X Team Retail Advisors has been named to the 2025 Influencers in Retail Real Estate list in recognition of their outstanding national impact, collaborative model, and results-driven approach. With a platform built on deep-rooted local expertise combined with strategic national reach, X Team continues to redefine what it means to be a partner in retail brokerage and advisory. Their network of leading regional firms delivers best-in-class service to tenants, landlords, and investors across major markets, earning the trust of national brands and emerging retailers alike.

This honor reflects more than just strong deal volume—it acknowledges X Team’s forward-thinking mindset, ability to navigate evolving market dynamics, and commitment to long-term client success. Whether executing site selection for growing retailers or repositioning assets for institutional owners, X Team brings a uniquely integrated perspective to every assignment. In a year defined by rapid shifts in consumer behavior and urban transformation, their influence has helped shape the next chapter of retail real estate.

X Team Retail Advisors, a national platform comprised of more than 350 retail real estate specialists across nearly 50 markets in the U.S. and Canada, continues to expand its national footprint.

Pacific Asset Advisors, Inc., a retail brokerage and property management firm in Seattle, is the latest affiliate to join. “The addition boosts our presence in the Pacific Northwest with a team of 13 retail-focused brokers and a property management group that is responsible for managing five million square feet of retail centers in the Pacific Northwest,” said Dave Cheatham, President of X Team Retail Advisors.

The retail brokers that joined Pacific Asset Advisors in the past 12 months include Michael Olsen, Tony Omlin, Adam Greenberg, Ryan Cornish, and Tyson Clarke. “Joining forces with the national affiliates within the X Team platform is a natural progression for Pacific Asset Advisors,” said Pacific Asset Advisors CEO Brad Close. “It aligns with our growth and expansion strategy as we continue to expand our presence in the Pacific Northwest.”

Four years after the COVID-19 pandemic put much of the brick-and-mortar retail sector out of reach for consumers on lockdown, operators are still adjusting to the new world of shopper expectations. That was among the high-level themes that were delved into by retail experts during the “View from the Top” panel at Connect Retail West 2024, held in Los Angeles just after Election Day.

“For us, it’s really focusing on the experience,” said Corey Conrad, SVP of leasing and brand partnerships at Caruso. “Time is one of the most precious gifts, and so when consumers give the gift of their time, we want to maximize that. And so we encourage our retailer partners to do the same.”

Mitchell Hernandez, co-founder and partner with the Beta Agency, said, “there’s a huge focus on the core business. A lot of retailers had actually gotten away from that. And coming through COVID, they realize the importance of it. At the end of the day, price really matters and your selection matters and making sure you can get your items when you need them matters.”

Among the Latino shopper demographic, which Primestor Development targets, “I think that we are an evolving market,” said CEO and co-founder Arturo Sneider. “It’s an emerging market in general.

“And so our retailers are actually in the learning stage of how to sell to a changing demographic that is very fast growing, very young, learning to behave between the physical environment and the digital environment very quickly in a cross-generational household,” he continued. Adding to that challenge are the costs of construction and the complexity of entitlements.

Asked about redevelopment by moderator Scott Grossfeld, a partner with Cox, Castle & Nicholson, COO Bret Nielsen of Anderson Real Estate responded, “We’re trying to redevelop our properties, put money back into them, try to create a better sense of place. And that’s not only for retail. We’re spending a lot of money in our office buildings, which I know is a four-letter word right now. But in Century City, where we own a couple of towers, we just put $150 million into them and we’re recreating the whole campus.”

Another initiative Anderson Real Estate is undertaking is partnering with emerging tenants, especially in the restaurant space, who haven’t established a balance sheet as yet. “So we’re trying to partner with them,” said Nielsen. “We feel we believe in them, they believe in us, and let’s just ride the journey together.”

The hour-long discussion also delved into numerous other areas, including the question of how brick-and-mortar is handling omnichannel transactions as well as retail categories and specific retailers that are in expansion mode. The latter was a theme also explored by Darren Pitts, EVP with Velocity Retail Group, in a one-on-one discussion moderated by Connect CRE’s Sarah Quinn.

“There’s a little bit of two classes,” said Pitts. “There are groups that are flourishing; the strong are getting stronger. And then you’re seeing some fallout where with some of the weaker ones, you’re starting to see cracks.”

Exploring the Exponential Growth of the Retail Resale Market Amidst Inflation and Sustainability Demands

The Doughnut Economy: The Nexus of Theory And Sustainability

In 2017, Kate Raworth, a British economist and the author of "Doughnut Economics: Seven Ways to Think Like a 21st Century Economist," pointed out that current economic principles are fundamentally ill-suited for addressing the significant challenges of this era. Raworth presented the ideal future economy as a perfectly round doughnut. A deliciously simple concept, Raworth proposed that the pastry’s outer crust represents an ecological limit, while its inner ring represents a social foundation. Step beyond the outer ring, and you damage the environment beyond repair. And spiraling below the doughnut’s inner ring, its social foundation, will expose the vulnerable population to risk, increasing income, food and housing insecurity, and inequity. Raworth put forth three economic tenants to distribute wealth fairly, regenerate resources that it uses, and allow people to prosper. Economic growth, Raworth argued, can be decoupled from resource consumption and environmental degradation.

Raworth’s ideas gained attention within the convergence of outlier events and scientific data pointing to global warming as a potentially existential threat to the planet. As her ideas spread, they caught on with climate activists, governments, industry, and the emerging generation of conscientious consumers who heeded the call and embraced the pursuit of a sustainable and resilient economy.

Inflation Pinches And Cinches

Consumers made it clear emerging from lockdown that although they may call the office home, they still wanted to get out and shop, dine in restaurants, travel, and play. Unfortunately, inflation soared alongside a rediscovered yearning for the finer things and consumption. The Fed’s unprecedented ten rate hikes in a row put the kibosh on many expensive splurges. Retail therapy began to manifest differently, particularly among Gen X, the Millennials, and Gen Z, the youngest cohort and most sustainably minded of the three. This mindset shifts in the face of rising prices encouraged shoppers to become more conscious of their spending habits.

A more economical approach helped contribute to the popularity and growth of the retail resale market, which is outpacing the growth trajectory of initial retail sales, and fast fashion, whose sales are flat and relies on a business model of quick turn-around and production and produces lower quality products not designed for staying power. Melissa McDonald, a Partner at The Providence Group in Charlotte, North Carolina, is an expert in retail tenant representation and has built relationships with some of the most prominent retail brands. McDonald believes social media and influencers play a role in the resale segment’s growth. “Yes, inflation is a contributing factor, most recently with the cost of consumer goods increasing. However, I see the impact of social media on female consumers who may feel the pressure to market their image and remain relevant through fashion,” she shared. “Many consumers, including me, buy on the resale market and shop online and in stores. I generally will not buy a pricey handbag or shoes at full retail unless I keep the items for a long time. Resale (when you are buying and selling) allows you to sell items you have not used and enjoy newly purchased resale items you may have discovered,” she added.

Gen Z’s Bazaar: The Booming Resale Market

James Reinhart, thredUP’s CEO, states that he doesn’t see the apparel industry’s historic reputation for waste, production overruns, and purposeful obsolescence going back to how it used to be. He envisions a sustainable path forward that is backed up by the numbers. The global secondhand apparel market growth will be 3X faster on average than the worldwide apparel market, ThredUP's 2023 Resale Market and Consumer Trend Report found. It is set to nearly double by 2027, reaching an estimated $350 Billion. The U.S. secondhand market comprising 20 percent of the global market, is expected to reach $70 Billion in the same period. And it is expected to continue to grow faster than any other channel.

Sustainability and shopping green brands may be the current Zeitgeist, but the cost of living increase is the inflection point where idealism meets realism for Gen Z consumers. Many younger consumers share that although they prefer to purchase sustainable or green brands, it is tough to afford the higher label price that often accompanies this apparel and accessories. A recent U.K. study from customer research company Untold Insights found that the cost of living impacts 96 percent of Gen Z and Millennial U.K. consumers from sustainable purchasing. McDonald also has witnessed this, convinced that buying exclusively from sustainable brands is a nice talking point, not borne out in reality. "I know they are buying from Zara, Mango, Target, H&M, and the endless supply of "disposable" apparel made in China and Asia. There is a percentage that adheres to that, but it doesn't equal half. They watch models on social media talking about it before they show up to an awards show in Gucci, Prada, or Chanel- some of it is vintage, but it is a relatively small percentage,” she notes.

 

Turning to resale, the consumer can enjoy affordability and sustainability. The rise in popularity is rooted in consumer demand for quality goods at cost savings. Consumers shop secondhand to save money while still enjoying fashion trends. Experts agree that while more people are aware of sustainability due to the resale market and buy-back programs, they are generally not choosing resale because they are passionate about sustainability. But instead, the enthusiasm lies in whether they are getting a deal on an item or buying something previously unaffordable. Several retailers have started resale programs to target their existing customer base while attracting new shoppers. High-profile retailers such as Levi Strauss, Lululemon, Canada Goose, PacSun, Patagonia, Nike, and H&M’s Sellpy platform (which offers their own secondhand merchandise and other third-party brands) have launched initiatives to take advantage of the market opportunity while supplementing their inventory and avoid overproducing merchandise.

Savers: Thrift Proud, Changing The Perception

Terry Bortnick, Principal, and Lea Park Clay, Retail Broker with Axiom Retail Advisors in Irvine, California, represent the national chain Savers in Southern California’s sub-markets of Orange County, Los Angeles, San Diego, Ventura, and the Inland Empire. Savers began as a single thrift shop serving its community in Bellevue, Washington. It has grown into the largest for-profit thrift operator in the United States and Canada, selling pre-owned apparel, accessories, and household goods. Their stated mission is "To champion reuse and inspire a future where secondhand is second nature." Savers owns 315 stores in the United States, Canada, and Australia and has filed their Initial Public Offering with the SEC. This success reflects their loyal and engaged retail audience that enjoys the hunt for one-of-a-kinds and the delight of saving a few bucks in the process.

Bortnick understands the great appeal and business model. “I can see why this category is expanding,” he exclaimed. We see that the thrift model or resale shop, especially the large, well-capitalized (thrift) retailers, are now becoming a first-tier choice for many shopping center owners,” he confirmed.

Fewer big box retailers and an increased focus on ESG, social and corporate governance have influenced the consumer-especially the younger consumer and changed purchasing habits. A resale store, like Savers, touches upon all these considerations. Value-oriented retailers have embraced the bargain-hunting model, according to Bortnick.

 

His colleague Lea Park Clay agreed with this assertion. “That’s exactly right. I have an 18-year-old in the house; she and her friends are all thrifting enthusiasts. They go on thrift store outings together, and only if they cannot find an item on resale do they purchase new. The sustainability movement has influenced their consumer behavior,” she explained.

Bortnick affirmed, “We have seen customers coming into the store twice a week or more to shop with the same frequency as if they were going to the grocery store.” He noted that the expectation of landing a “find” and a sense of discovery keeps customers engaged and returning for more. “Their inventory changes daily based on donations and partnerships with nonprofits. This repeat customer positively impacts foot traffic and increases exposure in these shopping centers,” he explained. The for-profit status of resale retailers like Savers departs from the charity shop model. They have become more attractive for shopping center owners and municipalities who can reap meaningful sales tax revenue from these high-volume for-profit retailers.

What Goes Around Comes Around, and Stays Around

Retail experts agree that circularity, upcycling, and reuse are here to stay. Fashion, notorious for its disreputable record of waste and inefficiency, is being forced to make amends for its transgressions by a global movement. Fashion schools now commonly offer sustainable fashion programs to train designers for the future. Sustainability is being taught in our schools and displayed in our cultural institutions. In 2017, Amsterdam opened the first museum dedicated to sustainable fashion, Fashion for Good. The organization acts as a laboratory, business incubator, and education center, promoting a responsible clothing industry with the city's and government's economic buy-in. Closer to home, category innovators like Savers, prominent retailers starting their own in-house programs, specialized digital resale platforms, and multi-brand retailers offering secondhand options offer consumers broader choices. Retail will continue to tap into this trend to appeal to shoppers and support the circular economy and a greener future.

One of the Most Rapidly Expanding Grocery Sectors

A Community Pillar

Asian supermarkets provide their community with a place to shop and find products of their homeland. Their specialty ingredients, fresh produce, fish, meats, and prepared foods can conjure vivid memories of beloved traditions and cuisine for customers. These markets have deep cultural roots, started by Asian Americans who saw a void to fill and an opportunity to provide for the heart of the community. For many new immigrants, they are a welcome taste of home and serve as a pillar for their communities in a foreign land.

X Team Retail Advisors members in Irvine, California, and Charlotte, North Carolina, assessed the most successful Asian grocery chains operating in their regions serving their communities and others. Today’s Asian supermarkets are jockeying for the same anchor spaces as the largest conventional grocery store. Asian grocery stores are enjoying demand from the younger generation of Asian Americans and experiencing cross-over appeal. Many have launched online shopping, Instacart delivery, or their app.

A World On The Move, The U.S. Population Shifts

To understand why ethnic grocery stores across the nation are flourishing, we must examine our country’s population base. The U.S. Census Bureau forecasts that by 2060 non-whites will make up 57% of the U.S. demographic mix. These changes are driving the industry’s expansion. According to the most recent data, more than half of the U.S. population growth between 2010 and 2020 occurred within the Hispanic community. Hispanic and Asian inhabitants have grown by 23% and 35.5% over the past decade. Add to those reporting mixed cultural descent, and the percentages rise to more than 50% for each.

Social media, remote work, and increased international travel have made the world smaller and more familiar. According to IBISWorld research, ethnic supermarkets in the U.S. employ 204,368 people and have a market size of $49 billion.  Grand View Research cites a global market valued at $39.5 billion in 2021 that is expected to expand at a compound annual growth rate (CAGR) of 8.7% from 2022 to 2028.

Savory And Sweet

H Mart, a popular Korean supermarket chain described as “A Korean Tradition That Was Made in America,” has grown in four decades from its first store in Woodside, Queens, to 84 stores in 14 states. It offers a wide range of Asian specialties, housewares, and a famous food court, Market Eatery, that brings together an array of prepared food vendors under one roof. H Mart has built a widespread fanbase that appreciates their stores' variety, presentation, and convenience.

Michelle Zauner, a Philadelphia musician, and writer with mixed Korean American heritage, describes the food court in Crying in H Mart as “A beautiful, holy place. An ideal people-watching spot while sucking down salty, fatty, black-bean noodles.” Zauner’s stroll down the aisles of H Mart unlocks poignant memories of her late Mom and the favorite Korean foods they shared. For Zauner and many others seeking culturally specific foods, a trip to the nearest store, often to neighborhoods on the city’s distant edges, was a journey to a different world.

Sea To Shining Sea

Jay Hagerman, a director and retail broker at the Providence Group in Charlotte, North Carolina shares, “Retail follows people, and the increasingly multicultural communities in submarkets is driving ethnic grocery store openings.” He describes the historical pattern that gave rise to these businesses. “Immigrants saw a void in the grocery marketplace and would open a specialized store to serve the tastes and needs of their community.” An original location would give birth to others as the initial community prospered and moved to suburbs or different regions. Hagerman points to Charlotte’s Super G Mart as an example of organic growth based on the success of their other locations.

Super G Mart promotes itself as “the largest international supermarket in North Carolina” and recently opened its third store in Pineville, roughly 14 miles from Charlotte, a young, affluent, and diverse city, according to Niche.com. A third of the population is between 25 and 44 years old, and 80% hold some college education or higher. The noncitizen community makes up 8.7% of the total population, and 55% of its residents are non-white.

Ethnic food retailers, recognizing their crossover appeal,  are selecting new locations purposefully incorporating a demographic mix and, as a result, are thriving. Tellingly, Super G Mart invites its customers to “Try new things. Amazing Finds in Every Visit.” The store offers a global adventure as customers “travel” across aisles of international groceries and household items. Appealing to Millennials and Gen Z consumers, often described as the Foodie Generation, these intercultural tastemakers desire convenience but demand authentic and fresh ingredients. They are known for seeking new experiences and discovering “finds” that are often captured and shared on social media.

Visionary Founders

Don MacLellan, Managing Principal at Faris Lee Investments, is a long-time retail specialist based in Irvine, California. MacLellan’s focus includes acquisition and disposition services and real estate investment advisory for the retail investor. He shares his insights and experience with 99 Ranch Market, an enduring company relationship that goes back decades. “99 Ranch and other leading Asian supermarkets are looking to aggressively expand their presence and attract a younger, affluent customer. They (the stores) had to pull back on expansion plans during the pandemic because of supply chain issues. These are starting to open up, though rapid expansion is still hindered by the inability to access fixtures and equipment needed for store growth.”

Founded in 1984 by Taiwanese immigrant Roger H. Chen, 99 Ranch Market is one of the largest Asian supermarkets in the country, owned by Tawa Supermarket, Inc. Mr. Chen opened his first store to provide suburban Asian customers an alternative to driving long distances to urban Chinatowns for grocery shopping. The company’s Buena Park, California headquarters operates its own production facilities, farms, and processing factories for its company-owned 54 stores nationwide. 99 Ranch Markets can be found throughout Southern California and Orange County, which has become a draw for Asian customers of various ethnicities, including Chinese, Korean, Japanese, and Southeast Asian.

Jonson Chen, 99 Ranch’s Chairman, wants to grow locations and improve the stores’ ambiance. A fresh interior design in the newer supermarkets offers visual simplicity and shopping efficiency that takes its cue from upscale mainstream players. Their in-house café serves Asian specialty foods and features a Taiwanese bakery. Prepared food stations provide busy professionals with a convenient, high-quality dinner or lunch.

MacLellan explains that Asian grocery-anchored centers have provided the nexus for other immigrant business owners to open complementary dining, shopping, medical, and banking services in that same center. He shares, “Dr. Alethea Hsu pioneered this approach, opening her first development, Diamond Plaza Shopping Center, in Rowland Heights, in the East San Gabriel Valley, a heavily Asian community. She developed the concept, and her family-owned company managed the center, which was a tremendous success.” Hsu’s second shopping center, Diamond Jamboree, opened in 2008 in Irvine, creating a bustling hub and the perfect match for Irvine’s booming Asian population. Anchored by H Mart, the development touts itself as “Orange County's International Eatertainment Destination.” Its success has transformed the vicinity, sparking residential development and a live-work environment.

Crossing Boundaries

ValueRock Realty, a leading retail and mixed-use real estate investment, and operating company based in Irvine, is developing a 41,400-square-foot 99 Ranch Market at Larwin Square, a grocery-anchored community center in Tustin, California. The store will assume the vacant anchor space formerly occupied by Haagen. It is expected to open in the second half of 2023, bringing the surrounding community its only full-service Asian grocery store.

ValueRock’s Senior Managing Director, Dennis Vaccaro, notes that Asian grocery store operators have adopted a successful sub-tenant business model imported directly from overseas. Vaccaro shares, “Asian operators have a completely different business model than traditional American grocers. They sublease a large percentage of their floor area to subtenants. If you enter the new H Mart in Irvine, you'll see this if you look closely. Or, in any Asian grocery store, you'll notice this happening.” He explains, “Usually, the sub-tenant is food and beverage, but not always. Sometimes you will find retailers. So, their business model combines their grocery product and sub-leasing to capture their customer base for multiple, longer stays under the same roof.”

At The Commons at Aliso Viejo, twenty miles down the coast, ValueRock is undertaking an extensive 180,000-square- foot commercial plaza remodel of three defunct big box stores. The shopping center’s grocery anchor will be a 45,000-square-foot 99 Ranch Market alongside a Tesla showroom, a collection of restaurants, and shops, including Daiso, a Japanese dollar store.

Vaccaro explains, “Demographic shifts continue to occur. Specialty grocery stores can draw from a wider radius than traditional grocers. Let’s assume that (an ethnic grocer) is targeting a certain population. They know they can expand a 15-mile radius from their targeted community and still draw that customer, plus others. South Orange County is further behind in the proliferation of ethnic grocery stores. 99 Ranch understands that their new Aliso Viejo store will attract a wider radius of shoppers, positioning them advantageously in the marketplace.”

Know Thy Customer Well

Given the numerous potential opportunities to capture market share, it is unsurprising that other Asian grocery operators are focused on expanding their presence. Vaccaro asserts, “My colleague Don is correct. Our clients are all looking at their growth strategies and new locations. It is a continuous conversation; in my experience, not all ethnic grocery stores have the same approach.” Persian grocers, who Vaccaro believes are some of the best operators in the industry, know their customers well and sell a mix of international items. Vaccaro states, “The inventory mix appeals to a broader consumer base, not one ethnicity but several cross-sections, and these merchants stock a wide variety of products in their stores.” Vaccaro believes that a hands-on manager that caters to their customers will gain loyalty. Vaccaro and MacLellan agree that the merchant, who reads the data and research, talks with the customer, and is responsive, will win long-term business. Understanding consumers’ desires and expectations will become even more essential as we become more diverse. “To me, this makes a lot of sense, right?” Vaccaro concludes, “Because we have mixed demographics almost everywhere in Southern California.”

Boutique Fitness Vaults Ahead

The boutique fitness boom has continued to expand and proven its resilience by meeting consumers’ changing tastes and the at-home workout lifestyle. Virtual work has elevated the need for creating and finding a sense of community outside the seclusion of home. The enhanced wellness services these types of fitness centers provide, nourish the body and psyche equally. The flexibility that subscription-based classes offer appeals to those who value variety and choice and sets them apart from mainstream fitness.

Driven mainly by Millennials and Gen Z, boutique fitness centers fill a niche for those willing to pay a premium price to break a sweat in a curated experience. Demographic and social change is inextricably linked to the sector’s rising success. Aggressive competition from other industry players, emerging technology, market saturation, the economy, and workforce trends will define its staying power.

The Sector Gets Pumped

Even before the pandemic had us spinning on stationary bikes or squatting before fitness mirrors, membership to boutique studios outperformed their large format gym counterparts. Between 2013 and 2017, membership at traditional fitness centers grew by 15%, while membership to boutique studios grew by 121%, according to the International Health, Racquet, and Sportsclub Association. The shift to personalized wellness reflected other consumer-facing industries as people began to value travel, dining out, and events over merchandise. Azoth Analytics placed the global boutique fitness studio market at $49.30 billion in 2021. North America leads the market share, followed by Europe and the APAC region. Studios compete for an even larger share of the $30.8 billion U.S. fitness market. They are expected to grow 0.6% in 2023 and be the sector’s highest performer.

“Jack-ed” Be Nimble

The average leased space for a boutique brand is 1,500-3,500 square feet making them more nimble and less expensive to set up than their big gym cousins. For context, Life Time Athletic fitness centers offer its members a premium “athletic country club” experience, average 100,000 square feet, and offer something for every workout aficionado under one roof. According to its website, the company leases more than 16 million square feet of real estate nationwide. Life Time clubs require a large footprint and expansive parking to accommodate their members. A newly built club can cost between $40-50 million and can be found in regional town centers, luxury malls, and larger shopping centers where space abounds.

Jason Baker, Executive Director of X Team Retail Advisors and Principal of Baker Katz, a Houston-based retail brokerage firm, believes that niche services and the speed of technology-driven transformation will accelerate within the fitness industry and may cull certain brands as a result. “Fitness will continue to evolve and be a highly competitive industry,” Baker shares. “I see a trend toward deepened specialization, and not all boutique operators will strive to fit everyone. We may see some brands, which felt like they were on the cutting edge a few years ago, have a short shelf life.”

F45, a franchised high-intensity fitness studio, generally operates in 1,650-2,400 square feet of retail space within smaller shopping centers, strip malls, or on high streets in the urban core or suburbs. F45 is one of ten brands under its parent company XPonential Fitness, a power player in the boutique sector offering fitness brands in various verticals, e.g., yoga, Pilates, stretch, and cycling. They have expanded to more than 2,350 studios across the U.S., Canada, and internationally. Starting costs to open a franchise are estimated between $50-60,000 with various fees and inventory expenses added, and the franchisee must have net liquidity in the low six figures. Lower barriers to entry have helped this fitness subcategory blossom as many potential operators have joined the fray.

Women have embraced boutique fitness studios for their comfortable, inclusive, and welcoming environment. Tim Miller, Principal of Great Street Realty based in downtown Chicago shares his observations from an urban setting with a large population of single professionals. “Health clubs have been a part of people’s social circles pre- and post-pandemic. I think what has changed are the options available and the size of the clubs. We see a pattern and preference, especially with women, for smaller fitness studios rather than the typical large gym.”

Solidcore is a Pilates-based fitness studio offering a notoriously challenging 50-minute workout on its Pilates machine, Sweatlana. Founded in 2013 by Washington D.C. entrepreneur Anne Mahlum, they currently have more than 80 locations across the U.S. Solidcore offers a virtual platform through Equinox’s app where a user can book a class (or classes), buy a membership, and view the schedule. Baker is working with their corporate leasing team to expand in Houston and praises their real estate strategy and disciplined approach. He asserts, “They are not trying to be all things to all people and are highly selective in the types of space they are willing to lease and improve. They are an example of a good operator with an eye on the ball.”

“The idea of fitness has become more sophisticated,” Baker adds. “This means you do not have to work out in a loud and intimidating environment as your only choice. The boutique model allows people to experience healthy accountability and be seen and known as individuals. These studios provide a personal workout that takes the guesswork out of training.”

Live, Work, Play, Shop, and Shred

Growing urbanization and a young working-age population with increasing disposable incomes have helped drive growth in the fitness industry. These urbanites seek to counterbalance their sedentary work-from-home lives by patronizing downtown retail districts to socialize, shop, eat, drink, and be fit. Workout patterns are changing, with many attending the gym in the evenings. There is less need to hit the gym before heading to the office—when the office is home. And increasingly, the gym is a stone’s throw from the front door. Boutique concepts have recognized this shift and are positioning their locations from super-regional trade areas to community shopping centers, small retail spaces on the ground floor of luxury apartment buildings, or tucked into neighborhood town squares. The benefit to landlords is an increase in general foot traffic. A potential concern is the overuse of parking and whether (or not) customers add shopping to their workout routine. Baker and Miller agree that it is unclear if a center’s retail sales get a bump from a studio, but that healthier food and beverage are most likely to benefit. Baker confirms, “I can think of real-life scenarios where you may have a fitness center two doors down from a good, clean organic juice place.”

Some retailers are introducing fitness spaces in-store, using technology to extend their brand beyond the physical, and forming beneficial alliances with hot studio brands. Lululemon introduced a new fitness platform in late 2022. The retailer has expanded programming and partnerships by blending in-person classes in select ‘experiential’ stores with app-on-demand and live-streamed classes with a subscription to MIRROR—now rebranded Lululemon Studio MIRROR. A studio membership unlocks clothing and equipment savings and class discounts. Content is provided by industry-leading small fitness brands, AARMY, Pure Barre, AKT, Yoga Six, and others.

Going The Distance

The rise of digital fitness, offering convenience and flexibility, has been a sea change in the industry and is not going away. The profitability of smaller studios incorporating technologies will continue to attract operators to invest in their expansion, as long as their members feel their value, and have the means to pay the premium. Complementary offerings like recovery, personal wellness, and dietary consulting can expand audience reach. Larry Conner, the CFO for REGYMEN Fitness and the Covery Wellness Spas, believes in the market’s potential. He shared with CBI Magazine, “It is not necessarily fitness people coming in for recovery. Non-fitness people are getting IVs, cryotherapy, and they might jump to the other side of the tracks and get into fitness.”

Miller observes, “Although boutique brands are chipping away at the revenue of larger gyms, it remains to be seen whether the industry as a whole is sustainable. Most gym members are accustomed to paying $50-100 monthly to join a large club with all its services. When you add boutique classes, that figure can quickly reach $300-$400 monthly for many of these specialized fitness brands.” He asks, “Is that a sustainable expense for most people?” The answer may lie in waiting at the crossroads where our strong desire to deepen health and well-being, and economic forces collide.

In WMRE’s 2023 Market Outlook, X Team’s president, Dave Cheatham believes that retailers will continue to tap into their resilience and ingenuity in the coming year, to meet the market. Whether through upgrading older spaces, small-format store concepts, or creating new business models, he proposes that those wishing to expand will need to be flexible, creative, and most of all, efficient.

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For seven decades, the Motor City delivered a reciprocating engine that hummed and drove this nation’s economy from its heartland of innovators and can-doers. Then came a steep deceleration of the auto industry that began in the second half of the 20^th century, which blanched the energy from this vibrant city that seemed unstoppable. Triggered by mismanagement and flawed government policy with destructive urban planning, shifting demographics, and riots, Detroit found itself on the ropes. In 2013, the city declared bankruptcy. It was the largest municipal bankruptcy in U.S. history.

It’s said that America has always embraced redemption and a good comeback story, and Detroit’s bad times may finally be in the rearview mirror. Nowhere is this most evident than in its downtown central business district. Today, walkable, clean, and perceptively safe, downtown Detroit is a far cry from the stark, empty lots and vacant buildings that peppered its corridors a few decades ago, keeping most people away.

The city is an urban development study in the power of collectivism, civic goodwill, and dedication to preservation that pulled it back from the brink. Detroit is being led once again by a new generation of innovators, visionaries, and creatives, whose ancestors initially built the city from its French eighteenth-century roots. The city is on its way up, laying a strong foundation for its spotlight on the national stage. For all the talk of divisiveness and incivility, one need only turn to Detroit to study how it righted its wrongs and bootstrapped its history to rebrand itself as a future city of industry and mobility 2.0.

A Perceptive Perspective Shift

Recently, X Team Retail Advisors, a national alliance of retail real estate advisory specialists met in Detroit to learn about the city’s plans to further develop its downtown retail district. X Team works with high-profile retail brands, real estate developers, and owners in major markets across the U.S. and Canada.

Jim Stokas and Jim Bieri principals of Stokas Bieri Real Estate, a Detroit-based retail commercial real estate brokerage firm, hosted the two-day event. They were delighted to witness the enthusiasm that they have for their hometown ignited in others. Bieri shares, “I genuinely think everyone had a great time. Stokas adds, “I overheard a discussion stating that we should hold the next meeting in Detroit, again. Several colleagues I spoke with looked at me with surprise and shared, “I love your city because it's safe, clean, and walkable. It may be the greatest city in the country, right now.” The partners both chuckle and admit that a few decades ago these words would not have been uttered.

“First of all, we're an overnight success that took about 15-20 years. I mean it's been a real community effort,” Bieri concedes. “We have a great Mayor, Mike Duggan, and former Police Chief, James Craig, Detroit born and raised, who returned from a distinguished career in Los Angeles. He organized a strong community policing program that reached out to an influential group of ministers and other community leaders to create strong partnerships.” In recent years, the community-based policing model is being embraced as an effective strategy to build inclusiveness, understanding, and trust. Mike Duggan, who is often credited for overseeing the resurgence of Detroit, won a third term in office in November 2021.

Stokas adds,” When the Black Lives Matter Movement (‘BLM’) erupted in violence and property destruction in several major cities, Bedrock, a local commercial real estate developer, advised their worried national tenants that it wasn’t going to be necessary to board up their windows. This was being done in many major metropolitan areas, like Chicago, New York, and Los Angeles. Bedrock knew its community and was proven right. Peaceful protests and marches were held downtown, and that was all.”

Tapping Into A Rich Legacy

Downtown Detroit offered everything in one place, shopping, dining, tourism, and entertainment to create a synergy and energy all its own. Retail was centered around Woodward Avenue, originating at Campus Martius Square (re-established in 2004 as an active community park), near the Detroit River and spanning north to Grand Boulevard. This artery was the epicenter of the city’s retail trade and the location of its largest department stores, with smaller boutiques and specialty shops lining adjacent blocks. Department stores included Kern’s, B. Siegel Co. (a ladies’ fashion mecca), Kline’s, Crowley’s (a beloved institution that offered the less well-heeled a vast bargain basement), and the shopping crown jewel, J.L. Hudson Company (Hudson’s), which opened in 1893, and at two million square feet was considered the second largest store in the country after Macy’s Herald Square, in New York City. One only had to mention, “I’m Going To Hudson’s” to impart exclusivity and style. In the early 1950s, the store allegedly had 12,000 employees and made an average of 100,000 sales a day.

Those retail monuments may be gone but their legacy remains. Paradoxically, it was the neglect and disinvestment that petrified many of these grand buildings in amber, preserving their details. A few local property developers have devoted much of their mission to breathing new life into downtown’s vintage beauties, burnishing them for a new generation. Bedrock, downtown Detroit’s largest property owner, owns over 100 buildings across its entire portfolio, totaling more than 18 million square feet. The developer has reinvigorated retail across the downtown core. Its projects include the redevelopment of the old Hudson’s Department Store site, slated to open in 2024, and the landmark Book Tower into a mixed-use development. Book Tower will feature a 200-room hotel, office, ground-floor retail, 150 apartments, and event space.

Bedrock has curated a balanced retail tenant mix to include local businesses and national brands. There are more than 350 retailers in the Central Business District, leasing over 4 million square feet and drawing an estimated 150,000 daytime visitors.

Millennials, whose population grew by 117% since 2010, according to EMSI data, have made downtown their home, residing in roughly 10,000 residential units. An additional 8,700 apartments are being developed, continuing to draw residents, along with good-paying jobs and expanding services. It is estimated that the average income of downtown Detroit residents is expected to increase by 10% over the next five years. The economics of living, working, and shopping downtown bodes well for retailers and those businesses looking to expand to the urban core.

Homegrown merchant, Shinola, has gained national attention as a lifestyle brand that makes beautiful watches, bicycles, and luxury leather goods. Most of the workers assembling watches are done by locals that were employed in automotive manufacturing. During its start-up, the company brought in veteran watchmaking experts to train these workers as watch assemblers.

While there continues to be a fluctuation in retail businesses opening and closing since the pandemic, this is evident across the nation as operators continue to evaluate their strategies. In recent years, Madewell, Nike, H & M, Lululemon, Warby Parker, Bonobos, and Under Armour have operated downtown. While a handful of these brands may have lacked staying power, others are being introduced. National retailers Sugar Factory, McMullen, and Gucci Detroit have recently opened their doors. Some eyebrows may be raised over a global fashion brand opening in downtown Detroit, but Gucci’s heart is in exactly the right place. Their Changemaker North American Impact Fund, begun in 2019, has identified Detroit as one of its 12 North American cities that will receive community grants to foster inclusion and diversity within the fashion industry, and across communities and cities. The brand is working with local nonprofits, artists, and funding scholarships to support education initiatives.

Pop and rhythm-and-blues singer Rihanna's wildly popular subscription lingerie brand Savage X Fenty will be debuting downtown in 2023, along with a small-format Target anchoring retail developed for the new City Club Apartments, a mixed-use community in growing Midtown. Whole Foods Market Detroit opened its doors in 2013, and Meijer Rivertown Market, about one mile east of downtown, opened in the last year to serve the increasing number of residents living in apartment communities nearby.

X Team’s Dan Clark, Principal of Sitings Realty (specializing in retail tenant representation, and retail project leasing in Vancouver, Canada), previously visited Detroit in 2015 but had no occasion to return until X Team’s recent meeting. He shares his experience, “The downtown corridor was incredibly impressive to me in comparison to my earlier visit several years ago. I am amazed at the transformation in a relatively short period. The high-quality tenants and the vibrancy of the city were evident. People were friendly, open and everyone cared about the city’s transformation, and was immensely proud of its progress, as they should be.” He continues, “I believe that the beautiful architecture and character of downtown would be attractive to national retailers if they can identify the right footprint.”

Both Bieri and Stokas agree that although progress has been made there is still work to be done. Stokas, who grew up on Detroit’s West Side, shares that there remain blighted areas throughout the city. He would like to see more retail projects slated for underserved communities to help build them up. “We realized through the development of Gateway Center at 8 Mile Road, the impact that a quality retail center has on the community in terms of jobs, the tax base, and services available to buy food, clothing, and other essential merchandise. So, there’s more progress to be made, but I am tickled, and it is always great to get objective opinions about your city from your peers around the country. In the past, I might have been embarrassed about how the city looked to out-of-town visitors, but not anymore.”

A 2.0 Model For Innovation

Civic and business leaders understand that being a hotspot for creatives and entrepreneurs is envious, but without the infrastructure and opportunities to grow, the ecosystem cannot be sustained. Luckily, the private sector has stepped in to build that capacity through several public-private partnerships. Detroit’s planned innovation district, a collaboration between the Related Companies, the University of Michigan, and Ilitch Holdings, Inc., plans to break ground in 2023. Ally Detroit Center has attracted DT Midstream, IBM, Google, Microsoft, LinkedIn, and several banking and financial institutions, bolstering downtown employment. Apple has opened its first U.S. Developers Academy in collaboration with the University of Michigan. The organization trains young people in communities of color, coding, and app development to help prepare them for skilled jobs in technology, potentially backfilling and growing the workforce. The Academy chose to open in the First National Building downtown, purchased and renovated by Bedrock Development. This historic property, completed in 1922, is the oldest structure surrounding Campus Martius with views of the Detroit River. The 25-story tower was purchased in 2011 as one of the developer’s earliest acquisitions. Significant renovation and restoration increased the building’s value per square foot tenfold, proving the worthiness of preserving the past. Bieri opened his office in First National in 1976 and has had an envious birds-eye perch witnessing downtown’s epic turnaround.

The Ford Motor Company is perhaps undertaking the most audacious project in an intriguing twist on what is old is new again. The company is restoring Michigan Central Station in Detroit's Corktown neighborhood. They have committed to spending upwards of $1 billion to restore the 1913 building and construct a new 30-acre mobility innovation district. The train station will be the centerpiece of the campus, expected to eventually house up to 5,000 workers comprised of Ford employees and smaller businesses. Ford has partnered with Google in a public-private partnership alongside state and local leaders in the project. The train station will offer a real-world testing site called the “transportation innovation zone,” so companies can pilot new technologies like electric and autonomous vehicles. One of the first projects announced is a one-mile roadway with an embedded wireless charging system designed to charge EVs while in motion or when parked. Corktown is Detroit’s oldest surviving neighborhood and is a locus of entertainment and dining. Settled in 1834 and named for its largely County Cork, Irish immigrant settlers, Corktown has been revitalized with the development of several new communities of apartments, townhomes, and other retail and hospitality as a major redevelopment push from the Ford campus nearby.

Detroit is composing the first chapter in what is potentially the great American manufacturing revival. Let us hope so. For those residents who held in memory and steadfastly believed in this great industrial city’s spirit and promise, it may be time to rewrite the script and rebrand the town. “The history of the city of Detroit was one of meteoric rise, great growth, and prosperity in the first half of the 21st century, and beyond.”

Although Santa is expected to hitch up the sleigh to deliver much of the merchandise Americans may desire for Christmas, this is not going to be a typical holiday season, according to several X Team Retail Advisors industry veterans, located in major markets across the U.S. Despite shoppers flowing back to stores, soaring inflation, and economic turmoil, indicate that consumers will most likely not be shopping in the same manner, as they have in the past.

Retailers have taken note, are employing new strategies, and plan to deepen traditional approaches to maximize the buying season. So, what can we expect to see from retailers and consumers? There may not be one overarching presumption or expectation, and a few may be contradictory. Retailers are facing different challenges in 2022, as the pandemic winds down and supply chain hiccups abate. This year, consumers may be making their lists and checking them thrice, to account for tightened budgets, and shifting priorities.

Expect an earlier and extended shopping season, intensified use of data, online tracking, and retargeting, as retailers rely on AI to predict, anticipate and guide consumer preferences. This holiday season will produce digital campaigns and experiences that meld the online and physical worlds in an immersive approach to interconnect the consumer experience across channels.

Shop Early To Maximize The Buying Season
…And Shadowbox Inflation

According to KPMG 2022 Holiday Shopping Report, 75% of retailers surveyed expect to do 40% of their company’s total annual sales during the holiday season. Retailers understand that inflation is a top worry for most consumers, and have kicked-off holiday sales in early October, to allow for an extended purchasing season. Shopping patterns have also changed during the pandemic, driving consumers to online, BOPIS, BOSS, and other omnichannel solutions. Online sales are projected to rake in nearly $210 billion this year, a 2.5% year-over-year increase from 2021, according to Adobe Analytics Holiday Shopping Trends & Insights Report, which tracks data for online retail spending.

However, with wallets tightened, consumer spending is down and gift buying is expected to be smaller and more practical. Consumers may favor entertainment experiences and travel this season over consumer durable goods, which were buoyed with extra stimulus cash during the pandemic. To combat these factors, retailers have been offering increased opportunities to buy, with early and frequent promotions.

The National Retail Federation (NRF) says nearly half of all consumers feel it is better to purchase gifts and seasonal items early to avoid inflation-driven price increases toward the end of the year. Another third believes that it is best to purchase items earlier in the season, as deals won’t get any better. Addressing this sentiment, Amazon has offered a second Prime Early Access Sale this fall to address inflation, and inventory concerns, and to manage their over-expansion during the pandemic. Target Deal Days kicked off their early holiday season with a focus on deep discounts on trending items across many brand categories.

Consumer behavior has shifted in recent years, with many choosing to spread out their shopping over the entire season. Over half, plan to start their holiday shopping early, to avoid any supply issues and locate the best prices. Shoppers are now in the habit of doing research online and using price comparison tools to take advantage of special promotions being offered across the season. Retailers are enticing price-sensitive customers through loyalty club discounts, layaway programs, and digital commerce promotions. It remains to be seen if Black Friday will resume its position as the supreme communal holiday shopping experience.

X Team affiliate Jim Bieri of Stokas Bieri Real Estate, a Detroit-based retail commercial real estate company, believes that online will continue to play a strong role in holiday shopping, as families look for bargains to stretch their budget. “Families are struggling to pay the bills and meet their expenses. I expect online discounts to start early on overstocked items as customers look to beat rising inflation and a deepening recession by buying early.”

Dave Cheatham, President of X Team and Phoenix-based Velocity Retail Group agrees. “I do expect that people will shop earlier online and in-store according to their preference, and will benefit from aggressive promotions and holiday deals. Last year, inventory was so low that retailers were not in any position to offer consumers special markdowns. The retail industry saw high demand for merchandise at all levels and low inventory. This year is flipped. Retailers will have a better level of inventory versus the supply chain drought we had last year. However, the consumer may fill their shopping list with needs and staples for the family, rather than wants and aspirational luxury items. I expect value stores and the basics, such as clothes for the kids, to do well.” Walmart, Nike, and Urban Outfitters have announced an inventory surplus this holiday season that will translate to heavy price promotions and savings for the consumer. Apparel and accessories are top gifts during the holiday season. Mastercard Spending  Pulse expects apparel gift sales to see a 4.6% increase over last year.

 

The Inventory Challenge
Get The Balance Right

During the pandemic, delayed or canceled orders that then arrived in ports, have caused an inventory glut for many retailers. Excess inventory is driving aggressive promotional sales, causing retailers to cut prices to clear merchandise from overstocked warehouses, into consumers’ hands. Industry experts agree that those retailers in the best position to succeed were able to clear old merchandise before the holiday season began, and accurately forecast inventory needs.

Tim Miller, Principal of GreatStreet Realty Partners in Chicago, who specializes in tenant representation and master brokerage, offers, “I believe that some of the global supply chain issues have eased, but those macro issues that poked holes in retailers’ local supply chains, need to be fixed.” Bieri concurs, “Getting the right goods to the U.S. remains a problem. Nordstrom, The Gap, and Tapestry have announced that they will use air freight, if necessary, to deliver merchandise to stores.” Miller offers, “Most retailers were used to a smooth, cyclical season change in their inventory. Now, we see retailers scramble for more space to liquidate old merchandise to make room for new in their stores.” Miller is confident that retailers have learned from the global disruption and will be better positioned to handle issues in the future. Bieri adds, “Inventory will even out and the season should end up with moderate growth. The key is to have the inventory that shoppers seek.” Miller asserts, “Those who can aggressively market and promote events will do well. Level B and C shopping malls may struggle with low foot traffic if they are unable to deliver on promotions and events.”

Data Mastercard; Chart: X Team Retail Advisors

Brands Sleighing The Holiday Shopping Experience

This holiday season is bound to be far more promotional than 2021, as retailers work hard to lure customers. A smart pairing between Macy’s and Toys’ R’ Us will deliver in-store toy shops to help boost holiday sales for both brands and build market share. The department store has been partnered with the toy company for online sales since August 2021, filling a gap in its inventory. Macy’s toy sales jumped 15 percent year-over-year for the first quarter of 2022 according to RetailWire. Macy’s expanded its partnership this past October, to include a Toys’ R’ Us department in every store across the nation for the holiday season.

Sam’s Club has created a virtual Griswold’s Christmas Vacation house offering an immersive shopping experience, stocked with gift items, festive décor, and music. Clicking on a featured item reveals a short product description and links to the website to purchase the item online.

Department store retailers are contextualizing their merchandise by teaming up with influencers to offer shoppers curated shopping collections, and their expertise. Nordstrom and Nordstrom Rack will be hosting in-store and virtual events focused on interior design, holiday fashions, gift ideas, and in-person holiday meals.

The Holiday Spirit, Yet To Come
…And To All A Good Night!

Although the impact of the recession will be felt, the greater inventory will likely account for an increased volume of sales, resulting in a solid holiday retail season. Certain retail sectors will do better than others that may be coping with an excess of inventory. Apparel, furniture, and home improvement will offer deep discounts to spark sales and clear merchandise. Dave Cheatham suggests that to gauge the success of this year’s retail holiday season, it might be wise to benchmark it against pre-pandemic statistics, for a more accurate assessment. He explains, “Although things are getting back to what we remember as “normal,” we are not there yet.” Steve Edwards, founder of The Edwards Company and a three-and-a-half-decade veteran of the retail commercial real estate industry places it all in context. “We are retail brokers representing some of the top tenants and landlords in the country, and are paid to take the pulse of our clients, and gauge consumer sentiment daily. In my thirty-five years in the business, I have never seen such an unpredictable market. Economists are contradictory with each other and sometimes with themselves. The bottom line is, I don’t think that anyone has a bead on how the holiday season will turn out.” Cheatham offers this final thought, “One thing is clear, economic uncertainties will decidedly play a role in this season’s outcome.”