Chris Waggett, a Denver real estate developer and landlord, is beyond fed up with retail theft and violence. He calls it a crisis.
Waggett, the CEO and principal of D4 Urban, said he’s now paying about half a million dollars a year for private security at his properties spanning roughly 75 acres south of downtown Denver. Tenants such as Dollar Tree and Sally Beauty have abandoned their locations in the area over the past several years as the city’s socioeconomic challenges have worsened, Waggett told CoStar News.
“There has been open drug use across my property, vandalism across my property, and sex, drugs and rock ’n’ roll across my property every day,” Waggett said. “It’s not at the scale of cities like San Francisco, but the problems are identical. I’m sick of it and done with it. My compassion has evaporated. We are spending a ton of money, daily, with reports of prostitution, human feces, drugs, car thefts, guns, knives … even screwdrivers are being used in shoplifting incidents. My people and my tenants shouldn’t have to deal with this or have the costs of occupancy being pushed up.”
Across the country, landlords such as D4 Urban are contending with rising crime and what many have said is a breakdown in basic civic safety. Issues from petty theft to violent raids and threats to employees have forced property owners and retailers to take matters — and rising expenses — into their own hands in an attempt to preserve their business.
Even then, however, the costs associated with private security or surveillance equipment are increasingly proving to be a breaking point for some tenants, leading to an influx of retailers cutting ties with locations in high-crime areas and property owners wringing their hands over how to fill their now-vacant spaces.
Waggett, too, has hit his limit and gave a dire warning about the long-term impact of retail crime in Denver and elsewhere across the United States.
“I’m not sugarcoating it anymore, because I’ve had enough,” he said. “We’ve had lots of tenants leave because of it, and if we don’t get law and order and civic safety on track, our downtowns will be hollowed out and retailers will leave.”
The post-pandemic rise in crime in some downtowns has meant more longstanding retailers are willing to cut their losses by simply closing up shop. In San Francisco, for example, Nordstrom, Saks Fifth Avenue, Whole Foods Market, Anthropologie and Office Depot have all made plans in recent months to exit their decades-old storefronts. Walmart, the nation’s biggest retailer by revenue, is shutting several stores in Chicago and Washington, D.C., as well.
And more shop closings could come.
For one, Minneapolis-based Target last week said it is closely monitoring the financial fallout of theft to determine whether it should shutter certain stores. The chain has reason to be concerned: It reported that it expects “inventory shrink,” or losses, to reduce its profitability by $500 million this year compared with last year. That would take its shrink losses to more than $1 billion for 2023.
“Security is a big issue, and there are a number of locations — often downtown — that are becoming increasingly hostile places to do business,” Neil Saunders, managing director of GlobalData, told CoStar News. “Retailers are considering the security of their own staff, and if they can’t guarantee it, they get nervous about it, as well as the security of their businesses. … Retailers aren’t charities. They’ll simply pull out of space if it’s no longer worth it for them. When retailers pull out, it makes the area a lot less viable.”
Retailers as well as landlords of malls and shopping centers are pursuing a variety of options to create secure environments, combat retail theft and prevent violence — responses that are less drastic that closing down.
They are beefing up their loss prevention departments. Some stores are locking up certain merchandise behind plexiglass. There are malls that are checking patrons with metal detectors and looking in their bags before giving them entry, or are requiring teens under a certain age to be accompanied by adults on weekend nights. Retail property owners are asking their local police departments for more officers, in uniform and in plainclothes, to be present inside and outside shopping venues. Some landlords are hiring off-duty police as security.
Hiring private security doesn’t come cheap, however, and is increasingly eating into both landlords and retailers’ bottom lines.
For D4 Urban’s Waggett, that tab exceeds $500,000 a year since the pandemic broke out across the country in early 2020. While the cost has become increasingly necessary, he said, it hasn’t always been enough to keep existing tenants in place — or attract new ones.
“The confluence of events on our property has meant we have had to up our security and pass what we can onto our tenants, but increasingly, we’ve had to eat it,” Waggett said. “At the same time, we’ve seen record tax increases, but no additional public services to address the issues. … There becomes a pain threshold and rental elasticity that starts to bite on tenants. Some of them can’t afford it, and that’s why they’re leaving.”
The retail industry is facing unprecedented challenges when it comes to security. Today there is a new breed of thieves who are engaging in organized retail crime — not shoplifting on a whim for personal gain but stealing as part of sophisticated criminal organizations that are reselling goods for profit, major companies including Target, Home Depot and Walmart have said. Retail inventory loss was $94.5 billion in 2021, up from $90.8 billion in 2020, according to the National Retail Federation.
Then there’s the violence — committed by both thieves as well as lone-wolf assailants — who are harming, and even killing, store employees and shoppers. And the incidents are increasing. Earlier this month, eight people were left dead when an armed man attacked shoppers at Allen Premium Outlets in Allen, Texas. Last July, three people were killed in a mass shooting at Greenwood Park Mall in Indiana, which like the Allen outlets is a Simon Property Group mall. And a year ago, 10 people were fatally shot by a gunman at a Tops Friendly Markets supermarket in Buffalo, New York.
The retail industry’s main national trade groups, ICSC and the NRF, say the private sector can’t solve the problem. They are lobbying for passage of the Combating Organized Retail Crime Act of 2023, new bipartisan legislation that would increase the penalties for those convicted of organized retail crime and strengthen the ability of prosecutors and investigators to bring cases against such crime rings. Changing public policy is necessary to really address the issue of retail security, according to those organizations and some retailers.
“It starts with legislation at the federal level,” Dave Johnston, the NRF’s vice president of asset protection and retail operations, said on a recent NRF podcast. “It starts with legislation at the state and local levels. And it also requires partnership between law enforcement, prosecutors, legislators and the retail community.”
It is happening in some places. Just last week, New York Mayor Eric Adams unveiled a comprehensive plan that he said aimed to “to beat back on retail theft through a combination of law enforcement, prevention and intervention.” There’s been a 77% increase in retail theft over the past five years, with a 45% increase from 2021 and 2022, according to city officials. There were 22,000 retail thefts in New York last year, the mayor said.
“Every instance of retail theft represents another inch that a business store is going to close for good,” Deputy Mayor Phillip Banks III said at a news conference on the new initiative.
Retailers have been coming up with stopgap solutions. In New York bodegas now, higher-priced goods that can easily be resold, such as laundry detergent, are often chained down with locked padlocks so they can’t be swiped.
Bill Thorne, who hosted the podcast and is the NRF’s senior vice president of communications and public affairs, offered his own eyewitness account of retail theft.
“I was at my local CVS,” he said. “Three guys ran out with buckets full of stuff. … They just quick walked out and everybody just stood there and watched them. It was unbelievable. And it’s the nature of the beast.”
As the crimes become more prevalent, videos of retail thefts are also making their way to social media. Last week, a video of four masked men running out of a Dior store with $125,000 worth of purses at the Mall at Short Hills in New Jersey was posted to TikTok.
Pharmacy chains like CVS, which has seen a spurt of robberies in the Washington area where the NRF is based, carry everyday name-brand items popular with organized retail crime rings. CVS didn’t respond to an email seeking comment.
The current environment has created a perfect storm of challenges for U.S. retail, with: a spike in mass shootings and other violence across the nation; shoplifting transforming into a business that actually recruits workers; a rise in drug addiction; a decline in daytime foot traffic as employees increasingly work from home; and high inflation making some people turn to theft because they can’t make ends meet.
Retail security has become such a pressing problem that companies are openly discussing their losses from theft and are often announcing and explaining why they are closing stores in parts of some crime-plagued cities.
“So many chains are publicly declaring that the reason they’re closing stores is because of security issues,” Nina Kampler, an attorney and retail real estate consultant, told CoStar News. “And I don’t remember another period of time that that was so visibly distinctive: meaning that often when companies close stores they’re very guarded. … They don’t want people thinking their brands are targets of crime. And they might not want their customer to understand that they’re unsuccessful in certain markets.”
Kampler added that “And yet today, we see something aberrant, in that the C-suites are actually announcing — whether it’s in Portland [Oregon] or San Francisco or in parts of Manhattan — that they are unable to keep the business going in an environment where thieves cannot be stopped from emptying their shelves.”
Retail giant Walmart, as well as companies like Nordstrom, are among the chains that have issued public statements about the reasons for their store closings in certain cities.
“Today we’re starting to see the thefts are more brazen, more open,” Johnson said on the NRF podcast. “It’s even being discussed with retailers now talking about shrink and loss in earnings reports in mainstream media, the impact on the bottom line.”
Target is among those chains that have gone public on the issue and also discussed what it is doing to combat theft and violence. On a first-quarter earnings call last week, CEO Brian Cornell hinted that the company is trying to avoid having to close stores due to the problems but may be forced to.
“Beyond macro-economic challenges, we continue to contend with significant headwinds caused by inventory shrink, building on a worsening trend that emerged last year,” he said. “While shrink can be driven my multiple factors, theft and organized retail crime are increasingly urgent issues impacting the team and our guests and other retailers. The problem affects all of us, limiting product availability, creating a less convenient shopping experience and putting our team and guests in harm’s way. The unfortunate fact is violent incidents are increasing at our stores and across the entire retail industry.”
Target’s mitigation efforts include changing how it displays merchandise and installing fixtures to protect it, adjusting its product assortment and making security changes in its stores, according to Don Liu, the retailer’s chief legal and risk officer.
“While we’re doing all we can to address the problem, it’s an industry and community issue that can’t be solved by a single retailer,” Cornell said. “That’s why we’re acting collaboratively with legislators, law enforcement and retail industry partners to advocate for public policy solutions to combat organized retail crime.”
Target is “focused on keeping our stores open in the markets where problems are occurring” while at the same time closely monitoring the safety of its patrons and employees as well as the financial impact to its business “as we determine the right path forward,” Cornell said.
The retail industry is making an effort to educate its members about security measures. At ICSC’s annual conference this week in Las Vegas, Johnston is scheduled to appear on a panel to discuss the issue with Julie Giblin, vice president of loss prevention for Ulta Beauty.
That beauty-goods chain has been hit by thefts across the nation, with at least one couple arrested and charged with stealing fragrance bottles in a number of Ulta stores in New Jersey and Pennsylvania. Those suspects were allegedly shoplifting thousands of dollars of merchandise that they would conceal in a baby stroller. In another case, the thieves were caught because of GPS trackers that Ulta had embedded in the goods that were stolen.
“The safety of our guests and associates is always our highest priority,” an Ulta spokeswoman said in an email. “We believe creating experiences with engaged, in-store associates does help prevent shoplifting but unfortunately theft still occurs.”
The NRF is also holding a two-day conference, “NRF Protect,” next month in Texas, which will feature experts on retail security, in terms of preventing theft and violence.
Landlords are taking steps to make their properties more secure but there is no easy solution, according to not only Waggett but other property owners and real estate brokers.
“It’s a major problem,” Ami Ziff, managing director of national retail at Time Equities, which has 138 retail properties. “A lot of the states we operate in the punishments are not there, law enforcement is not there in a lot of instances, to address these issues and/or they’re not tending to them because policies are in place that tolerate nefarious behavior or shoplifting up to a certain amount.”
Addressing the issue requires “a collaborative effort,” according to Ziff.
“Collaboration from politicians, the local police force, your tenant to communicate when and where they’re having issues, so you can really hone in the specific issues” Ziff said. “It’s not feasible to throw 24/7 security at the problem. In combination with that, increase security presence. It could be [police] substations at your properties. There’s a lot of different ways to deal with it, but it’s some sort of collaboration between all those parties involved.”
Barrie Scardina, executive managing director and head of retail services at real estate firm Cushman & Wakefield, told CoStar News some brokers she reached out to said so far national retailers aren’t seeking assurances about security in their leases.
But landlords are “being hyper-sensitive” about trying to address the issue, like asking for an increased police presence at their malls and shopping centers, according to Scardina. But it’s a complex problem that is sometimes linked to homelessness and the nation’s mental health crisis, she said.
“We seem to be in a place where the world is very divided and there has become a great bifurcation between the wealthiest and the people who are struggling,” Scardina said. “We see it in L.A. and San Francisco, in Chicago and Portland, and it’s really impacting commerce. … There’s just a lot of things brewing against the backdrop of a volatile economy. … So I do think that the best solution in my personal opinion is that the townships need to work with the landlords to think about solutions by market: What is the problem and how can we solve this in my market?”
Rudolph Milian, formerly with ICSC and now president and CEO of Woodcliff Realty Advisors, said he is fielding questions relating to retail security.
“As consultants we get many inquiries and landlords are looking for ways to mitigate losses, make the customer and store employees feel safe, make shopping convenient and pleasant, pursue sound risk management principles, etc.,” he said in an email.
Beefing up staff is one of the recommendations he said he often makes.
“Labor is expensive but it is a necessary element of retail customer service and loss prevention,” Milian said.
The industry seems to be following his suggestion. The NRF’s annual survey on retail security last year found that 37% of the respondents planned to increase the size of their loss prevention teams.
Mall giant Unibail-Rodamco-Westfeld is among the landlords that have expressed concern about tenants who have closed stores at its properties. It owns one of the malls that Nordstrom is exiting in San Francisco.
“The planned closure of Nordstrom underscores the deteriorating situation in downtown San Francisco,” a Westfield spokesperson said in an emailed statement to CoStar News. “A growing number of retailers and businesses are leaving the area due to the unsafe conditions for customers, retailers, and employees, coupled with the fact that these significant issues are preventing an economic recovery of the area.”
Public officials aren’t addressing retail security issues, according to Saunders and others.
“People who run the cities are negligent and have done nowhere near enough to take these issues seriously,” he said. “Many of them are far too soft on crime and too enmeshed in politics and not focused enough on the commercial and economic viability of those places.”
On a first-quarter earnings call last week, Walmart officials said the retail industry can’t solve the theft issue on its own and that communities need to step up and enforce the law to bring the situation back under control.