SAN DIEGO-Rather than worrying about the size of the retail parcel or the land around it, commercial real estate executives must pay attention to the merchants they have in place and learn those merchants’ business in order to be successful, say panelists at the recent ICSC Western Division Conference here. The panel, which included Joseph C. Hoesley, vice chairman of US Bank; Daniel Hurwitz, president & CEO of DDR Corp.; Alex Lelli, SVP, growth and development for ULTA Salon; Scott Nelson, SVP, real estate for Target Corp.; Christopher Niehaus, managing director of GreenOak Real Estate Advisors LP; and Charles Stilley, president of development for LOOK Cinemas, was led by Patrick Donahue, chairman and CEO of Donahue Schriber.
“We are in the retail business,” said Donahue. “We’ve gotten away from that in the last few years. You have to get involved in the retail business to be successful. Don’t just think of it as just a box or a piece of dirt.”
Helping retailers be successful is also important. For example, DDR Corp. has a Set Up Shop program that helps small businesses set up a business plan and get a break on rent for six months to allow them time to establish themselves in retail centers. “This is giving people hope, and it makes shopping centers unique” by avoiding the homogeneity in so many American retail centers, said Hurwitz. “What matters is what’s in the box, not if the box is shrinking or growing.”
Innovative thinking and reinventing oneself are also key to recovery, the panelists said. Stilley spoke of the luxury-cinema concept called Cinepolis that has emerged in the last few years and how it has allowed cinemas to raise their income from $3 million to in excess of $10 million per year. “You’re going from a lot of seats to fewer seats, and the square footage is shrinking, but you have more revenue per seat. This model is easier to work with and more mobile. And the consumer is attracted to these higher-end theaters.”
In discussing the Internet’s effect on brick-and-mortar retail, Nelson said the trick is for retailers to figure out how to leverage online purchasing with in-store shopping. “People with iPhones are using them to make informed purchases with regard to pricing.”
Lelli added that using the Internet to bring customers back into the store is key, such as offering in-store coupons in an online format. “Women don’t order a product off the Internet that they haven’t personally experienced.”
Hurwitz concluded, “I have no fears that the Internet is the death knell of the power center. The Internet is a very convenient excuse for poor performance.”
Donahue summed up:
- We’re in an extended time frame of low interest rates
- There are tremendous capital flows into real estate
- Cap rates are low and expected to drop in power centers
- Values are high
- The dead wood has been flushed out
- Retail is reinventing itself
- In two to three years, retail executives should be successful if they have the capital, product and people to execute what needs to be done.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
