What’s the future of your retail
center? Well, to meet the demands of tomorrow’s tenants, think about subdividing those big box
spaces, losing the parking lot, and adding a few bike racks.
Last year total retail
sales grew about 7 percent, according to the U.S. Commerce Department. But
online shopping grew almost 15 percent, toting up $165.4 billion in sales.
E-commerce is expected to reach nearly $270 billion by 2015, according to
To compete with e-retail’s convenience and selection,
brick-and-mortar retail “must
deliver where the online store cannot,” says Jennifer Bassett of Interbrand, a consulting
company that ranks the best retail brands. “This not only means more exciting window displays,
but an atmosphere fully infused with a brand’s values, from graphic design, interactive
elements, unique architecture, and exciting, relevant merchandising.”
Interbrand foresees “microformat” stores with 40 percent less
square footage and large windows for tempting displays, clustered in pedestrian
connected by sidewalks and bike paths. Grocery stores will mimic farmers
markets, drugstores will have medical and dental services, and most retailers
will offer in-store experiences that consumers can’t get online. For example,
at Lutxottica, an eyewear store in Melbourne, Australia, machines simulate snow
and water glare for consumers. “In the next few years, expect to see more brands
innovate their brick-and-mortar stores, through multisensory experiences more
akin to theme parks,”
1Q11 Multifamily Stats
Effective rents: 4.65%,
largest YOY gain since 1996
National occupancy: 93.6%,
up 125 bp YOY
2011 rent growth forecast:
A location’s effective tax rate is a
huge factor in corporate site selection, and a recent Ernst & Young study
ranks Maine first of the 50 states, having the lowest ETR of 3 percent, while
New Mexico and the District of Columbia are tied for the highest rate at 16.6 percent.
The study also analyzed the tax burden based on the type of facility, which
indicates further disparities.
[developers] want competitive [federal] money … we’ve set sustainability as a criterion for all of our
funds. And that’s
really going to begin to change the game on a broad scale.”
— Shaun Donovan, secretary
of the U.S. Department of Housing and Urban
A survey of real estate
auctioneers by PropertyAuction.com indicated that auctions are an option for
all types of properties and all types of sellers. Land, industrial, and
multifamily are the most common types of commercial assets auctioned, usually
through on-site/open-outcry auctions. Sealed bids account for only 2 percent of
auctions these days, while 21 percent of auctions are carried out online.
Hospitality — After a
two-year decline, hotel profits rose 9.8 percent in 2010, according to PKF
Hospitality Research. Full-service segments achieved the greatest gains at 14.4
percent, while limited service had the smallest at 0.5 percent. PKF estimates
total hotel revenues to grow by 6.8 percent this year.
Industrial — Self-storage
investment activity will increase as banks sell off REO properties in
California, Florida, Arizona, and Nevada, according to Marcus & Millichap.
REITs and other institutional investors will look to the Northeast for prime
core assets priced $10 million and above, while SBA loans will help finance
purchases below $5 million.
Multifamily — Declining
homeownership rates boosted 1Q11 apartment fundamentals nationwide, according
to Reis.com. More than 44,000 units were absorbed in 1Q11, and every major
metro saw revenue-per-unit increases, as much as 8.8 percent in top market
Office — Institutional investors,
including pension funds, sovereign-wealth companies, and insurance companies
added almost $1.4 billion in office assets to their portfolios in 1Q11,
according to CoStar, signaling a shift from selling to buying. REITs added $1.1
billion in office holdings during the same period.
Retail — Store closing
announcements fell 36 percent YOY in 1Q11, while the amount of square footage
closed increased 31 percent, according to Jones Lang LaSalle. A number of
retailers are downsizing, shuttering larger stores and opening smaller, more