Commercial Investment Real Estate September/October 2013 - Page 38

Shopping Center Net Operating Income Percentage change from previous year 15 Neighborhood centers Community centers 10 Power centers Regional malls 5 -0 -5 -10 -15 2010 2011 2012 Source: National Council of Real Estate Investment Fiduciaries Rentz: My clients are looking for quality real estate with no weak- nesses. It is more important than ever that the site has all the funda- mentals that make for a successful retail site: visibility, accessibility, parking, and favorable demographics. CIRE: What’s next on the horizon for the retail real estate sector? Rentz: Retailers will continue to reduce their square footage into smaller, more ef cient footprints. Traditional retailers will continue to perfect and grow their online presence, while the e-tailers will attempt to f ne-tune their brick-and-mortar locations to perfect a one-day delivery strategy. T e survivors and thrivers will have a great geographic footprint of stores as well as of er a great online experience. Yetter: Customer-f rst service is the key. T e auto-services industry has traditionally focused on upselling customers, thus creating a lack of trust among consumers. We are focused on combating that perception by delivering the highest level of service and focusing on the individual customer’s car needs. As in most industries, the level of service and the customer experience continue to become more important as customers evaluate their growing purchase options. Massey: It is all about the customer experience. Many retailers and restaurants fail to recognize that the customer’s needs and wants come f rst. T e retail customer today wants it all from omni-channel retailing to being wowed with their in-store experience. T is might be classif ed as the “Apple ef ect” that many retailers are trying to replicate. T ose who not adopt these two pillars in the future will disappear from the retail landscape. Glickman: Most retailers are shif ing focus and heavily investing in their omni-channel platforms, information technology, logistics, and same- or next-day delivery. By doing so, retailers like Target, Macy’s, Nordstrom, Walgreens, T e Gap, Of ce Max/Of ce Depot, Walmart, and many others are positioning themselves to compete in the digital world. Jennifer Norbut is senior editor of Commercial Investment Real Estate. WHAT’S NEXT? 7 RETAIL TRENDS TO WATCH 1. The Internet’s Other Impact. Online sales are not only impacting the retail sector, but the Internet is creating more informed consumers. Well-educated shoppers are causing pressure on retail margins, which translates into pressure by tenants to lower rent. 2. More Sales, Less Space. The wide range of available technology offers retailers more effi cient inventory control and space needs. They are applying the 80/20 rule – 20 percent of their SKUs generate most of their sales and gross margin. The result: Retailers can generate more sales per square foot in less space causing store formats to shrink. 3. Bigger Players Dominate. The supermarket sector is being consumed by dominant players with larger stores. 4. National Anchors. In large shopping centers, national credit-tenant anchors are winning out over same-category regional and local tenants. 5. Big-Box Woes. Large vacant boxes are becoming increasingly more diffi cult to re-tenant. 6. Exclusive Use. Second-generation retail space is being increasingly impacted by exclusive-use lease provisions. 7. Service Tenants Triumph. Landlords are making greater use of service tenants to maintain occupancy. A recent study revealed that service tenants comprised less than 15 percent of total occupancy 10 years ago versus almost 25 percent today. Gary M. Ralston, CCIM, CPM, SIOR, is managing partner of Coldwell Banker Commercial Saunders Ralston Dantzler Realty LLC in Lakeland, Fla. Contact him at Gary@SRDcommercial.com. 36 September | October | 2013 Commercial Investment Real Estate