RITTER: Can we predict which retailers are going to be able
to fill this space?
ROSE: From my experience, you’ve got to have a merchandising
lead that stays in tune with what we’re all interested in consuming, and if you don’t have a merchandiser leading any retailer,
the enterprise seems to slip. I think with Sears/Kmart, they’ve
struggled in saying “who are we” and “what are we?” That’s going
to prove, I think, to be problematic.
For Penney’s, they’ve changed the helm and I think Myron
Ullman is one of those really strong, talented merchandisers in
this industry, so I’m pretty bullish that Penney’s is likely going to
rebound and do quite well, but that’s still yet to be seen. In terms
of new retailer concepts that are cooking, it seems like fast food
is still blossoming new concepts everywhere you go and, of late,
it’s this whole trend of eating healthy.
ROBERTS: There are obviously new retail concepts being
started. I think the past two or three years with the economy was
probably a slow period, but going forward, I think there will be
new retailers that will come into existence and be in expansion
mode across America. Some of these boxes could
be replaced with existing concepts. We’ve had
some Circuit City and Linens ‘N Things in the
past that have been replaced by Dick’s Sporting
Goods or other retailers of that size. You can
always break-up the space for smaller users and
re-lease it that way, which we’ve done with concepts like Five Below.
ROSE: Academy Sports is a concept that’s going
to start to emerge across the country. You see Big
5 maybe sort of falter and then you see this cool
concept, Academy Sports, surface.
ROBERTS: The other thing that’s happening in
the market is retailers that want to downsize. It’s
a partnership between the landlord and the tenant, where the existing tenant tries to find a
smaller tenant and share in the cost of demising
the space. At the end of the day you can make lemonade out of
lemons and downsize space from 40,000 square feet to 30,000
feet, and bring a new retailer and new synergies into the center.
RITTER: Grocer competition is crazy. What do you see as
the main ingredient to survive in this retail segment?
McKESKA: You have to have a differentiated business model. The
traditional grocers aren’t going to be as differentiated as others,
but the customer expectations, in terms of what they want to buy
from grocery stores, have broadened so significantly, even in the
past 10 years. It’s made it possible for customers to have learned
that there are many more choices based upon the retailers that
have come along. The shopping patterns have changed, and people will shop in two, three, four different grocery stores today versus their having had a primary grocery store and a distant second
10 years ago. That’s through the advent of specialists, the Trader
Joe’s or the Aldis, as well as large discounters such as Walmart. You
need to know who you are and who your customer is.
RITTER: Are retailers finding the types of sites that they
want right now?
McKESKA: There’s still ample opportunity out there for those
people who have the types of business models that are flexible in
the spaces they want. For retailers who have very stringent site
requirements and who are trying to do a lot of ground-up development, it continues to be a somewhat challenging environment
because it’s not as if the result of the Great Recession is that real
estate values, land values or the cost of construction have gone
down dramatically.
RITTER: Are tenants happy with the sites that are available
to them?
ROBERTS: Our portfolio is about 98% leased. We’re primarily
leasing up smaller shop space, but a few of our centers have big
boxes that are available and I believe we’re seeing very strong
demand.
We’re certainly seeing development programs roll out with
certain retailers. The dollar store space is probably the most
active. The tenants are starting to think about expansion.
The ability to buy in secondary and tertiary markets is a result of the resurgence of the CMBS market”
JOE DYKSTRA,
Westwood Financial Corp.
These centers are generally smaller, at about 100,000 square
feet with three boxes. But I think over the next two or three
years we’ll see more development of the traditional power-center space and maybe larger centers, where you put together
300,000 to 500,000 square feet. That kind of development is a
sign of the economy improving and retailers looking at their
expansion plans long term.
RITTER: Are you getting the rental rates you’re aiming for
in this climate?
ROBERTS: I think it’s certainly better today than it was two or
three years ago. The rents have stabilized. In some cases we’re
achieving or beating our projections as far as rents, and overall
it’s much more positive than it was at the bottom of the market.
DYKSTRA: Our portfolio occupancy is very good and we are
seeing rents continue to improve. However, we believe tenants
as a whole are much more sophisticated and much more disci-
