“Unanchored projects in secondary and tertiary markets will remain challenging with limited retail tenants to occupy these types of centers,” says Cunningham.
“Consumer demand pertaining to retail has shifted dramatically in the last several years. Many traditional retail uses have become obsolete, which is forcing both tenants and landlords to reinvent themselves in order remain relevant.” That is according to Bryan Cunningham, VP of JLL retail. In celebration of GlobeSt.com’s 15th anniversary, he says that “With consumers continuing to use the Internet as a resource for purchasing goods and services, most shopping centers and retail developments are complementing traditional soft goods retail lineups with restaurant, entertainment and experience-oriented users to drive traffic to their projects.”
Unlike other product types, he notes, retail real estate is tied almost exclusively to sales volume. “Retailers will continue to be drawn to the highest profile projects in the best trade areas and will pay a premium to secure space in those developments in order to maximize sales,” he says. “Unanchored projects in secondary and tertiary markets will remain challenging with limited retail tenants to occupy these types of centers.”
Drilling down into one local market, with the return of consumer confidence and the corresponding rise in retail sales, retail vacancy in San Diego, for example, “is near an all-time low and rents in core markets have returned to or exceeded pre-recession levels.” However, he says that the retail tenant pool remains relatively shallow with value oriented apparel tenants, smaller format grocery stores, fitness users and restaurants driving most retail projects. “The tenants that remain active in today’s markets have positioned themselves to offer an experience that cannot be duplicated by online shopping.”
And according to Brandon Famous, Americas head of retail occupier advisory and transaction services at CBRE, 15 years ago the trend was power centers. Bigger is better, he said. “Big box retailers turned to expanded formats. Their focus wasn’t on efficiency, it was, ‘how much can we put in the store?’ because people wanted wholesale clubs and big department stores. But that’s changed.”
The single biggest impact on retail over the past 15 years has been the internet, Famous tells GlobeSt.com. “The internet has forced retailers to be much more efficient, not only in space requirements, but in distribution as well.”
Today’s retailer isn’t just thinking about what’s the most efficient store size; they’re trying to marry their philosophy in how to integrate bricks and mortar with e-commerce, Famous explains. “But e-commerce has also done something else: it has provided retailers with incredible data that they did not have their disposal 15 years ago.”
He adds that “Retailers now know shopping patterns and can tailor the consumer experience accordingly. They can identify products. If they see that 100 women clicked on a specific blue blouse, they know that they better have that blouse in the store, because there are people who will see it online and think, ‘I want that right now. Let me run to the store and check it out.’”
Phoenix/Gilbert - A limited partnership formed by Clarion Partners LLC in New York City, N.Y. (Stephen Furnary, CEO) paid $80 million ($61.47 per foot) to buy a 1.3 + million square-foot portfolio of industrial properties in the Valley. The seller in a single cash transaction was the Zimmerman Revocable Trust in Oakland, Calif. (Myron Zimmerman, trustee). Maricopa County records show the buyer was LIT Industrial Limited Partnership (Lion Industrial Trust entity formed by Clarion). The off-market sale was brokered by Bo Mills, Mark Detmer, Marc Hertzberg and Tony Lydonof Jones Lang LaSalle in Phoenix. The group of assets includes nine distribution-warehouse and manufacturing buildings in Phoenix and Gilbert. On the average, the space is 41 percent occupied. The leasing will be handled by Pat Harlan also of JLL, along with Lydon and Hertzberg. The properties, which were developed from 1984 to 2000, range from 13,656 sq. ft. to 323,345 sq. ft. Here is a description and location of each of the buildings: Valley West Distribution Center I, 323,345 sq. ft. located at 601 N. 75th Avenue in Phoenix; Valley West Distribution Center II, 323,345 sq. ft. at 605 N. 75th Avenue in Phoenix; Papago Distribution Center, 226,436 sq. ft. at 1010 N. 47th Avenuein Phoenix; Continental Tech Center, 108,212 sq. ft. at 955 N. Fiesta Boulevard in Gilbert; El Dorado Tech Center I, 83,472 sq. ft. located at 1171 N. Fiesta Boulevard in Gilbert and El Dorado Tech Center II, 43,000 sq. ft. located at1191 N. Fiesta Boulevard in Gilbert; 13,656 sq. ft. at El Dorado Tech Center located at 2020 W. Guadalupe Road in Gilbert; El Dorado Tech Center III, 110,975 sq. ft. at 2075 W. Obispo Avenue in Gilbert, and 69,112 sq. ft. at 2135 W. Obispo Avenue in Gilbert. BREW reported Zimmerman of Zimmerman Investments buying 982,455 sq. ft. of the portfolio in four separate sales completed in 2000 and 2001 that totaled $22.111 million (blended average of $22.50 per foot). Clarion Partners is a global real estate investment firm with $36.8 billion in assets under its management. The employee-owned company, formerly a subsidiary of Netherlands-based ING, is a registered investment advisor. Clarion Partners invests in office, retail, industrial, multi-family and hotel properties, either through buying existing assets or developing new projects in joint ventures. BREW has previously reported Clarion Partners buying, selling and developing all of the aforementioned property types in the Valley. The company is looking for more investment opportunities in the Phoenix area.
