As online sales continue to rise, the signs of the Internet’s impact on retail real estate are hard to According to projections by Forrester Research, cross-channel retail sales—including those influenced by online information but completed in stores—will hit $1.8 trillion by 2017, up from $1.2 trillion in 2012. Projections of new-store openings hold more subtle clues. Cassidy Turley estimates that restaurants will account for 43 percent of the 38,000 new-store openings expected this year. Until 2011, new-restaurant openings averaged only about 35 percent of the total. The result hints that online sales are contributing to a broad slowdown in non-restaurant retail expansion, according to Garrick Brown, director of research for Terranomics, Cassidy Turley’s retail affiliate. For retail real estate management, the implications of e-commerce are both far-reaching and complex. The much-noted preference for smaller footprints is a fact of life for many electronics retailers, department stores and other categories, which can treat their stores as showrooms, notes David Birnbrey, chairman & co-CEO of the Shopping Center Group. The influence of online shopping on this shift is impossible to miss. As a rule of thumb, Birnbrey says, the most likely products to be sold via e-commerce are those people don’t mind waiting for. For instance, according to the most recent estimates by the Census Bureau, computers and consumer electronics account for 22 percent of all Internet sales. Apparel, the runner-up, makes up 18 percent—the only other category to reach more than 10 percent of total online sales. Yet rising online sales do not negate the value of a strong brick-and-mortar presence for apparel retailers. Ordering a DVD online is one thing, but customers like to see clothing and try it on before taking out their wallets. In this fast-changing environment, retailers are expanding the complementary use of different retail channels. Fulfillment is one activity demonstrating robust growth, with bigger retailers increasingly fulfilling e-commerce orders from their stores, observes Bryan Jensen, vice president & principal of supply-chain strategy and logistics consulting firm St. Onge Co. By the end of last year, Best Buy Co. was offering its ship-from-store service at more than 400 locations. Macy’s, too, is expanding its omni-channel services, with plans to make fulfillment available at 500 stores. And in November, Gap Inc. expanded its “Reserve in Store” service to more than 200 Gap stores in 15 markets as well as its entire Banana Republic portfolio. Customers are invited to order as many as five items, which are held at the store for pickup until the next business day. On the flip side, some retailers are downsizing their stores, partly vacating a large-scale footprint. That presents a series of challenges for the owner and its leasing agent, since they have to ensure enough frontage for the retailer that replaces them, according to Jeff Green, a veteran retail real estate consultant based in Phoenix. But space that needs backfilling also gives the management team a chance to refresh a center—for instance, replacing an office products store with a strong anchor like Whole Foods. More complex are some new strategies emerging from a combination of growth in e-commerce and continued economic recovery. Macy’s, for instance, drew headlines in January when it announced intentions to shutter stores in a number of states—including Arizona, Kansas, Maryland, New York and Utah—and trim about 2,500 jobs. Its focus on its online sales was widely cited as a factor, but amid the buzz about the closings, the company’s plans for new stores may have been overlooked. By fall 2016, the department store chain expects to open stores Macy’s-brand stores ranging from 150,000 to 195,000 square feet in the Bronx, N.Y., Las Vegas, Miami, Ponce, Puerto Rico, and Sarasota, Fla. During that stretch, Macy’s will also roll out new Bloomingdale’s stores in Honolulu, Miami and Palo Alto, Calif. Of note, the 120,000-square-foot store at Stanford Shopping Center in Palo Alto will replace an aging predecessor that, at...
A Winning Combo
Mixing Residential and Retail
The nation’s home ownership rate is on the decline as rising real estate prices and mortgage rates hold back demand. According to the latest data from the U.S. Census Bureau, the ownership rate dropped to 64.8 percent in the first quarter 2014 from 65.0 percent in the first quarter 2013 and 65.2 in the previous quarter. The rate is the lowest since the second quarter of 1995, when it was 64.7 percent. The Census report also shows that approximately 86.2 percent of the housing units in the United States in the first quarter 2014 were occupied and 13.8 percent were vacant. Owner-occupied housing units made up 55.9 percent of total housing units, while renter-occupied units made up 30.3 percent of the inventory in the first quarter 2014. Renting has started gaining ground mainly due to a combination of factors, including slow job growth, staggering economy, tight mortgage credit and declining affordability. In the first quarter 2014, the median asking rent for vacant for rent units was $766, whereas the median asking sales price for vacant for sale units was $139,200. Aside from the financial considerations, a lot of people turn to renting because of the flexibility that it entails. It’s no secret that young professionals follow the job trail and seek housing that best accommodates their lifestyle needs. Often times, this means that proximity to employment cores, recreational and shopping destinations, as well as sustainability, walkability and comfort turn into powerful retention drivers. While the Millennial generation remains the key renter demographic, baby boomers are expected to give a huge boost to the rental market, particularly due to the increasing number of empty-nesters who are looking to downsize and move into more sustainable homes. With consumer attitudes and habits on an ever-shifting path, the real estate landscape is bound to change as well. For the contemporary renter, mixed-use developments – usually retail and residential units wrapped around each other so as to offer a cohesive live-work-play environment – have become the place to be. Yardi client The Bozzuto Group, a Greenbelt, MD-based real estate services company, builds on such principles as quality, diversity, and inclusion and strives to deliver enhanced communities to cater to today’s most discerning renters – and all of this while respecting the world in which we live. The company’s newest mixed-use development in Washington, D.C., combines a premier location on stately Wisconsin Avenue with brilliantly designed residences and state-of-the-art retail. Dubbed Cathedral Commons, the project is a joint venture of Ahold USA, parent company of Giant Food, Bozzuto Development Company, and Southside Investment Partners of Baltimore. The boutique style building offers 138 apartment residences and eight townhomes which will be available in fall 2014. Among a series of upscale amenities, the property will feature a hotel-style lobby; fitness center; a library and conference room for private meeting space; resident lounge for hosted community social functions; rooftop deck and private outdoor courtyards; and a 24-hour concierge offering Bozzuto’s Top Notch services. Interiors will showcase contemporary design elements, including a chef-inspired kitchen with quartz countertops, custom oak flat-panel cabinetry, white beveled subway backsplashes and upgraded stainless appliances. Living spaces will include hardwood flooring and contemporary chrome LED track lighting, while bathrooms will boast Florentine Carrera floors and showers, chrome fixtures, and custom-designed vanities with integrated square sinks. The retail component, scheduled to begin delivering this fall, includes Barcelona Restaurant & Wine Bar, Raku, iDoc Optical, Wells Fargo, SunTrust, CVS Pharmacy, and Starbucks, as well as the 56,000-square-foot Giant Food, which will bring a new urban prototype concept to the project. H&R Retail handles leasing at the property. “We are excited to bring a mix of locally-based retailers and national brands to one of the most established and historic neighborhoods in the District,” said Toby Bozzuto, president, The Bozzuto Group. “Cathedral Commons and its new retail center will be vibrant, modern additions to Wisconsin Avenue and Northwest D.C....
John Crossman
Crossman & Company
John Crossman has taken a career in commercial real estate to exceptionally contributive heights. Not content to focus solely on the success of the company he helms, the 42-year-old Floridian takes the time to speak to college students, volunteer and fundraise for non-profit and social justice causes, and all the while maintaining a focus on faith and family. In one of the online videos in which he is featured, Crossman explains his philosophy: “Some people have a perspective that if you’re a leader, you’re a king. You put a crown on, and people serve you. I remind myself that in my leadership, I’m a servant. Staying focused on serving my clients and serving my employees, serving the industry and serving Florida State, that’s my lot in life.” It sounds like a full plate, but Crossman has an impressive legacy to maintain. His father, the late Rev. Kenneth C. Crossman, was a Civil Rights leader influenced by Martin Luther King Jr. Growing up in a home where education and service were strong values was a major influence on Crossman, who has brought those principled practices into his real estate business. “There are lots of reasons to do it, but I feel morally obligated. If we weren’t helping out in the area of education within our industry, we’d really be doing something wrong,” he said in a recent interview. Yardi client Crossman & Company, co-owned by John and Scott Crossman, is a major retail leasing, management, development, and marketing firm in the Southeast, with over 20 million square feet of inventory in Florida, Georgia, Alabama, South Carolina, North Carolina and Tennessee. Since leaving Trammell Crow in 2006 to partner with Scott, Crossman has focused much energy on educating the real estate leaders, both of the present...
Shopping Snapshot
ICSC Infographic
You may have heard that Americans now do all of their shopping online. But it’s too soon to write shopping off as a national pastime just yet. In fact, shopping centers across the nation are seeing steady increases in sales this spring and summer, benefiting the economy. Jobs at the mall are also up. And in the good news category for commercial real estate companies, net operating income for shopping centers showed a steady upward trend in Q2 2013. These observations are culled from a dynamic infographic from the International Council of Shopping Centers (ICSC), shared below. What are shoppers spending more of their money on this year than last? Groceries, jewelry and home furnishings lead the way. Have you been spending more time at the mall this year? Are leasing conditions strong in your local retail market? Thanks to the ICSC blog for permission to share this...
Shopping for Gen Y
Housing preferences
As more of the 80 million-member Millennial generation enters the workforce, these so-called Gen Y-ers, age 18 to 35, are on everybody’s minds these days as one of the largest—and most fickle—groups to influence housing, shopping and the workplace. Financially strong and responsible, they nonetheless like to shop, prefer convenient housing over expansive, and while they are not yet the company decision makers, they certainly represent a growing proportion of the workforce—with a work style that is sometimes at polar opposites to their parents, the giant Baby Boomer generation. The Urban Land Institute followed up last year’s study of Gen Y housing preferences with a new analysis of their retail habits, released during the Spring Meeting, which took place in San Diego in mid-May. The study identified a strong group, with even a good percentage of those in their 20s financially independent and earning a comfortable living. Sixty-five percent of the 1,251 respondents to the survey said they do not receive financial help from their parents, with 41 percent working full time and fully 46 percent achieving household income of $50,000 or more per year. Thirty-two percent own their own home (predominantly those in their 30s). They carry an average of $22,000 in student debt, but four of five said they don’t use credit cards and 27 percent pay their credit card bills in full every month. Interestingly, while a large proportion live in or near cities, their orientation and long-term plan may be otherwise. Just 14 percent live in or near downtowns, but another 34 percent live in city neighborhoods outside the downtowns (think Brooklyn in New York City or Buckhead in Atlanta), while 13 percent live in dense older suburbs and 11 percent in newer, outlying suburbs; 19 percent in small cities...
Skyreaching Heights
Petronas Towers’ Yardi connection
Here’s a trivia question for you: Without cheating and looking at your smartphone, can you name the top ten tallest buildings in the world? And for bonus points: do you know that one of the planet’s highest skyscrapers has a Yardi connection? Until not too long ago, the world’s tallest skyscraper, was the Petronas Towers in Malaysia. For six years, between 1998 and 2004, Petronas’ sky-scraping spires were the highest on record. Since then, a number of buildings have surpassed it. Here’s the top ten list of tallest buildings as recorded by Wikipedia: 1 Burj Khalifa Dubai UAE 828 m 2,717 ft 2010 2 Makkah Royal Clock Tower Hotel Mecca Saudi Arabia 601 m 1,971 ft 2012 3 One World Trade Center New York City USA 541 m 1,776 ft 2013 4 Taipei 101 Taipei Taiwan 509 m 1,670 ft 2004 5 Shanghai World Financial Center Shanghai China 492 m 1,614 ft 2008 6 International Commerce Centre Hong Kong Hong Kong 484 m 1,588 ft 2010 7 Petronas Tower 1 Kuala Lumpur Malaysia 452 m 1,483 ft 1998 7 Petronas Tower 2 Kuala Lumpur Malaysia 452 m 1,483 ft 1998 9 Zifeng Tower Nanjing China 450 m 1,476 ft 2010 10 Willis Tower (Formerly Sears Tower) Chicago USA 442 m 1,450 ft 1973 Its one-time status as the tallest is one of many interesting facts about the Petronas Towers. Here are a few more from PBS.org: The Petronas Towers are constructed of 36,910 tons of steel Even if you have never visited Malaysia, you may have seen the towers featured in the film Entrapment, which came out in 1999, just one year after construction was completed A high-speed elevator takes you from the basement to the top of either tower – 88 stories – in just 90 seconds A full round of window washing of the 16,000 windows on each tower...
Evolving E-Commerce
Impact on real estate
Today’s retail market is something of a “living” sector, seemingly in a state of constant change as manufacturers and retailers learn to harness ever-advancing technology to attract and retain customers. Over the years, advancements have led to a variety of concerns, some of them significant: The growing popularity of online shopping has at various times fanned real estate owners’ fears that demand for bricks and mortar would wane. Retailers have feared a loss of turf to e-tailers, in particular Amazon and other mega-players. Consumers have feared invasion of privacy as their preferences are recorded and targeted in minute detail. All are valid concerns. But like any advancement, over time technology has also brought brand awareness, better customer service, greater convenience—even a competitive edge. And the refinements keep coming. As the speed of e-commerce increases, the types of technology needed to meet higher expectations grows ever more complex. Same-day delivery of consumer and business goods is one new wrinkle. Once limited to local delivery in big cities (Barnes & Noble has long offered the service in New York City, for instance), this trend promises to spread in the not-so-distant future. But with volume and distance come complications: Extending the reach and volume of same-day service demands new types of machinery and new sorting capabilities—and that presents a challenge not just for the machine manufacturers and logistics providers but for the property owners, as well. In fact, the new machinery requires a variety of changes in space: more complex internal layouts and technical capabilities to accommodate the machinery; larger mezzanine areas with higher clearance for packaging and other back-office tasks; greater life-system components ranging from lighting to HVAC to parking to fire protection because of an increased employee presence. The warehouses, though necessarily more locally based...
Joanne Massey
Sundance Square
Joanne Massey is the controller for Sundance Square, the renowned Fort Worth property management firm owned by the Bass family that controls 35 city blocks of the city’s downtown core, including numerous historic buildings, and is considered one of America’s most successful urban revitalization efforts. But her interest in cool stuff from the past doesn’t end when she leaves the office. In her free time, Joanne and her husband Robert enjoy shooting vintage lever action guns – “the kind that cowboys used to shoot” – in Cowboy Silhouette competitions. She’s reached the AAA level in many of the competition categories, which is no surprise when you learn that she’s a former national-caliber archery athlete. She got into Cowboy Silhouette after reconnecting with her husband, a college sweetheart whom she married four years ago. He was attending competitive rifle and shotgun events, so she tagged along. The Omaha native is also an avid golfer who hits the course several times a month. “I won’t go and just sit, that’s too boring,” she told us. While attending college at Texas Christian University, she was the top female collegiate archer in the state of Texas, and ranked in the top 10 nationally. Though the U.S. team selection process for the 1980 Olympic Games didn’t go in her favor, she has fond memories of her archery days. Joanne is also right on target with her career at Sundance Square, where she rose up through the Bass corporate accounting office to head up the accounting team for Sundance and oversee numerous major software transitions. Her team initially ran two high-rise office towers, then merged with another Bass-owned operation to form Sundance Square that oversees all of the downtown properties. She loves her job. “Being in a property management office,...
Lucy Billingsley
Billingsley Co.
Lucy Billingsley’s distinguished career in real estate development ranks her among the nation’s leading female industry executives. In the fourth decade of her career, she maintains great passion for the next project to command her attention. “My favorite deal is always the next one,” she told us during a recent interview. Billingsley Company, the Dallas-based company with land, office space, industrial, retail, single-family, multi-family, mixed-use and master-planned developments that she and her husband Henry founded in 1978, is flourishing. New phases of 10,000 unit master-planned rental communities The Neighborhoods of Austin Ranch and Cypress Waters are currently underway, and Billingsley is excited about changing the face of the multifamily experience. The company is also expanding its office and industrial holdings. Billingsley also devotes much of her time and energy to charitable work, and her philanthropy has included The Chiapas Project, Grameen Foundation USA, Women for Women International, National Geographic Society Council of Advisors, World Affairs Council (Dallas), Brain and Creativity Institute at USC, Council of Foreign Relations, The Hockaday School, and The Hunter and Stephanie Hunt Institute for Engineering and Humanity Advisory Board. In a short conversation, she filled us in on few views of the current marketplace, how she chooses philanthropic causes, and the lessons that her father, famed developer Trammel Crow, imparted to her. TBS: It’s been a challenging climate for real estate sales, investment and development over the last several years, although Texas come through the down economy very strongly. What do you see as the most pivotal focal points for property executives as the financial climate nationally continues to improve? LB: I think the multifamily world is a world that has made a significant and permanent shift in its role in America today – the shift is because the American...
