• Sat. May 25th, 2024

Retail Availability Bottoms Out, New Big-Box Tenants, Nugent Rocks Industry Crowd


May 23, 2023
Retail Availability Bottoms Out, New Big-Box Tenants, Nugent Rocks Industry Crowd


Store closings may be dominating headlines, but a multitude of retailers are still investing in expanding their brick-and-mortar footprints.

A panoply of apparel, grocery, medical, health and wellness, beauty, and entertainment tenants will soon populate malls and shopping centers across the country as the demand for top-tier retail space far outweighs the amount available to lease, retail executives said at the ICSC conference in Las Vegas.

“Retail availability is at an all-time low at a time when there’s a lot of demand but very little space coming in the pipeline,” Brandon Isner, CBRE’s head of retail research for the Americas, told CoStar News. “Suddenly there has been a lot of availability come online because of retail bankruptcies or restructurings, but a lot has been backfilled quickly. There are the usual suspects like TJX or Ross, but some has also been filled by retailers that are less familiar and that you might not know about.”

Chicken N Pickle’s location in San Antonio spans more than 7.5 acres in an area that pulls traffic from the nearby university campus as well as affluent suburbs. (CoStar)

There isn’t much overlap between an urgent care center for pets and a pickleball-oriented entertainment venue, but when it comes to retail space, the two are gobbling up as much as they can.

Nontraditional tenants such as Veterinary Emergency Group and Chicken N Pickle have swooped in to fill space left behind by closings among retailers including Bed Bath & Beyond, Party City and even Walmart, injecting a boost of activity into former stores that would otherwise be sitting empty.

“When there are big shopping centers and retail centers, we look at it as someplace we can activate and drive traffic to and provide a great amenity to a community with an otherwise vacant box,” Garrett Stutz, the director of real estate expansion for Chicken N Pickle, said Monday at ICSC. “There are so many good, nontraditional tenants out there like Prime Time Group, Elevate Entertainment, High Five. … Everyone wants to be social right now, especially after COVID, and nontraditional tenants give them great avenues to do that.”

Even better, Stutz said, is concepts like Chicken N Pickle’s ability to boost foot traffic for some of its neighboring tenants, sometimes by as much as 25% once the pickleball-restaurant venue opens.

“It’s not just us up here,” he said, adding that “there are a lot of groups out there that fit the mold and can drive that traffic.”

Top executives at companies ranging from Disney to Marcus & Millichap have faced challenges in reversing their pandemic-era policies allowing employees the freedom to operate remotely.

While parts of the American economy have started transitioning back to a more pre-pandemic environment, some real estate CEOs at ICSC lamented the hurdles they’re facing in luring their workers back to physical office space.

“We wanted to see people back in the office, but it was a much bumpier road than we thought it would be,” Phillips Edison & Co. President Devin Murphy said Monday. “Senior management had a much firmer belief that everyone needed to be back in the office, but other employees felt they could still get the job done in a remote environment. Ultimately, to have a strong culture, you have to trust your people to make the right decisions. It hasn’t been a completely smooth transition, but we’ve made it successfully and are stronger for it.”

It was a sentiment echoed by First Washington Realty CEO Alex Nyhan, who said his strong opinions about getting people to return to face-to-face work softened after realizing that the pre-pandemic work schedules weren’t working for most employees. For Hessam Nadji, the CEO of brokerage Marcus & Millichap, it came down to understanding the changes the pandemic wrought on the country’s work culture as well as what the next generation of employees may be missing by staying fully remote.

“We’ve been really struggling with some workers who have been very resistant to coming into the office,” Nadji said. “We’ll see training and relationship gaps within the next three to five years, and employees coming into the workforce won’t have sponsors or mentors like many used to have. A lot of this will eventually reverse, and I think we’ll go back to more in-office interactions, but not like pre-COVID. We’re never going back to pre-COVID.”

It turns out that Walmart and Nordstrom aren’t the only retailers closing some stores because of retail theft. Ulta Beauty is doing it, too.

Julie Giblin, the chain’s vice president of loss prevention, discussed the effect of organized retail crime — stealing as part of sophisticated criminal organizations that are reselling goods for profit — at ICSC. Despite the conception to the contrary, insurance does not cover losses from theft, she said.

Julie Giblin, Ulta Beauty’s vice president of loss prevention, and David Johnston, vice president of asset protection and retail operations at the National Retail Federation, discussed retail crime this week. (Linda Moss/CoStar News)

“In addition to losses, retailers — my peers — we are spending millions of dollars, each retailer, in physical security measures, new technology that is going into our stores and behind the scenes,” Giblin said Monday. “We‘re standing 24/7 operation centers. We’re adding more staffing to our stores, or our loss prevention teams. And we’re standing up organized retail crime investigators all throughout the country. And this all takes not only just the losses but the financial impact on what we’re spending to maintain and mitigate these losses.”

But sometimes that isn’t enough, according to Giblin.

“Unfortunately, there’s times that some of the retailers, based upon these losses and the impact, have closed stores,” she said. “And unfortunately, we have, as well.”

A packed audience of real estate professionals came to see Ted Nugent perform at Hendon Properties’ party in Las Vegas. (Linda Moss/CoStar)

The commercial real estate industry turned out in droves for singer Ted Nugent’s performance at Hendon Properties ICSC party Monday night in Las Vegas.

Atlanta-based Hendon hosted a Rock N Roll Roadhouse at the Cosmopolitan Hotel that headlined Nugent, who is known for his outspoken conservative views and gun-ownership advocacy. The rock musician known for his “Cat Scratch Fever” tune took the stage later in the evening and performed for a packed crowd of hundreds of attendees.

“He was awesome,” Charlie Hendon, president and CEO of Hendon Properties, said in an email to CoStar News on Tuesday.

Party attendees were treated to complimentary straw cowboy hats, small American flags and red bandanas, which some promptly wrapped around their heads and wore. There was also a 360-degree photo booth — featuring a camera on a long metal arm that rotates around a platform where guests stand, pose or dance — creating an almost cinematic video. And there was an opportunity to get airbrushed tattoos. Champagne flutes were suspended from a server’s metal hoop skirt for guests to pluck off to drink.

One of Nugent’s planned concerts in Alabama earlier this month was canceled following backlash over his political views.

One Medical’s Vice President of Real Estate Development Jamie Goldberg, second from right, said the health and wellness industry has finally won over landlords as a desirable tenant class. (Katie Burke/CoStar)

It wasn’t the case five years ago, but the health and wellness industry has officially caught the attention of retail landlords and property owners looking to not only fill space, but activate their properties.

The sector has shed its earlier reputation for expensive build-outs and potential noise concerns, transitioning into a tenant class known for driving foot traffic to surrounding businesses and attracting a wide range of demographics that boost sales, Jamie Goldberg, vice president of real estate and development for concierge medical services provider One Medical, said at ICSC on Tuesday.

“Being in a retail center gives the rest of the center some vibrancy,” he said. “Health and wellness fits a niche that centers and landlords didn’t really think about before, but now, landlords love it in their centers. That wasn’t the case five years ago.”

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