Outlets Going Strong
American outlet centers still outperform traditional malls in sales power,
according to International Council of Shopping Centers president and CEO
Michael P. Kercheval, at the Value Retail News Fall outlet convention. Sales at
the 205 North American outlet centers average around $532 psf, whereas
traditional mall sales average about $480 psf, he says. Developers are adding
11 new outlets centers totaling 3.8 msf in 2014, several of them opening in
Canada. In addition, 11 centers are expanding, adding an average of more than
76,000 sf of new space to meet tenant demand. Fourteen additional expansions
are in the works for next year and beyond, adding another 1.7 msf to the outlet
category. Retailers no longer worry about cannibalizing sales at their
full-price stores and have jumped into the outlet tenant roster with both feet.
More than 368 outlet chains operate almost 13,000 stores and plan to open
another 1,843 stores next year.
Value Retail News
widely believed that the commercial real estate industry can handle the
anticipated increases in interest rates without serious disruption to its
recovery and sales activity.”
Real Estate Investor Survey, 3Q14
— The 2015 forecast for both boutique and convention hotels is strong,
according to STR. The boutique niche will see a 0.5 percent decrease in
occupancy but 6.3 percent growth in average daily rates and a 5.8 percent
increase in revenue per available room. Convention hotels also face a 0.2
percent occupancy increase, 5.8 percent ADR boost, and a 6 percent RevPAR
— After the top three ports of New York/New Jersey, Long Beach, Calif., and Los
Angeles, the next three top-volume seaports are Savannah, Ga., Baltimore, and
Tacoma, Wash., according to JLL. Savannah’s increased volume has sparked big-box industrial construction in
nearby Atlanta, while Baltimore and Tacoma are seeing new construction of 1.4
msf and 3.5 msf respectively.
— The real question for multifamily investors next year is “Are we overbuilding?” says Cassidy & Turley chief economist
Kevin Thorpe. Given the increase in new development nationwide, “the underlying question of fundamentals —
vacancy levels and rents — is much more likely to impact the sale pricing of
apartment projects in 2015 than the potential impact of minor hikes in interest
Investors in secondary markets seek stabilized office assets instead of those
near lease rollovers, according to the 3Q14 PwC Real Estate Investor Survey. An
analysis shows 19 of 44 markets registering an above-average percentage of
acquisitions per inventory according to the survey, including Denver, Phoenix,
San Diego, Minneapolis, Austin, Texas, Nashville, Tenn., San Jose, Calif., and
Orlando and Jacksonville, Fla.
Dollar General and Dollar Tree both continue to pursue Family Dollar, however single-tenant
net-lease investors remain more interested in the number of new stores opening
than the brand takeover war. With 1,000 new stores opening this year, new-construction
dollar stores commanded a 50 basis point premium in 3Q14, and comprised 45 percent
of the entire sector, according to the Boulder Group.
of a strong 2Q14 earnings report, Ulta Beauty Supply announced plans to open
100 stores annually for the next five years. The beauty supply retailer is a
favorite of Wall Street analysts because of its one-stop shopping approach.
Ulta sells both high-end and discount beauty and fragrance products, as well as
hair salon services — a “major
disruptor” in the
beauty supply field, according to the Wall Street Journal’s MarketWatch. Ulta’s net income rose 35 percent in 2Q14, and it
raised its earnings growth for 2014 to 20 percent. The company’s 715 stores operate in 47 states in “convenient, high-traffic locations such as
power centers. Our typical store is approximately 10,000 sf, including
approximately 950 sf dedicated to our full-service salon,” according to the Ulta web site.
than C$13 billion in Canadian commercial real estate traded hands in the first
six months of 2014, according to Avison Young, a 10 percent drop from 1H2013.
The decrease in activity is not due to lack of cash or investors, but lack of
available assets, says Bill Argeropoulos, Avison’s vice president and director of research for
owners are opting to hold on to their properties given the difficulty of
replacing them with similar or better-quality assets,” he says. In addition, “Lower yields have led other investors to pursue
alternative growth strategies — such as new developments, which offer higher
yields, or redevelopment of existing assets to unlock value — while others have
sought investments abroad. All of these factors have tempered domestic
Canadian institutional investors bought $5.4 billion of U.S. properties in
1H14, primarily in Manhattan and Boston.