Retail Merchandiser - March/April 2017 - 107
RETAIL DEVELOPMENT SOLUTION PROVIDER
3 percent in 2017 and another 3.7
percent in 2018. Another positive sign
is that, according to the International
Council of Shopping Centers (ICSC),
holiday spending in 2016 rose by 16
percent over the 2015 season, beating
predictions by 4 percent.
Although housing starts continue to
be lower than hoped by homebuilders,
the unemployment rate continues to fall,
infusing cash into the pockets of many
households. According to the Bureau of
Labor Statistics, non-farm payrolls expanded by 178,000 positions in November and the unemployment rate declined
by 0.3 percentage points to its lowest
level since 2007. This news, coupled
with predicted wage gains, indicates that
more people will have jobs and those
jobs will, on average, be paying more in
the coming year. This should provide a
boost to consumer spending, a driving
influence for retail development.
In terms of what is occurring with
different types of retail projects, owners
of regional shopping malls have had to
adapt to stay relevant. For example, as
the public continues the trend toward
healthier food selections and different
types of cuisine, mall owners have been
forced to re-envision their food courts
through general upgrades in quality
and the introduction of more "exciting"
They have introduced sit-down
restaurants, entertainment and Internet
experiences to make the mall more of an
experiential venue where customers can
shop, dine, socialize and be entertained.
The goal is to increase "dwell time," or
the period the customer stays at the retail project, so that customers will spend
Grocery-anchored neighborhood centers generally continue to provide a good
return for their owners, with transactions
growing in volume since 2009, and 2015
being a peak year at $3.9 billion of transactions, and 2016 following close behind.
One of the larger growth sectors in retail
is specialty grocers such as Whole Foods,
Trader Joe's and Sprouts, while another
is discount grocers like Walmart Neighborhood Market. And although there
remains uncertainty over the consolidation between large-scale grocers, owners
A lower unemployment rate and predicted
wage gains indicate a boost in consumer
spending this year.
"[Consumer] spending [is] expected to
increase 3 percent in
of neighborhood centers continue to be
able to attract retailers eager to feed off
of the foot traffic generated by a tenant
mix that typically includes a grocery and
a drug store.
Other retail developers are being more
proactive dealing with existing space by
negotiating early lease terminations in
order to re-merchandise with better tenants and higher rents. Some "mid-box"
or "junior anchor" tenants like PetSmart
and Old Navy, which are looking to
downsize their footprints, may be willing
to give space back early, allowing landlords to aggregate enough square footage
to attract certain "hot" retailers in an
effort to revitalize their shopping centers.
Meanwhile, many retail developers
have had to deal with the closures of anchor stores, such as Macy's and Kmart,
as well as sporting goods operators like
Sports Authority and Sport Chalet. As
a result, so called "specialty leasing" is on
the rise, with retail developers looking
to re-lease large vacant space to concepts not traditionally associated with
shopping centers, such as go-cart tracks,
trampoline facilities, day care centers,
painting studios and cooking schools.
When it comes to the world of retail
development, the undercurrent of
optimism from the beginning of 2016
continues to grow. While the needle
on ground-up shopping center development may still not be moving, a
solid uptick in the GDP and continued
growth in the job sector bodes well for
continued improvement for retail developers in 2017. O
Dan Villalpando, a partner at Cox, Castle
& Nicholson, specializes in retail development and commercial leasing.