Digital Storefronts in Physical Properties

 

NEWSFLASH ICSC European Conference Update: The day started with keynote speaker, Alexander Von Schimeister, managing director for eBay in Turkey, explaining how eBay has evolved from initially working with private sellers to trade ‘collectable’ and unique items, to larger companies and brands. Today over 75% of the items that eBay sells are brand new, and eBay is working with retailers to market and sell their products to a wider customer base, without diluting the presence of their brand in bricks and mortar locations.

Von Schimeister shared one innovation that eBay in partnership with Westfield Malls is prototyping — digital storefronts in physical properties.

The digital storefront displays have interactive touch screens that allow customers to purchase and have items delivered to their home – wait time for delivery in photoManhattan is less than an hour! The storefronts have zero inventory, operate 24/7 and provide a unique way to connect and serve customers in a pop-up format that can give access to brands and items that wouldn’t traditionally be available to shoppers in these markets. The most notable digital storefront was the Kate Spade Saturday store in New York City.

After the session the conference moved to round table lunches, where I led a discussion on using social media to market shopping centers. The group was primarily from the Nordic Council of Shopping Centers, including Finland, Norway, and Sweden. It’s fascinating to see how social media and technology are flattening the world! More to come from the panels and tours later this week!

BY: JUSTIN GREIDER, U.S. ambassador of the ICSC Next Generation program, JLL Retail Florida

Retail Crosses a Bridge this Week in Istanbul

 

NEWSFLASH: ICSC European Conference Update: This week the retail industry gathers in Istanbul, Turkey for the 2014 ICSC European Conference to examine how shopping centers can innovate, analyze how to meet changing consumer demands and learn about future growth – and after a few delayed flights from the United States, I finally made it!

My arrival flight descended over the rural countryside of Turkey, and then approached the urban areas and city over the Sea of Marmara, which spans from the Picture1Mediterranean Sea to the Black Sea. The ride to the hotel provided me a first glimpse of the coutnry – the edge towards the Bosphorus Strait through the Asian side of the city felt very similar to driving through Queens or the older parts of Brooklyn; lots of mid-rise residential buildings with retail everywhere, but mostly local shops and restaurants. After crossing the river that splits the city in two, we climbed steep hills into the European side of the city. Here the buildings are much more ornate and have an older feel. There seemed to be more foot traffic in this part, and international, well-known retailers (though still not many from the US!)

The first night of the conference was centered on networking at the opening reception. I’m finding that the conference has a very diverse makeup –  my table at dinner included attendees from Holland, UK, Germany, Russia, Finland, France, Turkey and me from the U.S.  — fortunately, they all agreed to have the dinner conversation in English so I could keep up!

While I’m attending the conference I’ll continue to post to this blog, describing my activities, sharing the sentiment of the sessions I attend, the people I meet and the mood I find in Istanbul. Please feel free to comment and share these updates with friends and clients. Follow @JLLRetail on Twitter #EuroConf  for more updates from the conference.

BY: JUSTIN GREIDER, U.S. ambassador of the ICSC Next Generation program, JLL Retail Florida

Robert Gibson Joins JLL to Expand NYC Retail Practice

 

Robert Gibson has joined JLL as vice chairman of New York retail brokerage to lead the expansion of the firm’s retail platform in Manhattan, and will be responsible for the growth of retail tenant and agency leasing in the market.

“New York is a vital market for international retailers pursuing entry into the U.S., and for national retailers seeking access to an extremely dense customer base. As retail’s globalization continues and competition for prime, high-street locations increases, the addition of Robert Gibson to our New York retail platform will significantly enhance our ability to service clients with the very best representation.” – Greg Maloney, CEO of JLL Retail.

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The addition of Robert to JLL’s existing retail practice creates a robust platform for new and existing clients, and rounds out the expansion of JLL’s New York office to provide complete services across all business lines. JLL’s existing NYC retail brokerage team, Paul Berkman, Craig Slosberg and Davie Berke, will work as a team with Robert in servicing New York and tri-state-area retail clients.

“JLL’s extraordinary national reach and its internal culture of collaboration will enable us to provide a greater level of service to retailers seeking a presence in the New York metropolitan area and nationally. We look forward to a period of additional growth and expansion.” – Robert Gibson

Robert, most recently a vice chairman with Cushman & Wakefield Inc.’s Midtown Manhattan office, has more than 26 years of retail leasing experience in New York and nationally. He has represented H&M, Ferragamo USA, Capital One Bank, Burton Snowboard Company, Citibank N.A., Filene’s Basement, Sixty USA, Ricoh Corporation and Verizon Wireless in the New York metropolitan area and Salvatore Ferragamo, Burton Snowboards, Furla, and Trina Turk nationally. Property owners he has represented include Fisher Development Associates, LLC, Northwestern Mutual Investment Management Company, Alchemy Properties, Jamestown Properties, Digby Management, Colby Capital, and Marx Realty & Improvement Corp.

Robert received a bachelor’s degree from the State University of New York at Albany, and is a member of the Real Estate Board of New York’s Stores Committee, and of the International Council of Shopping Centers.

Let’s Take This Offline: Retail’s Migration Back to Honest-to-Goodness Storefronts

Fifteen years ago, online-only retailers didn’t exist but today there are more than 100,000 e-commerce retailers active in the United States[i]. While e-commerce is growing leaps and bounds, online transactions only represent 6 percent of total retail sales[ii], and while that number is set to double by 2020, bricks-and-mortar will remain a key driver to growth. Online-only sales strategies represent the ultimate in flexibility and cost-cutting, but the recent Clicks to Bricks: Why Online Retailers are Opening Stores report by JLL Retail said an increasing number of web-only retailers are planting a stake in old fashioned, bricks and mortar storefronts to maximize their sales.

“The virtual shopping game is changing. Even the most tech-savvy shoppers sometimes need to touch and feel the products they’re buying. It isn’t enough to have a purely bricks and mortar location, and we’re quickly finding out the same goes for a digital-only platform. To get the best of both worlds, e-tailers are reevaluating their current sales strategy to include physical locations, because the more touch points retailers can offer to shoppers the better.” – Lew Kornberg

Clicks to BricksWhile retailers are expanding their web and mobile sites, and building strong logistics systems, e-tailers are now clamoring for physical space. There are benefits to physical retail space that can’t be imitated online with current technology, and these stores have unique qualities to capture consumer’s attention. Online-offline stores typically showcase goods, and offer consumers a unique experience that’s difficult to replicate by using sensory appeal and high-tech gadgets. Retailers doing it right include:

  • Originally an online-only eyewear company, Warby Parker began to experiment with physical spaces by opening small showrooms, shop-in-shops and pop-ups across the country, going so far as to retrofit an old school bus into a traveliny store. The retailer opened a 2,000 square-foot flagship store in New York City’s SoHo neighborhood that has the look and feel of a classic library where shoppers can schedule an eye exam with an in-house optometrist, receive their glasses by mail or through store-pickup, and even browse through a selection of books from small independent publishers.
  • The online jeweler, Gemvara, recently opened a temporary store on Newbury Street in Boston to test the market. The highly interactive store allows consumers to configure jewelry using tablets and computers, and to have their purchases shipped directly to their homes. While in the store, shoppers receive expert advice from jewelry consultants, get a tutorial on gemstones, trends and jewelry care, and even receive a free set of stud earnings with any purchase.
  • Bonobos.com was founded in 2007 to provide men with better fitting clothes and make shopping an easy and hassle-free experience. While they found online-only suited some of their needs, they Guideshop, one-on-one shopping environments, designed to serve as highly personalized extensions of Bonobos’ online store. Guideshop “guides” work with each customer during appointments, which take fewer than 45 minutes, depending on a shopper’s needs. The store accepts walk-ins, but suggests shoppers book appointments in advance.

[i] How many online stores are there in the U.S. (2013 edition)?. (2013, September 18). Retrieved from http://blog.referralcandy.com/2013/09/18/how-many-online-stores-are-there-in-the-us-2013-edition/

[ii]  Thomas, I. U.S. Department of Commerce, (2014).Quarterly retail e-commerce sales 4th quarter 2013 . Retrieved from website: https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf

You’ve got questions, who’s got answers…now that RadioShack’s closing 1000 stores?

RadioShack’s Super Bowl Commercial The 80’s called…. They want their store back was a big hit, and may have been extremely prescient. But despite the headlines, the new store design promoted in the commercial is not counter to closing excess and underperforming stores— in fact it supports it, says JLL’s Michael Hirschfeld.

Shuttering storefronts is not revolutionary anymore, it’s evolutionary! In one fell swoop Radio Shack is changing how consumers perceive them, and simultaneously changing the RadioShackcustomer experience in their existing storefronts. By closing underperforming stores or stores in saturated markets, RadioShack has an opportunity to redirect attention and focus on the other 4,000 locations that are still operating. They serve an important niche market and we expect them to be around for some time. They’re still a go-to source for connectivity – in the long run, it’s expected to be a net positive for the consumer and the company.

So what will happen to the vacant space? JLL’s Kimli Cross says, while some locations in secondary malls will be a little more challenging to backfill, most can be occupied fairly quickly with temporary tenant in the near term, and we expect the street locations to be readily absorbed.

JLL Expands Retail Platform to the Great Lakes Region

Mary and MelissaAs part of its continued growth in retail brokerage, JLL today announced its expansion into the Great Lakes Region with the addition of Melissa Ruther and Mary Bresnahan as Vice Presidents, Retail Brokerage. The new team will be led by Steve Yenser as part of his current role as National Retail Brokerage Lead for JLL. Together, they will focus on all aspects of retail brokerage activity including tenant representation, project leasing, outparcel sales, new development and redevelopment throughout Ohio, Kentucky, Michigan, Western Pennsylvania and West Virginia.

“We are very excited to add retail brokerage capabilities to our list of client services in the Great Lakes Region, and see a huge opportunity to better serve our current and future clients’ needs. We expect to establish market leading results in the retail sector, as we have with all of our other service lines in the region,” J.C. Pelusi, Great Lakes Market Leader at Jones Lang LaSalle.

Collectively, Ruther and Bresnahan represent a wide range of national and local retailers including: Bloomin’ Brands, DXL, Cabela’s, Chuy’s, Marquee Theater, Matt the Miller Restaurant Group, Nationwide, Starbucks, Red Robin, Time Warner and Toys R Us/ Babies R Us.

Ruther will be based in Cincinnati, and  has more than a decade of real estate experience, and joins JLL from Edge Real Estate Group, LLC., where she was responsible for tenant representation, development, dispositions and agency leasing. She earned her bachelor’s degree from Xavier University, and is an active member of the International Council of Shopping Centers (ICSC).

Bresnahan will be based in Columbus, and has been involved in the retail brokerage business for more than a decade. She joins JLL from CBRE, where she specialized in lease dispositions, acquisitions of retail developments and tenant representation. She holds real estate licenses in both Ohio and West Virginia, and is active in the International Council of Shopping Centers (ICSC).

Yenser joined JLL in January of 2010 to lead the firm’s retail local market practice. Since 2012, he has steered the firm’s retail brokerage expansion by adding more than 80 experts, in 20 core markets across the country. Yenser will continue to lead the firm’s national expansion efforts, and will directly lead the retail efforts in the Great Lakes Region.

Institutional Lenders to Place Record Capital into Commercial Real Estate in 2014

LIVE FROM MBA: It is hard to believe that just seven short years ago, an economic collapse sent the U.S. debt markets into a tailspin, and the commercial real estate industry was left holding near valueless paper and underwater investments across the nation. Now, commercial property investors and lenders have a new attitude, and it seems they are just as confident as the peak market days. Industry experts attending the Mortgage Banker’s Associations’ (MBA)  in Orlando this week caution, there are fundamental differences in today’s optimistic outlook.

CMBSChart1

U.S. CMBS Issuance

While money isn’t exactly flying from the sky, it is flooding into real estate in record-numbers from the conduits, according to JLL’s Cost of Capital report. U.S. CMBS issuance peaked in 2007 at $230 billion. In 2013, CMBS issuance reached a post-recession high with $86.1 billion of new issuance, up 78.0 percent from its $48.4 billion level in 2012. Highly-rated CMBS spreads are also low from a historical perspective and remain stable, tightening by 20 bps since the start of the fourth quarter 2013, and into 2014.

Looking at the retail sector, there is plenty of debt capital at spreads in the 150 to 200 bps over swaps for 10-year fixed rate deals.  With the recent pullback in treasuries, trophy assets and those with long-term credit in rent rolls may be able to achieve financing in the low to mid-4 percent range for 10 years.  For smaller deals and those in transition, debt funds are filling a nice void in the debt markets with floating rate pricing in the 6 percent range. The net lease market is pricing incredibly strong from life companies with cap rates of sub-5 percent and debt yields at 7 percent for 15 to 20 year full amortized, investment-grade deals.

Wondering about other property sector financing? Read more about office, industrial, multifamily and hotels. 

Don’t stop reading here. Connect to all of JLL’s market resources:

  • For more information on market financing view JLL’s Cost of Capital report
  • Interested in hearing more about the global capital markets? Please attend JLL’s Global Market Perspective Webinar to learn valuable insights directly from our economist and property experts Wednesday, Feb. 5 from 10 to 11 EST. Register now: https://www4.gotomeeting.com/register/144368623.
  • For more news, videos and research resources on Jones Lang LaSalle, please check out the firm’s INVESTOR e-magazine

 

JLL & Roger Staubach Betting on the Broncos

Staubach reveals his winner of this Sunday’s Big Game.While the talking heads and Vegas odds makers look to point differentials, QB ratings and other on-the-field stats, the JLL team and its Americas Executive Chairman, Roger Staubach, are once again sticking with what they know best — commercial real estate — to make their winning pick for Sunday’s Big Game .

According to the firm’s analysis of the last 13 season finale games, teams based in cities with the higher office vacancy rate (i.e. more space available for lease) have won the Lombardi Trophy 62 percent of the time, including last February when Baltimore (15.5 percent vacancy) edged San Francisco (11.8 percent vacancy). This year, according to the latest JLL Research, the overall vacancy rate in the Mile High city stands at 13.9 percent compared with 12.5 percent in the Emerald City, making the Broncos the firm’s favorite to win the crown.

JLL’s Roger Staubach, who was MVP of the 1972 game, said that his pick also takes into account Broncos quarterback Peyton Manning, whose play has been on the upswing all season, much like the LoDo micro-market in downtown Denver, where the vacancy rate closed 2013 at 8.0 percent and more than 550,000 square feet of new buildings are currently under construction and one 110,000-square-foot building recently delivered.

“Peyton Manning is one of the greatest NFL quarterbacks of all time. I believe in our JLL formula, but more importantly, I also believe in Peyton and I know he’s going to get the job done for the Broncos and the great people of Denver on Sunday night.” – Roger Staubach

At the same time, Staubach also had high praise for the Seahawks’ defense, which has held its opponents to an average of just 11.6 points per game over their last five contests, and is almost as hot as Seattle’s South Lake Union submarket (vacancy rate of just 4.0 percent) or how the regional office market performed in 2013 yielding the fourth highest rate of net absorption across the country.

“I love Seattle’s ‘D,’ I love [quarterback] Russell Wilson and I love ‘The 12th Man, but this is Denver’s year.” – Roger Staubach

2014 Retail Investment Horoscope

Is equity still chasing retail deals? Are trades expected to happen in secondary markets? Will rising intrest rates have an impact retail transactions?

David Schonberger, Managing Partner at Radiant Partners,  JLL retail investment sales expert Margaret Caldwell and ICSC Chairman David LaRue share what they think is on the horizon for retail investment in 2014 in the short video below.
David

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From Dock to Doorstop – the new retail race

UPDATE ICSC New York: From E-bay’s one hour delivery service to Amazon’s futuristic proposed drone delivery, retailers are battling to gain competitive advantage by appealing to their customers’ need for  ‘insta-delivery’.

As the retail industry transitions its supply chain to an omni-channel model, demand is soaring for the real estate that supports this new paradigm.  A distinct real estate asset class tailored to e-commerce delivery has evolved. JLL has identified six newly-defined primary types of facilities that retailers are relying on to win the delivery war and reach consumers faster and more efficiently:

  • Mega e-fulfillment centers – where merchandise is stocked and picked at item level.
  • Parcel sortation centers (hubs) - parcels are sorted before being forwarded to local parcel delivery centers.
  • Local parcel delivery centers - for ‘last mile’ fulfillment, these represent a new type of facility and consumer destination.
  • Local urban logistics depots - to ensure rapid-order fulfillment, particularly to service major cities, these destinations may be integrated or separate from retail store locations.
  • Return processing centers – to process returned items.  Often, they are located within mega-fulfillment centers, but are typically centralized, requiring specialized inventory and materials handling needs.
  • Online food e-fulfillment centers - with appropriate refrigeration and cooling, typically for grocery delivery and similar functions.

With seven out of 10 retailers still analyzing and defining their omni-channel strategy for 2015 to 2017, demand for these facilities are set to increase. In the next five years, we expect e-commerce space to reflect the consumer’s need to receive their purchases not only when but where they want.  We also expect retailers to make the returns process just as easy. Omni-channel strategy will drive a brand new class of distribution real estate, such as return processing centers and watch out for more urban logistics centers on the outskirts of our nation’s cities.