Lee's Summit has landed two partners to help spearhead a mixed-use revamp of its historic downtown district.
On Tuesday, City Council members approved a development structure agreement with Kansas City-based Lane4 Property Group Inc. and New York-based Biederman Redevelopment Ventures. They will be master developer and manager for the city's Downtown Market Plaza, respectively.
Shots in Arms and Cash in Hands – What Does it Mean for Retail?
The American Recovery Plan Act became law on March 11 – having passed through the House and Senate and signed into law by President Joe Biden one day earlier than anticipated. In the month since its signing, millions of Americans have seen two things happening – (1) access to the COVID vaccine and (2) stimulus checks in bank accounts.
Shots in Arms
Short-term production and distribution challenges plagued the earliest months of the vaccine rollout, with frustration around the varying standards state-by-state and on how and who could access the vaccine. By the passage of the American Recovery Act in March of 2021, the outlook was much rosier, and by March 25, President Biden called a new goal of 200 million COVID-19 vaccines administered in the first 100 days of office (April 30). On March 2, President Biden announced that Merck Pharmaceuticals would assist rival Johnson & Johnson in the production of their 1-shot COVID vaccination, assisting with the distribution of vaccinations and ability to speed up timelines. “Two of the largest pharmaceutical companies in the world who are usually competitors are working together on the vaccine,” President Biden said in remarks delivered at the White House. “This is the type of collaboration between companies we saw in World War II.”
This collaboration has meant an accelerated timeline in even the most bureaucratic and complicated of states. California, home to 33 million Americans, announced that on April 15, all residents over the age of 18 would be able to receive the vaccine. Los Angeles County, the most populous county in the nation sped up that timeline by 5 days, on April 10 allowing all residents over the age of 16 to book a vaccination appointment, many of which were for the single shot JNJ vaccine. Governor Newsom further accelerated the opening when he declared the California economy would be “open for business” June 15.
What does open for business mean? This various state by state. Some states like Arizona, Texas, and Florida, have allowed for businesses to reopen, some removing statewide mask mandates as early as February. Retailers in these states have a head start on their slower-to-open counterparts in other states, being weeks ahead on indoor dining and capacity percentages. Regardless of the state of reopening, commercial real estate professionals agree we will see some return to normal this summer. “Humans are fundamentally social animals and I think we will all be hungry for in-person experiences once it is safe to return to them. Additionally, I think the shift away from working five days a week in the office is going to create a greater desire for ‘third spaces’ — not home, not a formal office environments,” said Clelia Warburg Peters, Venture Partner at Bain Capital Ventures.
The acceleration of vaccinations, paired with better weather and a world of retail adjusted to omnichannel operations, all lead to increased spending. Kiplinger forecasts 10% growth in retail sales in 2021, following a more moderate increase of 3% when pandemic shutdowns reduced sales in many months. 2021’s sales growth will be front-loaded into the first half of the year, because of the boost of relaxation of COVID-19 related restrictions and an increased sense of safety due to vaccinations. Kiplinger anticipates some consumer cash will be diverted into more services in the second half of the year, rather than goods, as travel and tourism are poised for a massive spike.
Stimulus Checks
The bill allocated for a third economic impact payment, or stimulus payment to individuals earning $75,000 or less and couples earning $150,000 or less, filing jointly. Each individual has received $1,400, with dependent children adding an additional $1,400 each to payments.
Based on the previous two rounds of stimulus, roughly 29% of funds were used for consumer spending. The balance went towards debt repayment and savings. Of the consumer spending, food and household supplies were the big winners, with recreational goods and household items making up a smaller, but significant amount of spending. The third round of stimulus has hit bank accounts at a time when the overall consumer confidence has increased, with the Conference Board citing that the confidence index is now at 109.7, up from the previous month’s rating of 90.4. “Consumer confidence increased to it’s highest level since the onset of the pandemic in March 2020,”, said Lynn Franco, the Conference Board’s Senior Director of Economic Indicators. “Consumers' assessment of current conditions and their short-term outlook improved significantly, an indication that economic growth is likely to strengthen further in the coming months.
Consumers' renewed optimism boosted their purchasing intentions for homes, autos, and several big-ticket items. However, concerns of inflation in the short term rose, most likely due to rising prices at the pump, which may temper spending intentions in the months ahead. X Team’s Ken Schuckman of Schuckman Realty based in New York doesn’t see any signs of spending tempering. “There has been a pent up demand for spending. While there has been a seismic shift in spending patterns over the last year, we are an inherently social people, and with stimulus checks in pockets and a more positive outlook than in previous months, spending should increase and benefit retail along with it.”
Ongoing Impact
Economists and CRE professionals alike warn of the long-term inflationary impact of pumping stimulus into the economy. X Team’s Schuckman warns of over-excitement about a second roaring ‘20s, reminding of the long-term impact of an inflationary environment. “There’s a lot of talk about the roaring ‘20s right now, but we need to remember what happened at the end of the last roaring ‘20s, the Great Depression.” Responsible monetary policy will need to follow the government spending spree of 2020 and 2021. Schuckman also emphasizes that the Stay-at-Home economy is over, but the conveniences we’ve become accustomed to will stick. In March of 2020, there was a 5-year projection that 1/3 of malls in America will close, in March of 2021, that timeline has been reduced to 24 months. “COVID has been an accelerator”, says X Team’s President, Dave Cheatham, “It is painfully clear that one of the lessons 2020 taught us is that COVID truly revealed who was weak in the retail sector and, conversely, it proved who was resilient.” Schuckman adds that innovation will be the winner in the new era, category killers will be dark big boxes, where new concepts will be able to open and thrive.
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The power of developing new ideas and mentoring young leaders is no more evident that at X Team Retail Advisors. The national retail alliance announced X Now, its multi-generational team, is growing its members in an effort to cultivate new retail leaders. The new regional X Now leaders are spread across the country and includes:
National leader, Evan Albert of MFI Realty in Baltimore, MD
Northeast, Andrew Thacker of S.L. Nusbaum in Richmond, VA
Southeast, Andrew Tanneberger of The Providence Group in Charlotte, NC
Midwest, Sean von Schwartz of Stokas Bieri in Detroit, MI
South Central, John Frazier of Baker Katz in Houston, TX
West, Kevin Trujillo of Velocity Retail Group in Phoenix, AZ and Joe Chichester of Faris Lee Investments in Irvine, CA
The X Now program was launched to ensure rising stars within the organization receive the tools and resources to develop and sustain a career in the retail real estate industry. Components of the program include mentorship, training, and fostering multi-generational teams, the backbone of longevity in commercial real estate.
“An organization’s growth and long-term success can often be traced to the priority and attention paid to its young leaders,” said X Team’s Jim Stokas of Stokas Bieri, who serves as a mentor to X Now members. “Mentorship benefits the company as well as the younger leaders who receive retail sector training and guidance that ultimately establishes a foundation for career success.”
A recent example of such collaboration within the X Team network involves Indianapolis, IN based Niessink Commercial. Connie Niessink, who serves as a mentor for X Now team members, relays how the firm referred an investment listing encompassing two retail centers in Indianapolis, IN to Faris Lee, an X Team affiliate in Southern California. As a result, Faris Lee found a buyer and a $9.3-million sale was executed for these properties.
The X Team is comprised of more than 350 retail real estate affiliate specialists in 40 markets across the U.S. that have come together in one dynamic and cohesive unit. The value of such an affiliation plays out in numerous ways, not the least of which are the opportunities to network, learn and expand beyond the backyards of members.
Niessink also shares how its 23-years of representing Panera Bread contributes to new opportunities for X Team affiliates. “We just completed our 50th transaction on behalf of Panera,” said Niessink. “Interestingly, this 50th deal was done in Louisville, KY with our X Team Partner, TRIO Commercial Property Group, which was the listing agent for the site. It is a perfect example of the power of collaboration across the X Team platform.”
That type of relationship-building effort to complete deals is at the forefront of X Now, too. Evan Albert, who joined the MFI Realty team in 2015, specializes in tenant and landlord representation throughout the Maryland, Washington D.C. and Northern Virginia markets. He has overseen the expansion of local, regional and national tenants, assisting them in site selection, analytics and deal negotiation. Albert has been in the industry for nearly six years but says he’s looking to build relationships with tenants and landlords through networking in the coming year as part of the X Now program.
Albert said one of the biggest challenges to establishing a foothold in the retail real estate industry for him so far is “building relationships with tenants and landlords who have been using other brokers for years. Retail real estate is an industry of networking, and we are all very social people, but it is difficult to convince someone who has been using broker x for the last 15 years to switch to myself.”
The value a program such as X Now brings to a career is measured in long-term success. “There is tremendous value in the program,” notes Albert. “First, it is a great networking opportunity. Second, these are the future leaders of their markets and by building relationships now, while we are relatively new to the business, allows us to build those decades long relationships that lead to business across our networks. Finally, we can compare ideas, tactics, and strategies to better hone our skills.”
But to tap into the power of X Now, young leaders must understand the support that is available and determine the resources that help them best meet their needs. “I would say the biggest area of support is in networking,” said Albert. “Anyone can trade paper and negotiate LOI’s but getting into the room with the head of real estate for xyz company can be a lot more difficult.”
An example that Albert says shows how a program like X Now brings value was when he needed a contact at a bank for a project in Virginia. Locating the right person was proving elusive through Internet searching or through his local contacts. “Ultimately, he discovered a fellow X Now member represented that bank in their market and was able to connect me to the right person.”
The X Now program equips rising stars within the X Team platform with exactly what they need to build a career in retail real estate. The innovative program is also a powerful tool to cultivate new retail leaders and grow the organization.
NORFOLK, VA (January 2021): SLN Capital Markets, a division of S.L. Nusbaum Realty Co., completed the sale of four separate outparcels to four different buyers at the Greenbrier Square Shopping Center in Chesapeake, VA. All of the transactions occurred within a few months after they hit the market, showing the continuing high demand for single tenant net leased assets.
“All of these deals had a few things in common. They were leased to national tenants with strong guarantors, long lease terms in place and they were located in a top shopping center off the interstate,” said Doug Aronson, Senior Managing Director of SLN Capital Markets who represented the sellers. “Buyers are flocking to safety and are willing to pay for peace of mind.”
Aronson generated multiple offers on each of the assets: an Arby’s, Popeyes, Starbucks and Kroger Fuel Center. All of them sit at or near the entrance to a shopping center anchored by Kroger, Dick’s Sporting Goods, Field & Stream, WoodSpring Hotel and other national and regional tenants. Sales prices ranged from $1,500,000-$2,025,000, with cap rates ranging between 4.94%-5.30%
With over 115 years of expertise in the real estate industry, S.L. Nusbaum Realty Co. manages, develops and provides brokerage services for shopping centers, apartment communities, office, industrial, land and investment properties throughout the Mid-Atlantic. For more information, visit: www.slnusbaum.com.
RICHMOND, VA (January 2021): S.L. Nusbaum Realty Co. is pleased to announce the sale of GreenGate Medical Office Building at 3400 Haydenpark Lane in Richmond, VA. The property was purchased by Montecito Medical Real Estate.
Nathan Shor and Reid Cardon of S.L. Nusbaum Realty Co.’s Richmond office and Chris Zarpas and Chris Devine of the Norfolk office facilitated the transaction.
The approximately 45,000 square foot, Class A, medical office building was built in 2018 and is located within GreenGate, a 75-acre, mixed-use development comprised of townhomes and single family residences, commercial office buildings and a variety of retailers in the prominent Short Pump submarket.
Current tenants in the building include Tuckahoe Orthopedics, VCU Health, Partner MD, River Run Dental, Richmond Virginia Orthodontics and East Coast Endodontics.
“S.L. Nusbaum Realty Co. was honored to be a part of this sale and to facilitate the transaction between the Buyer and Seller. Whenever any of our clients, whether the buyer, the seller, or both as in this case, walk away from the closing table satisfied, we are satisfied,” said Nathan Shor, Senior Vice President, Regional Director, S.L. Nusbaum Realty Co.
For more information, please contact: Nathan Shor, 804.944.2399, [email protected].
With over 115 years of expertise in the real estate industry, S.L. Nusbaum Realty Co. manages, develops and provides brokerage services for shopping centers, apartment communities, office, industrial, land and investment properties throughout the Mid-Atlantic. For more information, visit: www.slnusbaum.com.
The health pandemic that swept across the globe in 2020 produced a host of challenges, yet not all outcomes were negative. There were a number of bright spots and opportunities for growth across the retail sector that emerged amidst the culling of some of the weakest players. The pandemic actually acted as an accelerant to continued transformation of the retail industry, but it also clearly pointed to the need for retailers to execute on multiple channels.
While the damage brought widespread disruption to people’s lives and economies in virtually every corner of the U.S., the impact of government-ordered COVID-19 lockdowns is continuing to reshape a sector that was already undergoing tremendous change.
Beyond the initial shock of the arrival of a pandemic, an underlying fact emerges: the strongest, fittest and most prepared companies adapt to the challenges and learn how to thrive, while weaker ones become less relevant and fade away. “It is painfully clear that one of the lessons 2020 taught us is that Covid truly revealed who was weak in the retail sector and conversely it proved who was resilient,” says Velocity Retail Group's Dave Cheatham, who serves as President of X Team Retail Advisors, a retail real estate organization comprised of more than 350 affiliate specialists in 40 markets across the U.S.
“We experienced significant growth in the essential retail, food and home improvement categories in 2020,” notes Cheatham. “Clearly, consumers shifted where they spent their money in 2020, and that played out across all retail categories. Dollars were funneled to some retailers but not others.”
An example of that is the significant decrease in travel to theme parks and hotel room bookings in an attempt to avoid large crowds. Instead, vacation plans may have included travel in a more siloed approach or one that encompassed the outdoors. That helped drive the success of retailers that sold RV’s, camping gear, golf equipment, quads or bicycles.
Disposable income was also heavily shifted to the home front. Those working or learning remotely drove increases in the home improvement sector as people completed remodel projects at their house, added landscaping, bought new furniture, or discovered new tech gadgets to enhance their work efficiency or to help a child keep pace with their education. Simply by shifting where they spent time each day introduced growth opportunities for some retailers, while reduced others.
The work-from-home shift also brought out an interesting trend in apparel. “Since people stopped going into the office on a daily basis, they realized that they didn’t have to follow an office dress code, and could be more casual,” says, Cheatham, who points out that spending shifted away from buying more formal office clothing to buying more busines casual wear like dressy pants that look like wool but are actually tech wear. He notes, the “other shoe dropping” due to this shift was the fuel added to the athleisure wear category that features clothes that look good for work but are more comfortable and casual.
Another key learning in 2020 was the fact that the retail industry must adapt to a new way of conducting business, both from a physical aspect as well as technological one. Specifically, as a result indoor dining room closures, restaurants needed more areas outside to serve customers. That means adding drive-thru’s or curbside pick-up areas. Fast food restaurants like McDonald’s and even many Walgreens sought to add double or triple drive-thru’s.
The onward march of the tech convergence and COVID-19 health and safety measures will mean restaurants and stores will introduce more touchscreens, and apps from which customers can order. Cheatham says, “Covid threw gas on technology and it was already a trend set in motion by the fact Millennials shop differently using apps and digital tools. These are changes we expect will continue advancing in the future.”
The long-term impact of all the changes is the fact that many of the short-term solutions and strategies retailers deployed during challenging times are becoming permanent fixtures because consumers liked them, found value in the new approaches and it helped retailers create a more efficient sales process. Some of those emergency solutions included use of QR codes and menu photos instead of menus that need to be printed each day at restaurants.
Physical aspects of a store or restaurant are also be explored to find new ways to serve customers. Some of those could involve updating design and zoning codes in cities to accommodate more drive-thru’s to meet demand for outdoor service. In some cases that will mean planning for much longer stacking lanes to accommodate increased drive-thru business, observes Cheatham.
While Covid acted as driver to continued adjustments in the retail sector, retailers must re-think their overall strategies, as well. A case in point, notes Cheatham, is Starbucks, which shifted to pick-up stores before Covid hit. The Seattle-based coffee giant announced it was slowing the addition of traditional third-space stores and instead favored a new, smaller pick-up store concept.
The Covid pandemic can’t be credited for ushering in all new approaches to retail. In fact, for some time retailers have been under pressure to meet consumers demands in a host of ways in what is commonly called Omnichannel retail. This integrated customer experience aims to deliver goods and services at every conceivable moment, in any fashion or at whatever place someone wants. Retailers now must deliver in four ways – a great in-store shopping experience, home delivery for online shopping, buy online pick up in store (BOPIS), and drive-thru’s where practical.
“Amazon taught us the art online shopping for home delivery, and Covid taught us convenience of pick-up at stores in the buy online pick up in store (BOPIS) or pick up in store parking lot model,” says Cheatham. “Grocery stores now must open their arms to young moms who want to pull up and have their groceries loaded in car, or seniors to shop at a special time and have items loaded into their car.”
One of the prime examples today of a fast-food retailer who understands the requirements is Chick-fil-A. It reinvented the customer experience via drive-thru’s, incorporating practices that were well received by consumers such as replacing windows with sliding doors and eventually the adoption of outdoor ordering. “They are now a master of the process because they understood it wasn’t about taking orders faster. They recognized it was about creating more touch points to serve customers since they were restricted from having dining rooms open,” says Cheatham.
The strategies retail tenants can deploy to navigate choppy waters depends largely upon the health of the business heading into the pandemic. For instance, those who had serious terminal illnesses related to their core business model, didn’t survive, as evidenced by such examples as Pier One or Sears. And for those that are sick or weaker and lack the financial wherewithal to see them through a long-term disruption, they are likely headed for a painful demise.
In 2020 some sectors of the retail industry performed well such as grocery-anchored, or discount retailers like Costco. The retailers expected to be in demand down the road include those that best meet customers’ needs when and where it is demanded.
“The real answer to the challenge retailers face today is helping them develop selling channels and different processes during this time period,” says Cheatham. Those with the expertise to understand what, how and where to meet customer demand, whether that be adding drive-thru’s, pick up spots or delivery options, as well as the knowledge of the best practices to retain from COVID-19 times, will be those who succeed in the future.
The ability to operate successfully in multiple channels will dictate the future winners. Amazon already succeeded online and in delivery, so now they are working to expand their brick-and-mortar channel. Walmart is acutely focused on building an online delivery service because they already operate a store near customers.
“The false narrative is that brick and mortar is going away,” notes Cheatham. “Yes, we will see some retailers disappear. But ultimately, the greatest need is the ability to operate in multiple sales channels today. That’s where we expect to see the best examples of growth and expansion in the retail sector in the future.”
Leaders such as Costco or Amazon will continue to find ways to remain ahead of the competition, whether that means coming up with a new way to sell something or offering something new to sell. Amazon now sells health insurance and pharmacy orders can be delivered directly to your door. Malls now are focused on adding more entertainment options, restaurants, essential retailers, and even medical and office users.
The biggest challenges Cheatham sees ahead in 2021 for retailers, retail property owners or retail investors include right-sizing stores to the proper footprint, adopting a less homogenized format, working to be the two or three dominant players in each category and perfecting an omnichannel strategy. The key, he believes, is “trimming the fat” and figuring out where your operation is the weakest, so you don’t “get weeded out.” In today’s omnichannel environment, that may mean improving a retailers’ in-store experience or addressing an online shopping bottleneck or adding a drive-thru.
“The fundamental precept of retail is to deliver a customer what they want, when they want it and at a good price. Retailers who are able to accomplish that the most efficiently across the four channels will survive,” notes Cheatham. “Change creates opportunities, but only for the fittest who seek to fill the void and don’t get caught up in the chaos around them.”
Irvine, CA – (Jan 5, 2021): In a continued effort to carefully evaluate opportunities for its clients, Faris Lee Investments has arranged the off-market purchase of Meridian Plaza, a multi-tenant retail center anchored by Dollar Tree in Cypress, CA.
The 28,500 square feet property fronts Katella Avenue, one of the primary east-west thoroughfares in the trade area, trafficked by more than 53,000 vehicles per day. The asset is comprised of several national tenants including Starbucks, Dollar Tree, H&R Block and Wienerschnitzel.
A 1031 exchange Orange County-based family office acquired the asset for $13 million. Nick Miller, Director, and Shaun Riley, Senior Managing Director represented the buyer while Thomas Kim and Jamie Park from Apple Tree Management represented the seller in the transaction.
Transacting a multi-tenant retail sale in the current market where nearly every property is experiencing some level of rent collection issues makes every multi-tenant retail transaction exceptionally challenging. With fewer lenders in the marketplace and appraisers making downward valuation adjustments to compensate for further Covid-19 risks, a lot more strategy on the brokerage end is needed to bring about a successful transaction.
“There is a clear insufficiency of supply for multi-tenant retail assets with no rent collection issue in today’s market,” says Nick Miller. “We have noticed a trend of investors willing to acquire at aggressive pricing for these types of assets, as long as collections are strong” To provide its client with a secure and income-producing investment, the acquisition search parameters consisted of targeting COVID-19 resistant multi-tenant strip center assets with minimal to no rent collection issues. Many of the offering submittals were off market properties. Faris Lee Investments continues to add value to its clientele but being active in matching buyers and sellers in hard-to-find off market transactions.
About Faris Lee Investments: Faris Lee Investments is a national leading retail advisory and investment sales firm. The company’s high-level retail investment advisors and sophisticated financing experts develop forward-thinking strategies for all retail acquisitions and dispositions and guide clients through complex transactions. Through its recent strategic affiliation with X-Team Retail Advisors, a nationwide partnership of seasoned retail leasing experts, Faris Lee offers a fully integrated platform with disciplined expertise in landlord leasing, tenant representation, capital markets, and investment sales to maximize value for clients.
For more information, visit www.farislee.com
While an anxious national media reports on the retail apocalypse, spiking vacancy rates and big-name bankruptcies, perhaps it’s time for cooler heads to shift their focus squarely to the winners in the present disruption. Doom and gloom sells newspapers, but the list of prospering brands is long, and growing, as consumers adapt their shopping habits both to e-commerce revolution, and the current COVID crisis. Big wins by clever and opportunistic brands is the most under-reported story in retail today.
Indeed, the current state of affairs in the economy has created a new set of darlings in retail, as select retail and dining brands have demonstrated themselves to be both essential and internet-resistant. Expect that savvy commercial owners will be re-positioning their tenant mixes going forward to maximize the stability and success of their assets around these winning brands.
Grocery stores have clearly re-established themselves as the most essential and implacable of anchor tenants, posting soaring sales and record profits as consumers pare back travel and dine at home. Look for a broader and deeper array of grocery store offerings, in smaller sizes and unconventional locations to play out in retail in the 2020’s.
The classic grocery store co-anchor, the pharmacy, has demonstrated itself to be equally internet resistant, while the elevated safety and security that their frequent drive thrus offer have made pharmacies an easy winner in the COVID era. Prescription and over the counter medicines, as well as paper products and cleaning products all represent regular visits to the local pharmacy.
Hardware stores, home improvement big boxes and large format general merchandisers have all qualified as essential, while also benefitting from consumers staying at home, working from home, and consequently working on an array of home improvements, home office set ups, etc.
Drive-thru restaurants, coffee shops and QSRs have proven themselves able to generate as much, or in some cases even more revenues, than they were achieving in the pre-COVID paradigm. As traditional dine-in establishments have closed or reduced capacity with outdoor dining only, drive thrus have filled the void with hungry consumers and kept their cash registers ringing.
Likewise, brands that have adopted mobile ordering and smartphone apps, or marshalled proximate parking space for the mobile customers and delivery drivers have been able to differentiate themselves and align with the needs of consumers in the changing market environment. Dunkin’, Sweetgreen, Chipotle and Chick-fil-A are among the long and growing list of brands that have nimbly met changing consumer habits.
Other winners in retail? Garden centers and outdoor furniture retailers have benefitted as consumers spend money on their homes, instead of flying to Hawaii or Europe this summer. With less flying comes more driving, and gas stations and their C-stores and car washes have kept on humming. Add to these other crisis-resistant concepts including banks and credit unions, urgent care clinics and collision repair, and a picture starts to form on how tomorrow’s landlords will curate the internet-resistant, crisis-resistant tenant mix.
Dramatic and fast changing market conditions are quickly serving to sort out the new winners in retail. Look for savvy REITs, investors and owners to re-position their assets around these new winners to collect a bigger slice of tomorrow’s commercial rent stream.