As published on GlobeSt.com, August 18, 2016
TUSTIN, CA—While retail vacancies are at an all-time low, and many Southern Californiashopping centers are enjoying stability, landlords with mid- to big-box anchors are still wondering, “What’s next?”, Coreland Cos.’ president Chris Hite tells GlobeSt.com. Whichretailer will be the next to announce store closings or dramatic space reductions? For this pre-ICSC story, we spoke exclusively with Hite about the areas of concern, how sales compare year to year and what can be done to ease concern about mid- to big-box retailers.
GlobeSt.com: Which retail segments, or specific retailers, are of biggest concern to you and why?
Hite: Big-box retailers, especially soft-good retailers, continue to be the main factor keeping owners up at night. Despite the strength of the economy, these retailers remain under substantial pressure to right-size and remain competitive in an arena that offers consumers a variety of options.
Based on gross sales data for national big-box retailers, it’s clear that those retailers that have right-sized and implemented smart omni-channel strategies are faring much better than those stuck in larger footprints. For instance, Best Buy’s sales per square foot are stronger today than Target’s after years of right-sizing efforts and focusing on a progressive consumer experience. Meanwhile, Kohl’s, with one of the largest footprints, is producing an eighth of Best Buy’s sales per square foot.
Lying awake at night is not a bad thing if it forces us to pay more attention to the data available in the marketplace. Information is power. Great owners, managers and brokers need to stay vigilant in securing store sales and watching the marketplace closely for threats and opportunities.
GlobeSt.com: What commonalities are you seeing across your property portfolio?
Hite: Leasing and managing approximately 10 million square feet of Southern California properties exposes us to the full spectrum of retail centers. Grocery store-anchored shopping centers and destination retail driven by restaurants and entertainment remain the most competitive, followed by high-rent shopping districts and bargain centers.
Leasing remains strong for shop space across the board. New entrepreneurs taking advantage of low interest rates are introducing a number of new local restaurants and specialized services to retail centers. The activity is driving rent growth across core A and B assets, although C centers in outlying areas are still challenged by hard-to-lease space.
GlobeSt.com: Overall, how do sales compare year-to-year, and are you seeing many delinquencies?
Hite: Shop tenant sales are up across the board. In most markets we continue to see rent growth and solid occupancy. There are retailers stepping up to fill larger blocks of space and providing alternatives that didn’t exist a few years ago. Delinquencies are correspondingly low, and when weaker tenants have to be replaced, the downtime is significantly reduced. Ultimately, you can find solutions and afford to shed tenants that have not been able to keep up with growth.
GlobeSt.com: What can be done to ease concerns about these mid- and big-box retailers?
Hite: Vigilance is what immediately comes to mind. Your brokerage team should have its ears to the ground, always talking to retailers and tenant rep brokers to better understand which deals are getting done, where they’re getting done and terms of the deals. Managers should be tracking sales as best as possible, keeping a close eye on the operations of retailers and reporting to owners.
Never underestimate the value of being a customer. Taking time to visit same stores and competitors, makes it clear which progressive retailers are enhancing their experience, versus others that are barely keeping their shelves stocked and struggling to please customers.
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