- Posted February 27, 2012
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Nine retail real estate trends for 2012
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By Darren Currin
Dolan Media Newswires
OKLAHOMA CITY, OK-- In its recently released U.S. Retail Highlights: 2012 Outlook, Colliers International is describing the national retail market as being a new universe as retailers are hard at work exploring new ways to reach customers and bring new life to their brands. Additionally, Colliers explained that there is a new type of shopper emerging that has the potential to be a game-changer for the industry. They described this shopper as being one that researches every purchase online and compares multiple stores' inventory on a smartphone while simultaneously shopping in the store. These shoppers are looking for that special buying experience or product, the one that's just right for them; they are always concerned about the lowest price.
Ann Natunewicz, national manager of U.S. Retail Research for Colliers International's Retail Services Group, said the following about the retail market in 2012:
''2012 is a huge year for retail, and for real estate in general. How landlords and retailers respond to mobile commerce, their ability to partner and innovate, will determine how well they monetize shoppers who are already in their physical space--a huge advantage over earlier e-commerce, which was all transacted somewhere else.''
The report also detailed nine big trends to watch in the retail real estate market in 2012 that included opportunities for strategic acquisitions, the marriage of brick-and-mortar with mobile e-commerce, and the likelihood of more big-box stores moving into previously underserved urban areas. Here is Colliers' list of the nine trends to watch:
A wild ride for equities in retail real estate investments: U.S. equities markets will continue to react to news on any and all economic indicators, including ongoing news of store closings. The angle of these reports will vacillate between opinions of ''smart consolidation of poor-performing assets'' to a possible harbinger of corporate economic trouble.
U.S. manufacturing improvement accelerates: Look for sales of big-ticket items to improve as consumer optimism (and beat-up cars and fridges) releases pent-up demand for durables. In this environment of low interest rates, businesses and households may be more comfortable with - or more capable of - taking on new debt.
''Customer experience'' will trump ''price'' in the value equation: Retailers increase value by either lowering their prices or increasing the quality of their ''customer experience,'' which means removing every potential barrier that stands between converting a customer's interest to purchase into the intent to purchase. Innovation in improving the customer shopping experience, whether online or in the store, will be the key.
Retailers will roll out more limited editions, exclusives and mobile-device specials: 2011 retail sales piqued shopper interest through exclusives and limited editions (Missoni label at Target) or with ''limited-time offers'' (LTOs) that drove traffic. LTOs generate urgency in a shopper who must be ''sold'' before parting with her money, especially for a full-price item. Merchandise and deals only available online or via a mobile device are expected to increase this year.
More strategic acquisitions across brands, assets, property sectors, and technology platforms: Retailers are investing in smaller companies to enhance their multichannel integration. Strategic acquisitions allow the acquirer to extend its brand outside its core competency, such as Starbucks picking up juice bar concept Evolution Fresh.
Distressed retail property asset pipeline begins to move: Data shows that more than $350 billion in commercial real estate loans will mature both this year and in 2013. The opportunity for retail investment lies between the trophy assets still trading at low cap rates, and the large pool of marginal, low- or no-cash flow assets that can't be refinanced, which will either default on maturing debt or be transacted in a ''fire sale.'' Also, more institutional players will be scouting around for retail portfolios (public REITs are sitting on huge capital reserves).
Foreign investors turn to retail in U.S: Yield-seeking investors need places to park their money, and the stability of U.S. property markets still make them attractive destinations for ''flight capital.'' Recent data confirms that the U.S. is still a leading destination for global capital flows. Among property types, foreign capital may now look to shopping centers or broken land deals in space-constrained or high-growth markets.
Expanded capacity, but still stringent underwriting: Non-performing real estate loans remain highly problematic for all banks, but stronger regional banks have slowly resumed commercial lending. As mortgage production ramps up, investors will see banks being more competitive, but with far more stringent underwriting standards. Properties need to demonstrate solid cash flow and real net operating income (NOI), assume conservative rent increases, and any loans approved will be recourse, except for the best customers.
Urban site-seeking retailers, including big boxes, are back in force: The economic crisis hit suburban communities much harder than their urban counterparts, so as retailers seek out lower-risk growth opportunities, underserved urban areas fall firmly within the crosshairs. Blocked out of urban areas in the past because their stores were too big, big-box retailers now have two options: 1) They can go in with their large-format stores, as renewed interest in urban locations coincides with municipalities' worsening fiscal problems ... or, 2) Retailers can test small-format store options, take infill space, and co-opt share from smaller local operators.
Entire contents copyrighted © 2012 by The Dolan Company.
Published: Mon, Feb 27, 2012
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