equipment and data sources have become so much more affordable, too, that we can look as good as anybody," said LeFeber.
Written by Sasha M Pardy
Independent Retail Brokerages Move Fast To Outflank Market Downturn
Small Brokerage Houses Across the Country Report How They're Faring in Today's Rocky Retail Environment
Today's retail commercial real estate environment is certainly a challenging one. Consumers are strapped for cash and eliminating car trips to save gas. Retailers are going bankrupt, shuttering stores and pulling back or halting expansion plans. How are local/regional independent retail brokerage firms adjusting to the changed environment? CoStar Advisor put this question to the leaders of some of the leading independent retail brokerages across the country. CoStar Advisor: In light of retailer expansion pullback, is tenant representation accounting for a smaller part of the total retail brokerage income at your firm so far this year? Tom Londres, a principal at Metro Commercial Real Estate whose firm has grown to handle about 30 million square feet throughout Pennsylvania, New Jersey, and Delaware, said Metro's primary earning business lines through 2007 covered all four bases: tenant rep, landlord rep, investment sales and property management/construction services. "While our tenant rep side of the business over the last seven to 10 years has gone from our second most important line to first, that business is peaking. For the foreseeable future, landlord rep is going to be dominant. There are less retailers and the healthy retailers are doing less deals," said Londres. Jack Liberty is president and founder of Orlando-based Liberty Universal Management, a retail real estate firm that was founded in 1989 and leases, manages, or owns about 7 million square feet of retail property throughout Central Florida. Liberty's primary line of business is landlord representation, followed by 25% to 30% tenant representation. Liberty said that tenant rep fees at his firm are still accounting for just as much income as before the downturn. "Fortunately, our tenant rep clients are very motivated right now - at least the quality tenants that have unlimited resources are taking advantage of a tenant friendly market. The landlords are jumping on the deals because there's no longer a line 10-deep for each outparcel or in-line space." Bob LeFeber is a co-founder of Commercial Realty Advisors Northwest ("CRA"), a Portland-based retail real estate company founded in 1996. CRA brings in slightly more tenant rep income than landlord rep income. "Our income during the first six months of this year was about equal to the first six months of last year. While a number of our tenants have slowed their expansion plans, we also have some retailers seeing same store sales increases, particularly in the discount category. Not all regions of the country have been affected the same. The Portland market is still doing well, with vacancy around 6%, and is still under-retailed compared to national averages. (However) people are anticipating some reduction of income into the first half of 2009," said LeFeber. Mark C. D'Addabbo is president of Connecticut-based New England Retail Properties ("NERP"), said he expects income to be more weighted to landlord representation this year, but without a major decrease in tenant representation income. "Fortunately, the tenants we are working for continue to expand. Though we haven’t noticed an impact over the last 12 months, it might be a different story at this time next year." Marshall Mills is president and COO of The Weitzman Group, a regional retail brokerage firm with four offices in Texas and a retail listing portfolio of 44 million square feet at the core of the company's business. Weitzman also does a significant amount of tenant rep business that has yet to see a slump. “We're continuing to see our tenant representation business remain at a high level in Texas. We’re still seeing positive economic growth. So far, our major markets haven't really seen a significant impact beyond a slowdown in housing starts," said Mills. CoStar Advisor: How is production on the landlord rep side faring? "In the last 10 years, there's been less space and more demand. Over the last 12 months that has changed to less tenants and more space," said Londres. "Landlords are more in need now and are fighting over fewer deals. Up until the last six to 12 months, new development was full steam ahead; so now there is an onslaught of new space from centers that were in the planning stages years ago, plus there’s a lot of vacant space coming on. Landlords are responding by lowering rents, or offering free rent, more T.I., or flat rents." "We've picked up four to five centers already this year and see opportunity for 10 to 12 more. What better time is there for me to start calling landlords? If you're not doing something outside of the box, the opportunity is perfect right now for those who are," said Liberty. LeFeber says that CRA has maintained its landlord representation accounts, as there hasn't been much for new developments in the area to add to the pool. Leasing activity is slowing down, he says. And while the good news is that landlords are listening to CRA's recommendations to meet potential tenants in the middle, the bad news is, "A lot of our brokers are saying some tenants aren't moving on deals and there's been a hint of desperation from landlords," added LeFeber. In response, some landlords are advertising fee incentives to entice brokers to bring their tenants to their properties, said LeFeber. Mills said Weitzman has continued to gain new landlord representation accounts so far this year. In part, he says, because the company is very focused on creating "the right tenant mix” at its centers. In addition, Weitzman is seeing success in lease-up at mature shopping centers undergoing renovation. Rick Rivera is president and CEO of Los Angeles-based Centers Business Management ("CBM"), which was founded in 1987 and specializes in retail leasing and property management, has negotiated nearly 5,000 new leases valued in excess of $500 million in Southern California. Rivera said CBM's property management "has kept us ahead of the rest" because they are "in the trenches" daily with landlords and tenants that bring them opportunities. But on the leasing side, Rivera said, “Being in So Cal allows us to continue to do leases even in a slow economy because while our chain deals slow down, there are always mom and pop businesses that are opening stores -- and we do a lot of those leases," said Rivera. "The toughest part is landlords who have unrealistic expectations about their centers," added Rivera. "Landlords have bought properties based on expectations that are no longer realistic. The education process is tough." CoStar Advisor: How is your leasing staff having to work differently or harder than they were in the past couple years? "I would say if you're working six to 10 deals before; you're working 10 to 14 deals now to increase that closing ratio. Deals are taking longer to get done and while you can find two to three tenants deep for a space, five deep is tough. We're working 20% smarter and harder, shooting out more emails, making more calls, etc. We’ve always canvassed at least once a week, which is more important now because we can’t rely on phone generated revenue," said Liberty. The firm is having more frequent brainstorming and lead sharing meetings, too, said Liberty. CRA's leasing agents are "having to be more creative," said LeFeber. "We have to find those niche retailers that aren't intimidated by the current economic situation. While national retailers might have put expansion on hold everywhere, local tenants are only focused on this market. Our guys are here longer, doing more cold calling and definitely more brainstorming," he added. "Our leasing staff is definitely spending more money on marketing the properties. There's less deals coming through the front door. Deals are being made with intense effort to sway potential lessees from going to a competitive property," said Londres. "I think they are working longer hours and they're saying yes to business that they probably would have passed up a few years ago to; taking on more to get the same result," added Londres. CoStar Advisor: What other economic issues that are having an impact on your company / staff? "Operating costs continue to increase across the board. We just have to work smarter and harder to offset them," said Mills. "We represent tenants for half the country, so we're seeing an increasing cost on that business. We're still doing the same amount of tours, but getting fewer deals done. Flying is more costly and when you're doing that multiple times per month combined with other trip expenses and market fees not going up... Appetite for deals is down, yet cost of putting programs together is going up," explained Londres. "I've hired some temporary office help here and there during peak times, rather than adding another staff position to the payroll," said Liberty. D'Addabbo said economic pressures on consumers have had the effect of longer lease-up, "We might have retail space that would normally lease up in several months staying vacant for longer periods. Sometimes it's not even the economics slowing the deals down -- there may just be minimal activity in the market.” Where CRA has experienced the most impact it the lack of new developments, which has lessened its likelihood of earning new listings. CoStar Advisor: How is lease-up going at your new shopping center developments in comparison to older/established shopping center listings? "Our market is hitting the limit on number of centers that we can absorb unless there is a new onslaught of retailers. The older centers, unless they're jewels, are having a harder time because there are newer options out there for tenants. And, on the newer centers, rents are coming more in line with existing space -- the old $20 is now $16 at newer centers and existing space is $14. So tenants now can go in a brand new space for a close enough price," said Londres. "The biggest difference is on proposed developments in new growth areas. They're often delayed until the housing growth catches up with the retailers' requirements. We’ve seen retailers concentrate on in-fill and existing center locations as development slows," said Mills. D'Addabbo said that persistent and dramatic increases in construction costs, combined with lenders' pre-lease level requirements has had the effect of developers not being able to accept lower rents, as well as less new retail space coming on the market. "I believe you will see a good deal of the less expensive space leased to the smaller local/regional tenants," he added. In the Portland area, LeFeber explained, market rents for second and third generation space are nearly as expensive as new space ($20 - $30/psf range in comparison to $30-$40psf at new projects). "Top quality retailers continue to expand and can pay those higher rents," said LeFeber. "But, there's not a lot of them," he added, explaining that Portland has seen a pullback from the pool of franchisees that could afford higher rents, too. CoStar Advisor: How does being affiliated with a network help you, particularly during times like this? Liberty Universal is a member of the Retail Brokers Network. "It gives us a lot of booth recognition at ICSC Las Vegas and gives us a lot of presence at marketing events. We have regional presence and national connectivity now. We're a boutique company, but have 900 people working together around the country, without having to pay 13 layers up," said Liberty. The Weitzman Group is also affiliated with the Retail Brokers Network. "This nationwide network has always been valuable to us, and our affiliates are directing business our way," said Mills. CoStar Advisor: How does being "small" (at least in comparison to the national brokerage firms) help you? "We've always been able to make decisions quickly. Our landlords like that they can get the owner on the phone if they have a question. They know that we are entrenched in this market because we own our own product, so they really listen to when I tell them that if I were in their shoes I would do the deal, because I am in their shoes," said Liberty. "We have 75 people that live and breathe this region, so I think being 'small' really helps us because we can give very specific answers about our market, where the big guys deliver the big picture," said Londres. He added that Metro has retailer clients coming to them to evaluate their leases and that takes "accuracy and precision. Retailers are operating on razor thin margins and have to squeeze every penny. I've got SVPs of real estate at these retailers calling me, caring about a .50-cent difference where they didn't before. They need to know the cost difference in going across the street down to the penny. At the big firms; that's not their platform - they're not about every crumb," said Londres. "We have always felt that being small enough to work closely with our clients and each other in our offices has been a great advantage, as well as just focusing on So Cal. And, now we have access to the same tools the national brokerages have," said Rivera. "We aren't affected by what may be happening elsewhere in the country as much because we're totally focused on our market. I’ve talked to other managers of firms that maybe they feel they aren't getting the attention they should because their companies are worried about other parts of the country. Not having some national office questioning what decisions are being made may be an advantage. Equipment and data sources have become so much more affordable, too, that we can look as good as anybody," said LeFeber.
Wednesday, August 6, 2008
The Market Buzz
7-31-08 Sibley Station to reopen as Mayson's Grille!
Sibley Station is now owned by the owners of Moonlight Bay in Crosslake, and they have plans to turn this Pequot Lake restaurant into a family-friendly, casual dining establishment, called Mayson's Grille. The new restaurant, which hopes to be open before the end of August, has plans to offer daily lunch specials with homemade soups and salad dressings. They will be open 7 days a week for lunch and dinner. Be sure to watch for their official opening date, so you can check them out!
7-31-08 New Mexican Restaurant Coming to Town!
Are you looking for affordable, authentic, family atmosphere mexican food? We've got just the ticket for you! 'La Fiesta' is coming to town! That's right! This family owned mexican restaurant will be locating in the former Dave's Pizza location in the former Reed's building in Baxter. Get ready for a taste of the real mexico!
7-29-08 Minneapolis Heart Institute to open an office in Baxter
The Minneapolis Heart Institute will be occupying the second building at the Riverstone Professional Centre, located near the Super Wal-Mart Center in Baxter.
The Minneapolis Heart Institute® is recognized internationally as one of the world's leading heart institutes. Their state-of-the-art facilites combine the finest in personalized patient care with sophisticated technology in a unique, family-oriented environment. The Institute's programs, a number of which are conducted in conjunction with Abbott Northwestern Hospital, address the full range of heart-health needs: prevention, diagnosis, treatment and rehabilitation.
7-25-08 Play N Trade to locate at Northwoods Plaza!
Owners Mark Westberg and Tine Theisen have recently signed a lease on the space next to Lakeland Health Services at the Northwoods Plaza in Baxter, near Home Depot. Do you have a video game that you are tired of playing? Or is there a new game that you've been dying to try out? Play N Trade will specialize in offering new and used video game that customers can buy, sell or trade!
7-20-08 Close Joins Initiative Foundation Board
Little Falls - The Initiative Foundation named Chris Close, co-owner of Close~Converse Commercial Properties of Brainerd, to its regional board of trustees. He will serve a renewable three-year term. At 28, Close becomes the youngest trustee on the foundation board. He joined his father, Kevin Close, at Close~Converse in 2002, where he now specializes in commercial and investment real estate and leasing. In 2007, Realtor Magazine named him among the top 30 real estate agents younger than 30 in the nation. Close has bachelor's degrees in finance, entrepreneurial management and marketing from the University of Minnesota's Carlson School of Management.
~ Press Release from Brainerd Daily Dispatch ~
Sibley Station is now owned by the owners of Moonlight Bay in Crosslake, and they have plans to turn this Pequot Lake restaurant into a family-friendly, casual dining establishment, called Mayson's Grille. The new restaurant, which hopes to be open before the end of August, has plans to offer daily lunch specials with homemade soups and salad dressings. They will be open 7 days a week for lunch and dinner. Be sure to watch for their official opening date, so you can check them out!
7-31-08 New Mexican Restaurant Coming to Town!
Are you looking for affordable, authentic, family atmosphere mexican food? We've got just the ticket for you! 'La Fiesta' is coming to town! That's right! This family owned mexican restaurant will be locating in the former Dave's Pizza location in the former Reed's building in Baxter. Get ready for a taste of the real mexico!
7-29-08 Minneapolis Heart Institute to open an office in Baxter
The Minneapolis Heart Institute will be occupying the second building at the Riverstone Professional Centre, located near the Super Wal-Mart Center in Baxter.
The Minneapolis Heart Institute® is recognized internationally as one of the world's leading heart institutes. Their state-of-the-art facilites combine the finest in personalized patient care with sophisticated technology in a unique, family-oriented environment. The Institute's programs, a number of which are conducted in conjunction with Abbott Northwestern Hospital, address the full range of heart-health needs: prevention, diagnosis, treatment and rehabilitation.
7-25-08 Play N Trade to locate at Northwoods Plaza!
Owners Mark Westberg and Tine Theisen have recently signed a lease on the space next to Lakeland Health Services at the Northwoods Plaza in Baxter, near Home Depot. Do you have a video game that you are tired of playing? Or is there a new game that you've been dying to try out? Play N Trade will specialize in offering new and used video game that customers can buy, sell or trade!
7-20-08 Close Joins Initiative Foundation Board
Little Falls - The Initiative Foundation named Chris Close, co-owner of Close~Converse Commercial Properties of Brainerd, to its regional board of trustees. He will serve a renewable three-year term. At 28, Close becomes the youngest trustee on the foundation board. He joined his father, Kevin Close, at Close~Converse in 2002, where he now specializes in commercial and investment real estate and leasing. In 2007, Realtor Magazine named him among the top 30 real estate agents younger than 30 in the nation. Close has bachelor's degrees in finance, entrepreneurial management and marketing from the University of Minnesota's Carlson School of Management.
~ Press Release from Brainerd Daily Dispatch ~
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