The value proposition of today’s retail property management firm – Part I – by Pliskin
Based on current research, strip shopping centers in the U.S. have been holding their own in 2015. The market is strong, but property managers and owners still face challenges in keeping spaces leased as a result of changing retail market dynamics and other causes, such as excess inventory, competition from online retailers, high profile bankruptcies, and the new demands of today’s shoppers. Staying ahead of these challenges requires the expertise and experience of a progressive, pro-active property management firm.
Excess Inventory, Online Shopping, Maintaining the Right Mix
Some retail property owners are feeling the effects of excess inventory resulting from the decline of major retailers. There were casualties across all sectors, including big names such as Blockbuster Video, Borders Books & Music, Circuit City, Linens & Things, CompUSA, KB Toys and more recently, Radio Shack and the Great Atlantic & Pacific Tea Company’s (A&P) Waldbaum’s, Pathmark and The Food Emporium Stores. Other large retailers, from Office Depot and Sears to Toy “R” Us and Barnes and Noble, have been closing stores; some in very large numbers. On a positive note, there has been growth in some sectors such as alternative grocery stores like Aldi’s, as well as Whole Foods, which have been consuming some of the inventory left behind.
Online shopping continues to take a bite out of brick and mortar centers. The latest projections by Forrester Research are for Internet retail sales in the U.S. to increase this year by 10%, climbing to $279 billion. With the onslaught of online marketing, mobile apps, e-coupons and e-alerts for special sales and promotions, online shopping is not expected to slow down any time soon.
In addition to addressing the excess inventory and stiff competition from online retailers, shopping centers still must grapple with the traditional needs associated with brick and mortar centers. These include: ensuring that the physical structure and building systems are in good condition; the center makes a strong, attractive impression from the road; there exists ample parking in safe, well-lit parking lots; there is a good mix of quality tenants to attract customers; and overhead costs are contained. It’s a tall order to fill that many owners – some focused on their primary profession or business and others simply looking to slow down and without an heir apparent to take over – do not want to manage directly. For these owners, a third-party, experienced retail property manager is invaluable. Leveraging insights, knowledge and resources, this professional can position a shopping center for its greatest success and return on investment.
Optimizing Shopping Center Performance
Experienced property managers understand the nuances of the marketplace; not just the obvious trends. They know what it takes to maximize a shopping center’s performance and transform it from the outside in, so that it attracts new tenants and more customers. They know what strategies to suggest for luring the online shopper into their stores; strategies like creating the so-called “Apple” experience – engaging shoppers with creative in-store displays and ambience in ways in which an online or mobile smart phone experience could never compete.
Skilled property management professionals are in regular contact with the tenants of the centers they manage so they know when a tenant may be considering an expansion, downsizing,a relocation or retirement, and are prepared with other retailers to fill that space as soon as it becomes available. They know what it takes to attract all generations of shoppers, from Baby Boomers to Millennials. For example, surveys to determine what Millennials want from retail centers have found that they want: restaurants at various price points; lifestyle stores like hair/blow-dry salons, gyms or yoga studios; green grocers and specialty food shops; centers that demonstrate a tie to the local community through philanthropic activities and special holiday events; and a commitment to protecting the environment as evidenced by recycling cans, solar lighting and/or panels, and electric car charge stations.
Survey feedback from the Millennial and Baby Boomer generations also indicate they appreciate retail space that’s been “refreshed” with new paint, lighting fixtures, and eye-catching signage, displays and facades. Recommending a face-lift and/or perhaps a pop-up store, which enables a center to test a new tenant concept, are other strategies savvy property managers are using to boost the performance of their clients’ shopping centers.
Maintaining the right tenant mix, keeping a property in its best condition, understanding market trends and how to leverage them to attract customers, and minimizing vacancies and operating costs are ways that an experienced property management firm demonstrates its real value. Helping shopping center owners establish a strong brand and reputation for high quality properties, while protecting their investment and freeing them up to pursue other business or recreational interests also constitutes the property manager’s high value proposition.
Look for our next column in which we will discuss the property manager’s role in advancing high standard operating procedures that reduce expenses and minimize risks.
Jeffrey Pliskin, Esq., is the president & CEO of Pliskin Realty & Development, Inc., Garden City, N.Y.