SHOPPING CENTER INSIGHTS BY JEFF DERVECHBlog

Tractor Supply is continuing its plan of growth with an announcement to add 500 more stores to its existing footprint of 1,900 units. This retailer has been around for over 80 years and caters to a very niche customer. The average store generates approx. $257 per square foot when compared to Macy’s at $195 per square foot. No doubt this is a strong company with profits growing by approx. 9% per year on average since...

Retail landlords continue to take advantage of the store closures within their property portfolio. They are eager for a new beginning and are re-tenanting their spaces with new concepts that pay more rent and add to the retail synergy at their properties. Concepts such as cinemas, trampoline parks, fitness facilities, dining halls, sporting goods retailers and discount home furnishing stores among many other options are what these landlords are pursuing to replace this recaptured retail...

Did you know that Planet Fitness was the #1 ranked tenant by total new square footage leased since the start of 2017 across all “mall” tenants? Fitness is an expanding sector and one of which is near internet resistant. With more than 36,000 clubs across the US with 60M+ members, consumers are more health conscious as ever in today’s day in age. Many shopping center landlords are seeking fitness uses as ideally anchor tenants to...

US consumer confidence is at an 18 year high with an index of 138.4 in September up from 134.7 in August. The all-time high is 144.7 which was reach in 2000. This bodes well for the economy as consumer spending fuels most developed service-based economies, including the US representing approx. 70% of GDP. Coupled by a strong economy and robust job growth, a high consumer confidence level of 138.4 in September proves a healthy economy...

Do you know what the future of malls looks like? This is an ever-changing and evolving question but one that is posed quite regularly. As traditionally formatted malls are re-purposed or re-positioned, developers are having a fun time creating a new picture with a blank canvas. “New is the new, new”! This was a phase quoted by Spencer Levy, America’s head of research for CBRE. University Mall in Tampa near the University of South Florida...

More and more of Americans are continuing to eat at home, making the “dine-out” dollar more competitive amongst restaurants brand. 82% of Americans meals are prepared at home. Traffic for the industry was down 1.1% in July, the 29th straight month of declines, according to MillerPulse data. Restaurant Operators continue to report rising sales, however this increase has been caused by price hikes and not necessarily more customers. Pre-made meals, online grocery delivery, crushing student...

Interesting Opinions via Twitter from different economist pertaining to the August jobs report. Overall, it is a very healthy report marking the 95th straight month of employment gains with an unemployment rate at 3.9%. Jobs create discretionary income which in turns fuels retail sales keeping the shopping center industry in a healthy state. [Source]

In the off-price and specialty retail space, TJX and Ross lead the pack with the highest return on their investment compared to how much they pay in rent. This report analyzed companies return on investment as it relates to what they earn in sales per square foot, compared to what they pay in rent per square foot. TJX and Ross both bring in more than 20x greater then what they pay in rent. This is...

Retail Sales spiked over the summer primarily due to a strong economy with GDP at 4.1% annualized growth in Q2 and successful retailers are effectively implementing Omni-Channel retail into their arsenal. This is required for the future success for any retail brand and the strongest retailers are spanning across physical, mobile and social platforms to implement this strategy. This is what customers want and desire and allows retail brands the opportunity to parlay their physical...

Planet Fitness is anticipating future growth and looks to Sears and Kmart vacancies as ideal opportunities. The retailer plans to backfill a lot of these recent retail vacancies and looks to landlords as a use that can drive traffic and that “can’t be Amazoned”. Planet Fitness continues to grow its membership base now at 12.1 million, up from 10.4 million a year ago with a total of 1,608 stores mostly in North America. Between 2013...

Toys ‘R’ Us is beginning the process of selling off its real estate, most of which are freestanding stores or located in open air shopping centers averaging approx., 40,000 sf. According to bankruptcy filings players in the mix include Big Lots, Hobby Lobby, Ashley Furniture, Burlington Stores, TJMaxx, Aldi, Marshalls, HomeGoods, PGA Superstore, Target and more. This auction process requires bidders to close very quickly with no financing/lender contingences which leads to only players that...

Despite some of the negative headlines, quality malls and well positioned brick and mortar retail is expected for robust growth in the coming decade. Over this period, annual consumer spending is estimated at 4.3% which will be fueled primarily by low unemployment and an expanding economy. As anchored department store tenants are redeveloped due to the change in meeting consumer demands, inline tenants will continue to fare much better as they are able to pivot...

Let the countdown begin! The arrival of new lease accounting regulations is on the horizon, less than 6 months out – January 2019. The new changes will require lease liabilities to be brought onto the balance sheet, requiring retail operators to recognize and report almost all lease obligations which has not necessarily been the case in the past. The purpose of this change by FASB is to improve transparency, comparability and financial reporting. This implementation...

CVS moves to add option for Doc On-line styled service. This is the way of the future for the drug-store chain as they look to transform their business model to incorporate expanded physician service offerings. It comes at a time where CVS is getting closer to acquiring Aetna and also as Amazon looks to enter the pharmacy space with its acquisition of online pharmacy Pill Pack. CVS will be using it retail presence as infrastructure...

Automation in Restaurants is continuing to increase! A study revealed that 54% of tasks preformed in restaurants can be automated. The declining costs of automated machines in conjunction with the rising cost of the labor market are increasing the appeal for fast food chains. Employees will always be needed at restaurants, but the question is to what degree? Some tasks can be completed by a “machine” but there are many components to a restaurant that...

As the hurricane season approaches us, the message is clearly and simply “be prepared”. Last year’s hurricane season caused a record $202 billion in damages in the US and approx. $370 billion worth worldwide. Property Owners must realize that there is a 30-day waiting period from the date a flood policy is purchased before the policy takes effect. Also for consideration, commercial property insurance usually does not include flood or business interpretation coverage “loss of...

Retail Investors continue to search for value-add opportunities composed with a tenant mix of e-commerce resistant and experiential tenants including such uses as medical, fitness, restaurants, grocery, entertainment and convenience. The Net Lease Market remains very strong despite headlines, although the average cap rate is up 10 basis points; many factors go into that (lease term, location of property, tenant credit, size of asset, etc.). Investor’s remains confident and the recent increase should not be...

Starbucks announces plans to slim and trim approx. 150 underperforming stores in 2019 particularly in urban markets in order to optimize their existing store base! This is a case of opening up stores too close together also known as “cannibalization”. Starbucks is still the 800-pound gorilla but is facing growing competition from trendy, independent neighborhood coffee shops. Starbucks will continue to expand, primarily by shifting their focus from urban to suburban in order to capitalize...