Post on 04-Apr-2018
7/29/2019 Colliers 2013 North American Retail Outlook
1/11
7/29/2019 Colliers 2013 North American Retail Outlook
2/11p. | COllIERs INTERNATIONAl
HIGHLIGHTS | 2013 OutlOOk | retail | nOrth america
Further reecting a lackluster quarter, several o our indicators t
came in lat or positive were less than stellar. The Chicago Fe
National Activity Index (CFNAI) was essentially unchanged, with a
reading at the end o Q, dropping below zero (indicating below-av
age growth) in October beore rebounding to . in Decemb
Personal incomes shot up .% in December, but only becau
corporations responded to the threat o higher capital gains rates
shiting dividend payments to . We dont expect that grow
rate to be sustained, at least in the short term: The reversion o soc
security taxes to .%, up rom the rom the .% collected during
past two years, removes an estimated billion rom consume
pocketsequivalent to the combined U.S. revenues o McDonald
Amazon.com, and Costco. Although the handul o retailers that rep
monthly sales turned in better-than-expected January results, re
sales reported by the Commerce Department rose by only .%
household spending adjusted to lower take-home pay.
There was encouraging data, too. U.S. auto sales ended the ye
at . million vehicles, up % rom , and the highest volum
since . Chinas Q GDP growth came in slightly ahead o analysexpectations; rising household incomes there are expected
contribute to domestic consumption/retail sales this year. Conditions
Europe have eased somewhat in the past six months as Northe
countries stepped up support or the European Monetary Unio
resulting in sharply lower yields on -year Spanish and Italian bon
Here in the U.S., with two more revisions to GDP, the advance
number will likely be revised upward to be weakly positive, but w
expect growth or H to come in at or below a % annualized ra
THE u.s. HOusINg RECOVERy: ITs REAl THIs TIMERetail real estate has tracked in lockstep with the housing mark
irst, with its collapse and since then along its painu
uneven recovery. During the past year, we have observed consistenimproving trends in the housing market and now are condent that t
sector is growing again. In its year-end housing wrap-up, Wells Fa
noted that unlike other economic indicators (namely consum
condence), residential transaction volume, housing prices, and per
activity were not shaken by broader unease over the countrys s
debate last all.
Beginning in September , when the National Association o Ho
Builders and First American launched their Improving Markets Ind
(IMI), Colliers has looked to the IMI to quantiy the strengthening U
residential market. We like the IMI because it aggregates metropolit
area data on employment growth, home price appreciation, and sing
amily permitting activity, and only lists a market as improving i all th
trends have been positive or six months. The IMIs list o improv
metro areas has grown out o months (see chart on ollow
page), jumping rom at the end o Q to in Q .
February , the IMI hit a record level: metro areas, and or t
rst time, every state in the country has at least one market represent
This broad-based housing recovery bolsters our more positive outlo
or retail sector perormance. In mid- we pointed
strengthening year-over-year home goods sales compsrepor
irst by specialty retailers Williams-Sonoma, Bed Bath & Beyo
ECONOMIC RECAP
During the ourth quarter o , U.S. national attention turned
sharply to the so-called scal cli and the potentially devastating
impact its simultaneous budget cuts and tax changes could have on
the countrys uneven economic recovery. Although Congress agreedto a basic deal at the absolute last minute (read: New Years Eve),
public worry over what-i scenariosmost o them badintensied
through the all and peaked in mid-December, just as the holiday
season was in ull swing. As a result, despite continued improvement
in the housing and employment markets, only our o Colliers twelve
Bellwether Economic Indicators trended higher or the quarter.
Sources: Trepp, National Restaurant Association, Fitch, Commerce Department, Citibank,National Federation o Independent Businesses, Autodata*Colliers projection; data not yet available
Chicago Fed National Activity Index (CFNAI)
GDP U.S.
GDP Hong Kong*
GDP Germany
NFIB Small Business Optimism Index
NRA Restaurant Performance Index
Citibank Economic Surprise Index (U.S.)
CMBS retail delinquencies (% of total)
National Unemployment Rate
Retail sales growth (Commerce Dep't)
Personal Income (% growth)
Auto sales (annualized pace in millions)
TREND VERSUS
PRIOR QUARTER
BEllwETHER ECONOMIC INdICATORs
Surprisingly solid U.S. retail sales and business investment could not
oset sharply lower ederal deense spending, which led to the Gross
Domestic Product (GDP)s irst quarterly contraction (an -.%
advance reading) since Q . Germany bucked the Eurozone
recession or most o the year, but its advance Q reading came in at
-.% as domestic rms deerred or cancelled planned investments in
response to a slowing global economy. The Restaurant Perormance
Index dropped below its threshold level or expansionary
activityin October and remained there or the rest o the quarter. The
Citibank Economic Surprise Index (CESI) tracked a volatile path in
beore turning negative late last month, indicating that more
economic reports are coming in below consensus estimates.
7/29/2019 Colliers 2013 North American Retail Outlook
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HIGHLIGHTS | 2013 OutlOOk | REtAIl | nORth AmERIc
COllIERs INTERNATIONAl | p
Other Top rental markets included San Francisco (./PS
San Jose/South Bay (.), Miami-Dade County (.), aLong Island (.). The burgeoning technology industry
positively impacting real estate undamentals throughout the entBay Area. As companies expand hiring, employees will dema
more apartments and more amenities, in some instances creatinewly viable commercial corridors that will add desperately needretail inventory. For the country, we are projecting a slight eros
in rental rates or Q due to post-holiday shake-out and stoclosings announcements, which will pressure landlords to ren
marginal tenants in place rather than ace store closures.
In , nearly million square eet o shopping center space ca
online nationwide, with a dozen markets contributing nearly one-ho this total. O those twelve, only ourWashington, D.C., Oaklan
East Bay, and New Yorks Westchester County and Long Islandcobe considered Core, as the strongest perormers includMinneapolis-St. Paul (nearly , SF), Dallas (+, S
Orlando (+, SF), and Denver (+, SF). We expect tpattern o delivery to continue in as secondary markets bene
rom ) continuing improvement in housing trends, as evidencedtheir concentration in the IMI data cited earlier; ) employment growin manuacturing centers such as Ohio, Michigan, and Pennsylvan
) the expansion o the Energy sector, not just its impact in powhouse markets such as Houston (see photo above) but the potential
available spaces in metropolitan Honolulu. Increasing internatio
tourist countspassenger traic hit a new record high or t
rst three quarters o especially rom Asia, are driving dema
or goods and services in Waikiki. A number o high-proile re
developments are progressing, including General Growth Properti
expansion plans or the Sears pad at Ala Moana Center, Taubm
Centers International Market Place in Waikiki, and Hughes mixed-u
master-planned development in Kakaako.
Pier , and more recently by home improvement giant Home Depot
as anecdotal evidence that households were prioritizing spending
on their primary residences. That observation has now been picked
up by a broader section o sector analysts and Wall Street. Estimates
vary on how much the average new home sale or multiamily move-in
generates in retail sales, but our research colleagues on the residential
side suggest a one-month rent or mortgage payment as a reliable
proxy. To capitalize on move-in spending potential, opportunistic
retailers would be well advised to prioritize merchandising and
inventory adjustments: Our department store sources have noticed
more rapid sell-throughs o small appliances and home dcor items
taking place in at stores in hot multiamily submarkets. We project
that housingboth retail spending and the impact o higher employmentin construction-related positionswill contribute around basis
points to GDP growth. The strength o the U.S. market also
presents an attractive opportunity or oreign housewares and
urniture brands; we wouldnt be surprised to see some new retailers
rom Europe or Asia look at U.S. expansion in the coming year.
CURRENT CONDITIONS
What ollows is an overview o shopping center operating results
or Colliers U.S. retail markets, along with a short discussion o a ew
key trends weve been tracking this quarter that are impacting our
national outlook.
The average nationwide rental rate ended the year at ./PSF,
essentially at compared with Q and down . (-.%) rom Q
. Retail sector momentum continues to accelerate in the Hawaii
market, which again led the country with an asking rental rate o
./PSF, up % year-over-year. Corresponding vacancy rates
dropped a stunning basis points, rom .% to .%, reecting
heated competition among retailers to secure one o the limited quality
0
50
100
150
200
250
300
125
Sep
2011
1223
3041
76
98 99 101 100
80 84 80
99 100
125
201201
242
259
Nov
2011
Jan
2012
Mar
2012
May
2012
Jul
2012
Sep
2012
Nov
2012
Jan
2013
# of Improved Markets
NAHB/FIRsT AMERICAN IMpROVINg MARkETs INdEx
Source: National Association o Home Builders
Continued on pag
7/29/2019 Colliers 2013 North American Retail Outlook
4/11p. | COllIERs INTERNATIONAl
HIGHLIGHTS | 2013 OutlOOk | retail | nOrth america
uNITEd sTATEs | sHOppINg CENTER MARkET sTATIsTICs
MARkETINVENTORy*
dEC , (sF)NEw supplyyTd (sF)
uNdERCONsTRuCTION
(sF)
VACANCy RATEdEC , (%)
VACANCy RATEdEC , (%)
yTdABsORpTION
(sF)
QuOTEd RENTdECEMBER , (us$psF)
y-O-y CHANIN RENT (%
Atlanta, GA 142,642,479 301,224 71,178 14.9 14.5 1,004,274 12.72 (2.60)
Bakerseld, CA 9,216,143 30,937 30,934 9.4 9.1 72,233 14.00 (6.85)
Baltimore, MD 45,713,525 270,616 51,363 8.2 7.8 514,444 18.74 1.02
Birmingham, AL 27,124,520 14,641 - 13.7 13.3 175,272 8.59 (7.03)Boise, ID 12,974,068 8,260 18,098 11.7 11.2 29,784 12.00 2.65
Boston, MA 87,564,315 296,267 - 7.0 6.5 549,034 15.50 2.51Charleston, SC** 15,241,053 - - 9.2 7.3 - 15.46 (1.02)
Charlotte, NC 52,055,791 292,300 5,177 11.6 12.0 (75,789) 13.23 0.92
Chicago, IL 160,237,068 83,795 507,000 12.3 12.2 (96,599) 15.18 (3.19)
Cincinnati, OH 35,677,375 16,865 - 12.8 13.0 550,102 10.59 (8.31)
Cleveland, OH 60,308,591 80,028 15,700 13.6 13.0 (23,543) 10.37 (2.17)
Columbia, SC 15,034,748 - - 9.1 9.3 51,121 10.50 (2.87)
Columbus, OH 32,265,903 63,713 124,437 12.2 11.1 317,941 11.73 (6.68)
Dallas/Ft. Worth, TX 150,748,809 470,171 135,093 14.2 12.8 2,193,546 13.32 1.83
Denver, CO 72,675,061 414,564 25,416 9.6 9.4 934,929 13.86 0.14
Detroit, MI 72,425,516 107,287 20,400 15.6 15.4 439,827 12.39 (0.56)
Fresno, CA** 24,786,257 53,732 550,000 12.5 12.8 104,842 13.47 (0.88)
Ft. Lauderdale-Broward, FL 48,509,366 161,708 - 9.9 9.0 478,726 17.52 0.69
Green Bay, WI 6,663,720 9,200 - 14.1 13.4 121,319 9.63 (3.70)
Greenville/Spartanburg, SC 29,480,691 10,500 63,800 9.4 10.4 (54,870) 8.93 0.00
Hartord, CT 42,749,225 159,792 35,200 8.4 8.5 389,672 13.21 (0.83)Hawaii** 22,322,081 148,799 338,515 6.0 4.0 301,649 4043 16.4
Houston, TX 140,973,923 62,305 n/a (39,354) 13.7 14.03 2.18 (0.57)
Indianapolis, IN 40,132,558 29,373 - 11.9 11.4 261,316 11.61 (2.19)
Jacksonville, FL 38,930,678 179,657 - 12.1 11.8 203,795 12.70 (5.01)
Kansas City, MO-KS 39,252,023 57,218 - 14.2 13.3 421,636 11.95 (0.91)
Las Vegas, NV ** 44,201,964 195,000 - 12.1 10.7 825,682 16.32 (1.45)
Little Rock, AR 15,150,399 - - 8.8 7.9 26,415 10.59 9.97
Long Island, NY 53,283,765 314,562 42,300 5.0 5.2 192,661 23.35 (2.30)
Los Angeles - Inland Empire, CA 86,905,414 216,979 83,334 11.5 11.9 117,503 16.94 (7.48)
Los Angeles, CA 153,552,916 184,752 139,139 6.8 7.3 (479,475) 22.41 (0.49)
Louisville, KY 28,334,804 70,778 26,607 11.7 10.4 57,603 10.97 (5.67)
Memphis, TN 30,725,425 175,825 14,080 13.0 14.4 259,481 10.84 (0.82)
Miami-Dade County, FL 46,696,510 167,581 48,505 5.5 4.8 476,517 23.55 6.51
Milwaukee, WI 34,307,099 413,803 5,300 11.9 11.6 574,712 11.42 0.26
Minneapolis, MN ** 43,032,294 679,960 475,916 7.7 7.5 639,543 15.48 (5.84)
Nashville, TN 29,814,913 60,200 - 9.7 12.0 (363,765) 12.95 (2.41)
New Jersey - Northern 92,198,983 63,200 42,800 10.0 9.9 41,862 19.53 0.41
Oakland/East Bay, CA 40,769,545 413,797 132,002 6.1 6.2 402,499 21.04 0.14
Oklahoma City, OK 27,158,626 6,580 4,000 10.4 9.5 197,605 9.75 (0.71)
Omaha, NE** 26,814,996 55,520 18,554 11.6 11.0 463,727 11.91 2.06
Orange County, CA 62,659,926 79,771 - 6.9 7.2 (92,527) 22.70 0.09
Orlando, FL 63,333,415 416,855 - 11.5 11.9 250,641 13.86 (7.17)
Palm Beach County, FL 35,269,323 8,092 163,252 10.2 9.5 314,166 16.42 (4.48)
Philadelphia, PA 152,177,247 341,178 101,087 9.7 10.0 58,874 14.33 (1.10)
Phoenix, AZ 104,240,834 212,894 92,132 16.4 15.5 1,880,491 13.66 (2.43)
Pittsburgh, PA 32,233,140 225,851 39,400 6.6 5.7 463,288 11.45 (4.02)
Portland, OR 35,292,265 22,250 - 8.2 9.4 (288,077) 16.28 (5.24)
Raleigh/Durham/Chapel Hill, NC 38,477,861 69,323 53,424 9.1 9.0 151,025 14.67 (6.68)
Reno, NV 13,993,317 - - 13.3 14.6 (47,829) 14.89 (3.12)
Richmond, VA 29,725,934 148,442 20,400 11.0 11.6 (91,220) 13.12 (4.65)
Sacramento, CA 50,888,619 25,500 3,800 13.7 13.5 387,637 16.25 (4.19)San Diego, CA 53,768,846 222,355 190,383 7.6 7.4 501,993 20.28 (1.79)
San Francisco, CA 9,439,743 - - 4.0 3.8 6,227 26.27 (4.12)
San Jose/South Bay, CA 30,557,493 145,522 - 6.3 6.5 121,572 26.15 1.87
Savannah, GA 7,455,973 - - 8.8 9.2 (95,728) 14.48 (0.28)
Seattle/Puget Sound, WA 57,974,052 359,259 235,000 10.3 9.1 1,047,510 17.80 (1.87)
St. Louis, MO 55,502,603 114,417 57,500 11.0 11.1 287,666 12.02 (4.98)
Stockton, CA 19,445,085 - 158,000 10.9 9.9 238,299 15.15 (2.82)
Tampa/St Petersburg, FL 87,575,353 127,200 24,232 10.8 10.6 270,517 13.07 (1.58)
Washington, DC 81,568,273 465,749 387,305 7.5 6.9 708,954 22.25 0.09
West Michigan** 32,212,073 28,500 - 17.4 17.4 30,171 9.32 0.43Westchester County, NY 50,646,091 382,794 515,299 6.9 6.8 387,829 19.34 3.04
TOTAls 3,283,090,606 9,737,441 5,066,062 10.4 10.1 18,776,502 15.28 (0.01)
* Community and Neighborhood Centers | ** Select Colliers ofces track their own retail market data. | Sources: CoStar, Colliers Research
7/29/2019 Colliers 2013 North American Retail Outlook
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Our periodic monitoring o retailers mobile interaces and dedicatedapps over the past year revealed more user-riendly platorms.
Although we dont have complete detail on how companies invested
their development spend, its obvious that executives prioritized mobile
initiatives which, or some irms, meant addressing internal
conidence issues regarding actual or perceived lack o mobile
technology knowledge that may have paralyzed previous decision-
making. As a result o this collective investment, mobile remains
extremely well positioned to grow both in absolute volume and as a
percentage o total retail sales. By , eMarketer predicts that
mobile revenues could come close to quadrupling rom their
volumes (see chart above).Continued on pag
new boomtowns to emerge near shale and natural gas reserves
and ) the opening o the expanded Panama Canal, which willreorganize the existing hierarchy o U.S. port cities. Well discusssecondary markets again later in this report when we reveal our
Trends to Watch.
MOBIlE dEVICEs gRAB HIgHER ONlINE MARkET sHAREMobile devices impact on retail sales, which barely registered two
years ago, spiked dramatically in . O the + billion in online
sales reported by comScore, between % and % (depending on
the source) were transacted over a mobile device. Several actors
are converging to aid the rapid ascent o mobile as a tool or both
product research and retail transaction activity. First, increasing
penetration o mobile devices has created a signiicantly larger
market o would-be shoppers: Wireless Intelligence, the GSM
Associations research arm, estimates there are million mobile
devices currently in use by a U.S. subscriber base o million.
Second, the surge in applications sotware development has trans-
ormed usage patterns: Citi Research recently reported that % o
mobile technology activity is non-communications usage. Traditionalsmartphones small screens hinder users ability to navigate complex
websites and view products easily. Enter the phablet: a smart-
phone with a larger screen that blends phone and tablet (and
its a word that makes us smile every time we say it).
0 5
20
40
60
80
100
10
15
20
25
Total Volume ($ Billions) % of Total E-commerce Sales
2011 2012 2013* 2014* 2015* 2016*
gROwINg MOBIlE E-COMMERCE REVENuEs
Source: eMarketer | *projected
sElECTEd RETAIlERs OpENINg + u.s. lOCATIONs IN
RETAIlER CATEgORy EsT. OpENINgs
Aaron' Home -
Avance Ato part Ato -
Atozone Ato
Be Bath & Beon (a concet) Home
Bet B Mobie Home
Bi lot diconter
Bao wi win Retarant
Carter' seciat
Car' seciat -
Chiote Fat Foo -
CVs dr -
dic' sortin goo Hobb
doar genera doar
dnin' dont Fat Foo - (net)
Fami doar doar
Five Beo seciat
Foot locer/la Foot locer seciat
Franceca' seciat
Hibbett sort Hobb -
Homegoo Home (net)
Jo. A. Ban seciat -
Mcdona' Fat Foo
Mattre Firm Hoin Home
Michae Hobb -
O'Rei Atomotive Ato (net)
Qoba Fat Foo -
panera Fat Foo -
pe Bo Ato
pia Ht Fat Foo (net)
Ro store (a) diconter
sa Beat Hoin seciat -
starbc Fat Foo *
sherin-wiiam seciat -
Tractor s Mic. -
uta seciat
urban Otftter (a bran) seciat
Vitamin shoe seciat
wamart (a) diconter -
wareen dr -
*Extrapolating rom stated corporate objective to open 1,500 new locations in next fve year
Source: PNC Research, Colliers Research, company reports
7/29/2019 Colliers 2013 North American Retail Outlook
6/11p. | COllIERs INTERNATIONAl
HIGHLIGHTS | 2013 OutlOOk | retail | nOrth america
uNITEd sTATEs | RETAIlER REpORT CARd
RETAIlER
MOsT RECENT
REpORTINgpERIOd
% CHg IN y-O-y
sAlEs (MOsT
RECENT QTR)
% CHg IN
y-O-y sAlEs
(pREVIOus QTR) COMMENTs OuTlO
dEpARTMENT sTOREs
Belk Q3 2012 5.8 4.9 converting 15 more stores to agships through remodels and enhanced premium brands
Dillard's Q3 2012 5.0 3.0 strength in men's apparel, men's and women's accessories; managing expenses well
JCPenney Q3 2012 (26.1) (21.7) store trafc ell 12%; corporate promotions strategy still conusing customers
Macy's Q3 2012 3.7 3.3 stronger-than-expected quarter with strength in men's, home, and select women's apparel
Nordstrom Q3 2012 10.7 4.5 ull-line stores +11.2%, Rack +8.1%; will launch six pop-up shops in February
Neiman Marcus Q1 2013 5.4 7.9 company now sells online in 100 countries; ne jewelry outperorming
Saks Fith Avenue Q3 2012 3.3 4.7 signicant investment in Project Evolution, their omnichannel systems platorm
Sears (U.S.) Q3 2012 (1.6) (2.9) new pricing and promotions strategies helping sales o appliances, apparel
The Bon Ton Q3 2012 1.9 0.1 narrower net loss; managing clearance goods more closely; announced two new stores
AuTO
Advance Auto Parts Q4 2012 (1.9) (1.8) BWP acquisition closed December 31, improves competitive positioning in the NortheastAutoZone (U.S.) Q1 2013 0.2 2.1 higher new car sales beginning to weigh on results, especial ly or merchandise
O'Reilly Auto Parts Q4 2012 4.2 1.3 proessional business growing aster than Do-It-Yoursel; comps grew on higher avg. ticket
Pep Boys Q3 2012 (2.7) at dropped CapEx by $5 million by pushing planned new store openings into 2013
dIsCOuNTERs
Big Lots (U.S.) Q3 2012 (4.6) (1.9) extensive 2013 ocus on remerchandising; insider trading probe o ex-CEO continues
Costco (U.S., with/excl. uel) Q1 2013 7.0 / 6.0 6.0 / 6.0 planning 5% square ootage growth globally in 2013;
Dollar General Q3 2012 4.0 5.1 heightened competition; plans increased investments in price to drive sales volume
Dollar Tree Q3 2012 1.6 4.5 higher trafc driving sales; continuing to add coolers/reezer cases to stores
DSW Q3 2012 6.3 4.2 trafc, conversion, units per transaction all up in Q3; increased FY 2012 earnings guidance
Family Dol lar Q1 2013 6.6 5.4 consumables as a percentage o total sales increased nearly 400 basis points, to 73.9%
Fred's Super Dollar Q3 2012 (2.5) (1.0) trafc, sales trended up in last month o quarter; gaining traction with Pharmacy
Kohl's Q3 2012 1.1 (2.7) Citi downgrade ollowing a challenging holiday season
Ross Q3 2012 6.0 7.0 or the quarter, juniors perormed best; southwest Texas and Florida led regionally
Sam's Club (U.S., excl. uel) Q3 2013 2.7 4.5 continued investment in pricing; testing programs to accelerate membership income
Target Q3 2012 2.9 3.1 opened two more City Targets; strong results rom Credit Card divisionTJ Maxx Q3 2013 7.0 7.0 $200M Sierra Trading post acquisition provides them an established ecommerce position
Tuesday Morning Q2 2013 5.6 1.7 stronger-than-expected customer response to Nov./Dec. sales events
Walmart (U.S.) Q3 2013 1.5 2.2 positive sales comps across all regions o the country and merchandise categories
gROCERy
The Fresh Market Q3 2012 5.6 8.0 expanded into Caliornia: rst store opened in Oct.; expecting West Coast to drive growth
Harris Teeter Q1 2013 2.5 3.0 cautious outlook or FY 2013 but continued expansion in Washington DC metro area
Kroger (excl. uel) Q3 2012 3.2 3.6 record Q3 EPS; wil l bui ld, expand, or relocate 50 stores during calendar year 2013
Roundy's Q3 2012 (3.6) (3.3) reduced quarterly dividend; Chicago-area stores holding up well against competition
Saeway (total / excl. uel) Q3 2012 0.2 / 0.1 1.9 / 0.8 sales at, but management team predicting market share gains during the next year
Supervalu (Retail ood) Q3 2013 (4.5) (4.3) sale o ve brands removes several weak perormers rom corporate balance sheet
Weis Markets Q3 2012 (1.7) 0.4 hit unavorable YoY comp with higher Northeast storm-driven sales in September 2011
Whole Foods Q1 2013 7.2 8.5 opening 11 new stores in FY 2013, including rebranding o six Johnnies Foodmasters
HOBBy
Barnes & Noble (retail) Q2 2013 (2.9) 4.6 gaining traction with third-party Nook distribution, but warned o uture store closings
Best Buy (U.S.) Q3 2013 (4.3) (3.2) at holiday comps; customers appear to be delaying purchases ahead o product launches
Cabela's Q4 2012 12.0 3.9 record Q4 earnings; comp sales growth driven by sales o guns and ammunition
Dick's Sporting Goods Q3 2012 5.1 2.9 expanded testing o ship-rom-store program; launched mobile app in Q3
GameStop (global) Q3 2012 (8.3) (9.3) strong launches o Madden 13, Borderlands 2 couldn't oset declines in hardware business
hhgregg Q3 2013 (9.7) (8.8) shiting product mix away rom video, electronics to appliances, urniture, tness equip.
Ofce Depot (N. America) Q3 2012 (4.0) (6.0) within next ve years, chain will downsize or relocate 500 stores to mid-size ormats
OfceMax (retail) Q3 2012 (2.6) (1.8) merchandise mix changes benetting margins; Ofce Depot merger speculation
PetSmart Q3 2012 6.5 7.0 signicantly raised FY earnings guidance ater another strong quarter
Staples (N. America) Q3 2012 (1.0) (2.0) investing in new product lines; will triple online assortment to nearly 100,000 SKUs
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COllIERs INTERNATIONAl | p
uNITEd sTATEs | RETAIlER REpORT CARd (CONTINuEd)
RETAIlER
MOsT RECENT
REpORTINgpERIOd
% CHg IN y-O-y
sAlEs (MOsT
RECENT QTR)
% CHg IN
(y-O-y sAlEs
pREVIOus QTR) COMMENTs OuTlO
Aaron's (corporate-owned) Q4 2012 4.6 6.5 Black Friday promotion, immediate delivery with no payment until Jan., drove record resultsBed Bath & Beyond Q3 2012 1.7 3.5 executives continuing to hint at longer-term international expansion plans
Home Depot (U.S.) Q3 2012 4.3 2.6 acquisition o U.S. Home Systems (kitchen/bath reacing) wil l improve ulllment
Lowe's (U.S.) Q3 2012 1.8 (0.2) more eective promotions management drove outperormance in cabinets/appliances
Pier 1 Q3 2013 7.9 6.1 35% o online orders picked up in-store; hal o calendar '13 CapEx going to e-commerce
Williams-Sonoma, Inc. Q3 2012 8.5 7.4 hol iday sales up 4.8% year-over-year; planned expansion into Australia in early 2013
pHARMACy
CVS Q4 2012 4.0 4.3 raised 2013 guidance; MInuteClinic revenue up 38% or the quarter; +226 bps market share
Rite Aid Q3 2012 (1.5) at company celebrates its 50th anniversary in 2013; CapEx to increase 20% on add'l remodels
Walgreens Q1 2013 (8.0) (8.7) growth platorm ocused on wellness, global expansion, and emphasis on community health
spECIAlTy AppAREl
American Apparel (incl./excl. online) Q3 2012 20.0 / 21.0 16.0 / 14.0 overall and online sales up; inventory efciency improving
Ann Taylor Q3 2012 4.0 4.7 opened rst Canadian store; has begun to ull online orders in stores
The Buckle Q3 2012 2.4 (0.8) men's merchandise, private label goods trending higher as a percentage o sell-throughs
Destination Maternity Q1 2013 1.9 2.7 Q1 revenue lower; opened its rst 12 leased departments in BuyBuy Baby
The Gap (all) Q3 2012 6.0 6.0 Gap N.America (+7.0%), Banana Republic (+6.0%), Old Navy (+9.0%), international (-3.0%)
H&M Q4 2012 at at online investments, new brand launch weighed on Q4 prots
Hot Topic Q3 2012 0.1 3.9 CFO resigned; Torrid rebranding drove signicant (+190 bps) improvement in gross margin
Limited Brands (al l) Q3 2012 5.0 8.0 Victoria's Secret earned record operating prot in Q3; La Senza business stabil izing
Men's Wearhouse Q3 2012 9.5 4.4 comps moved higher on promotional activity, which drove higher units sold
Zumiez Q3 2012 3.7 9.5 cut Q3 earnings guidance based on weak sales in Europe
REsTAuRANTs
Applebee's Q3 2012 2.0 0.7 chain is ully ranchised; Q3 results reected higher average check, lower trafc
BJ's Restaurants Q3 2012 2.3 4.4 comps gain on new loyalty program, bartender education to drive crat beer sales
Bloomin' Brands Q3 2012 3.6 2.4 all our core chains comped higher; raised FY guidance or revenues and earnings
Bob Evans Q2 2013 1.0 1.0 corporate ocus on restaurant updates; post-"reresh" locations lit sales 5%, ROI 20%
Brinker Int'l (system-wide) Q2 2013 0.9 2.7 Chili's gained market share during holidays; Maggiano's achieved 12th qtr o comp growth
Bualo Wild Wings (owned) Q4 2012 5.8 6.2 high chicken wing costs continued in Q4; multi-year partnership with NCAA or March Madness
Burger King (U.S./Canada) Q4 2012 3.7 1.6 U.S./Canada led global growth in Q4; 55th Anniversary Whopper(R) promtion drove trafc
Cheesecake Factory (total) Q3 2012 2.5 1.7 Cheesecake (+2.9%) with increases across the U.S. and across dayparts
Chipotle Q4 2012 3.8 4.8 7.1% comp sales growth or 2012; 165-180 new restaurants planned or 2013
Darden (Basic/Specialty) Q2 2013 (2.7) / 0.7 (0.3) / 2.2 all three chains comped lower: Olive Garden (-3.2), Red Lobster (-2.7%), Longhorn (-0.7%)
Denny's (system-wide) Q3 2012 0.4 0.8 guest trafc down, but customers willing to trade up to higher-priced limited oerings
Domino's Q3 2012 3.3 1.7 new store redesign will accommodate higher percentage o carryout purchases
Dunkin' Donuts (U.S.) Q4 2012 3.2 2.8 strategic development and investment aimed at increasing ranchisee protabili ty
Einstein Noah Q3 2012 0.2 1.3 company opted to recapitalize itsel ollowing a strategic review process last all
Jack in the Box (system-wide) Q4 2012 3.1 2.8 quarter sales growth nearly 2x the QSR sandwich segment average; gaining market shareKona Grill, Inc. Q3 2012 0.2 2.3 operating margins remain near the top o their peer group
Krispy Kreme (company stores) Q3 2013 6.8 5.4 increased FY 2013 outlook; predicted double-digit earnings growth or FY 2014
McDonald's (U.S.) Q4 2012 0.3 1.2 reocusing marketing message on value oerings, new products (Fish McBites)
Mimi's Ca Q2 2013 (5.6) (3.3) $50 million sale to French operator o multiple ca brands should drive ops efciencies
Panera Bread Q4 2012 5.1 6.2 th consecutive year that earnings grew 20%+; 2013 investment in marketing, catering
Papa John's (N. America) Q3 2012 5.0 5.7 raised FY 2012 earnings and sales comps guidance; hurricane expected to boost sales
Qdoba (system-wide) Q4 2012 0.4 2.1 looking to urther dierentiate rom competitors by elevating catering business
Ruby Tuesday, Inc. Q2 2013 0.3 1.9 new CEO; closing 13-unit Marlin & Ray's chain; looking to expand Lime Fresh
Ruth's Hospitality
Ruth's Chris Q4 2012 5.4 5.9 3-year growth above 20%; signed agreement to open ranchised locations in China
Mitchell's Fish Market Q4 2012 3.4 4.6 higher trafc (+5.4%) compensated or a lower average check
Starbucks (Americas) Q1 2013 7.0 7.0 execs cited "robust" holiday trafc; one in 10 U.S. adults received a Starbucks git card
Yum! Brands (U.S.) Q4 2012 3.0 6.0 both Taco Bel l and P izza Hut expanding into rural areas and with smaller units
* Sources: Company Reports, Colliers Research
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HIGHLIGHTS | 2013 OutlOOk | retail | nOrth america
estate pipelines, but also detailed investment in their service and onl
platorms. And dollar stores expansion counts are roughly in l
with , although shrinking margins and some slowdown in com
growth indicate that the segment may be maturing. We continue
monitor the dollar stores perormance and their merchandising sh
toward ood and daily needsand its impact on traditional supermarke
CANAdIAN ECONOMy slOws IN Q,AwAITs HIgH-pROFIlE RETAIl OpENINgs
The Canadian retail sector continues to expand and demonstra
broad-based health, although the pace o retail sales growth h
slowed considerably since but or some exceptional regio
markets. Despite recent layo announcements rom Best Buy/Futu
Shop (closing stores), and Sears (which closed several stor
last year), employment markets remain robust and consumers a
generally conident in their uture spending ability. We expect th
when Canadas ull-year retail sales data are released later t
month, they will relect a national growth rate o approximat
% even as spending slowed considerably in H ollowing
airly strong Q/Q. Looking ahead to , continued rock-bottointerest rates will support automobile purchases, as is also occurr
in the U.S., but higher household debt levels and slowing consum
condence will aect discretionary sales.
Our projected % retail sales increase in masks signiica
regional variations. Ontario and Quebec still represent well mo
than hal o Canadas billion total retail sales. The natu
resource sector will continue to spur Alberta and Saskatchewa
nation-leading sales growth, albeit at rates o only % over
Development activity will likely continue, i not at the torrid pace o
last ew years. I the Canadian dollar weakens on strengthening U
jobs and housing markets, its posit ive impact on Central Canad
vitally important manuacturing sector could prop up national statistby compensating or at sales growth on the coasts.
Canada has never experienced as much interest rom U.S. a
international retailers and developers as it has in the last three yea
Even i the Canadian dollar weakens, U.S. companies continue to vi
the Canadian market as an attractive investment opportunity. Targe
+ Canadian stores will begin to open next month; the compa
announced a partnership with iconic retailer Roots to stock limite
edition product. Meanwhile, Walmart will expand its Canadian netwo
to stores by investing million in construction and oth
costs. Nordstroms -store Canadian rollout wont begin until late
at earliest, but it will be a barometer o the national ret
economy and the depth o demand in Canadas luxury market.
Finally, Canada will see its rst true outlet malls north o the bord
as Simon Property Group, Tanger, and other established outlet dev
opers establish Canadian partnerships and stake claims in ma
markets. Colliers is aware o approximately outlet malls in th
planning stages, including two competing projects in the Toronto me
and two in Vancouver. As with most retail developments, must-hav
anchor tenants are the limiting actor or growth. Multiple cente
proposed in markets are intensiying competition as developers vie
secure retailers limited commitments.
Spent more than planned
Spent what they planned
Spent less than planned
No data
Sample Size:
105 companies
7%28%
25%
41%
RETAIlER CApITAl ExpENdITuREs, plANNEd VERsus ACTuAl
Source: Company -Ks and earnings reports, Colliers Research
BAlANCINg REAl EsTATE, supply CHAIN INVEsTMENTsWithin the context o omnichannel integration, retailers have
undergone a signicant shit in mindset. Gone, or the most part, are
deensive attitudes and tur wars between e-commerce and
brick-and-mortar operations, even i growth achieved by the ormer
comes at the expense o the latter. The retail industry has inally
recognized that to stay relevant, it must ully embrace and invest in amultichannel strategy. Incremental revenue gains achieved by early
adopters o this attitude, such as Walmart, Macys, and Nordstrom, only
urther emphasize the point. Nevertheless, in an environment still
dened by the cost-conscious consumer, companies remain ocused
on thoughtul investment and where best to allocate each incremental
dollar o their Capital Expenditures (CapEx) budgets. These investment
choices orce constant reevaluation o how best to balance real estate
and distribution/ulllment within corporate strategy.
Last spring, Colliers proprietary analysis o planned retailer
CapEx illustrated dramatically improved executive condence: % o
our sample set ( o companies) increasing their budgets year-
over-year, and % o companies by more than %. Comparingplanned to actual expenditures in , though, revealed a more
tempered execution. We acknowledge that we dont yet have complete
results: Less than hal o our tracked companies released results
beore we had to nalize this report. However, based on a combination
o year-end comments and extrapolating trends rom the end o Q,
we estimate that more than % spent less than they initially allocated
or the calendar year, with one-quarter o companies pulling back on
spending by more than %. We suspect that much o the decrease was
tied to the slowdown in the economy: Pep Boys, or example, disclosed
that it was pushing back some planned openings into .
Advance disclosures or 013 CapEx have generally been much less
detailed than what we received last year. Large-scale store openings
announcements (see chart on page 5) are concentrated in the Quick-Serve
and Restaurant categories (Dunkin Donuts, Cheesecake Factory, and BJs
Restaurants all investing more in new stores), home urnishings (Bed Bath
& Beyond, HomeGoods, Mattress Firm, and Sherwin-Williams), and
specialty stores such as Francescas and Urban Outftters that ocus on
accessories. All our major auto supply chains disclosed signifcant real
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COllIERs INTERNATIONAl | p
MExICOs RETAIl INVENTORy CONTINuEs TO ExpANdMexicos economic stability, which continued during
the second hal o , is reected in current consumer condence
levels; Decembers reading o was the years highest. Consumers
upbeat attitudes have been demonstrated through the upward trend in
retail sales. During rom through mid-, specialty stores
recorded the largest cumulative growth rate, .%, ollowed by super-markets at .% and department stores at .%.
Mexicos shopping center inventory, as measured by Gross Leasable
Area, has grown by % since (see chart below), and currently
contains shopping centers larger than , SM (, SF).
Power centers and ashion malls are the ormats most oten preerred
by developers. Retail projects are ocused on bringing luxury brands
and leading ashion companies to high-end malls. The trend toward
planning and construction o mega-projects such as Va Vallejo and
Centro Comercial Nuevo Sur has begun.
Retailers and developers remain condent doing business in Mexico,
judging rom retail development and redevelopment pipelines. Colliersis tracking shopping centers under construction, with a total net
leasable area o , SM. All but ive o these are ground-up
developments. eighteen shopping centers opened in , including
Town Center Rosario, a ,-SM power center in Azcapoltzalco and
anchored by Walmart and Sams Club, and Plaza El Dorado, a
,-SM ashion mall in Boca del Rio, Veracruz and anchored by
Liverpool and grocer Chedraui Select. For , Colliers is projecting
total shopping inventory to grow by .% and to reach a level o nearly
million square meters.
During Mexico received large amounts o domestic and oreign
investment: USD . billion in Q alone. This trend is expected
to continue. Mexican retailers are also paying closer attention totechnology as consumers use devices to purchase products.
FUll-YEAR OUTlOOk
NINE TRENds TO wATCHIn addition to the improving U.S. economy, and t
spillover eects which that are expected to lit the re
sector, heres what well be watching this year.
1MORE pART-TIME wORkERsThe retail industry is acing personnel challenges
it restructures customer service and selling programs to uncti
seamlessly across multiple channels. Even or companies with exce
tional reputations in brick-and-mortar customer service, expand
into e-commerce means an accelerated pace o transactionsa
dealing with customers who hold omnichannel to the same standa
as they do established in-store programs. As the majority
e-commerce inrastructure platorms are still in their inancy, there a
ar more places or customers to slip through the cracks. We expect t
retailers, as they continue to invest in systems upgrades, will optmitigate risk by adding more employees in both customer-acing a
back-ofce unctions. Restaurant operators are also being pressur
to prioritize service improvements and protect market share
patrons continue to scrutinize discretionary spending. Throughout
sector this should translate into more part-time employees.
2TAx REFORM FEARs dRIVE sAlETRANsACTION VOluME, CAp RATEs
The prospect o a year-end increase in the U.S. capital ga
tax rate motivated sellers and made Q a record-breaker or re
investment sales. Real Capital Analytics reported that total transact
volume reached . billion, up % rom , with individual as
sales driving most o the December surge. The newly adopt% capital gains rate, up rom %, is unlikely to materially imp
investors willingness to dispose o propertiesyet. As the tax reo
debate expands this year, though, the prospect o an addition
increase could launch another period o renzied dealmaking and th
i implemented, bring transaction activity to a standstill, especially
combined with signicant changes to exchange rules. Extre
cap rate compression over the past two years illustrates the imp
that lack o both quality inventory and yield-generating alternativ
had on pricing and transaction velocity, especially in the single-tena
net lease space. Investor demand or retail product has becom
an impetus or new development, just to create inventory that c
then be sold. In addition to the prospects o higher uture taxes,
specter o higher interest rates (given the coming change in FedeReserve leadership) should move a broader cross-section o selle
o the sidelines.
3BRICk-ANd-MORTAR RETAIlERsREEVAluATE sHIppINg pROgRAMs
Free shipping on purchases and returns began as a servi
dierentiator, but it has evolved into a cost o doing business or
retailers, especially brick-and-mortar chains looking to neutral
operational cost advantages enjoyed by pure-play online rms. Wh
retailers gain in customer loyalty, though, they sacrice in margins. C
0
100
200
300
400
500
5
10
15
2007 2008 2009 2010 2011 2012 2013*
# of Centers Total Square Meters (Millions)
MExICO sHOppINg CENTER INVENTORy
Source: Colliers Research | *projected
9
Continued on page
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IN-sTORE FulFIllMENT: AlTERNATIVE TO sHIppINg?Brick-and-mortar retailers also have the option o expanding
in-store ulllment in lieu o risking potentially unpopular changes to
ree shipping programs. Walmart, Ann Taylor, Macys, and Pier are
among those experimenting with these programs that, in bringing
customers back into stores to pick up their orders, provide opportunitiesor incremental sales o in-store (and potentially higher-margin)
merchandise. Eective execution requires signiicant technology
investment to link sales and inventory tracking between distribution
centers and store locations, actored against predictive analyses o
customer buying patterns to better predict where specic merchandise
might be needed. Aside rom cost savings at the company level, the
uture real estate impact o in-store ulillment could be signiicant.
Retailers that succeed with ulillment programs could eectively
repurpose sections o their existing sales oor without needing to reduce
their ootprint, mitigating landlords downside risk rom vacancies.
Research estimated in October that ree shipping reduced gross
margins by up to basis points or the companies it covers.
Whats more, these estimates dont take into account January increases
by UPS, FedEx, and the U.S. Postal Service in shipping rates or
ground, air, and less-than-truckload reight. As we said in our Q
report, it would be disastrous or retailers to eliminate ree shipping
customers would revoltbut executives comments in recent earnings
calls suggest there wont be too many sacred cows in their quest to
rein in costs. Future program tweaks might include placing limits on
the amount o merchandise that can be returned without a penalty,
or raising the order dollar value that qualiies or ree shipping.
Another benet o more careully managed shipping programs: ewer
raudulent returns, which the National Retail Federation estimates
currently cost U.S. retailers . billion annually.
NEw, BlENdEd ROlEs FOR CORpORATE ExECuTIVEAs brick-and-mortar retail real estate companies rebuild th
organizations to operate multichannel selling platorms, the ne
changes could come in the executive suites. Traditional corpora
structures house separate divisions or real estate, marketi
management, inormation/technology, and merchandising (
retailers). As e-commerce/internet initiatives gained strategimportance in recent years, CEOs irst responded by reassign
or promoting an existing executive to ocus on what may still ha
been viewed as a niche business. Saks Incorporateds Februa
announcement that it is ormally tasking its senior executiv
with broader cross-channel responsibilities, and adjusting their tit
accordingly, is the rst o many corporate adjustments we expect t
year. More broadly, were also looking or realignments in leaders
o real estate versus online operations as more retailers combi
divisional sales reporting.
6 sMAllER pROTOTypEs ExpANd ANd EVOlVESmaller prototype stores will continue to open in
more leases come up or renewal and companies rationalize reestate operations. While much has been made in the past several ye
o the impact on real estate (inventory returned to market, difcu
re-leasing marginal spaces), less attention has been paid to how w
retailers are executing in these new, smaller spaces. Did they make
correct merchandising decisions? As we toured smaller prototyp
o existing box retailers this year, we were struck that the mo
successul onesCity Target, to name onedid not end up be
signicantly smaller than the parent chains existing ull-line ootpr
Thereore, shopkeeping unit (SKU) rationalization didnt need to
dramatic: it could avoid a massive product overhaul and the risk t
would accompany it. Looking at other chains that did launch w
signiicantly smaller prototypes, though, we were less comorta
with the execution. Too oten, square ootage downsizing can turn ian exercise in cost analysis: stock the store with only the most protaSKUs rather than conduct a thoughtul internal debate on how best
reinvent a retail brand in a smaller space. Well see how the perorman
o these smaller stores diverges in the coming year, especially as t
marketplace provides more opportunities to evolve: Some big box cha
that originally announced smaller prototypes (, SF to , SF) a
now moving right into testing o even smaller spaces, , to , SF.
Source: ICSC
5
4
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HIGHLIGHTS | 2013 OutlOOk | REtAIl | nORth AmERIc
|
COllIERs INTERNATIONAl
Union Street, Suite
Seattle, WA TEl +
FOR MORE INFORMATION
Ann T. Natunewicz | Manager
Retail Research | USATEl +
EMAIl ann.natunewicz@colliers.com
James Smerdon | Vice President, Director
Retail Consulting | CanadaTEl + EMAIl james.smerdon@colliers.com
Flavio Gmez Aranzubia | ManagerMarket Research | Mexico
TEl + ()
EMAIl avio.gomez@colliers.com
CONTRIBuTORs
KC Conway
EMD, Market Analytics | USA
Jennier Macatiag
Graphic Designer | USA
ofces in countries on continentsUnited States:
Canada: Latin America:
Asia Pacic: EMEA:
$1.8 billion in annual revenue
1.25 billion square eet under
management
Over 12,300 proessionals and sta
400+ Retail proessionals in68 U.S. Ofces
Copyright Colliers International.
The inormation contained herein has been obtained rom sourcesdeemed reliable. While every reasonable eort has been made toensure its accuracy, we cannot guarantee it. No responsibility is
assumed or any inaccuracies. Readers are encouraged to consulttheir proessional advisors prior to acting on any o the materialcontained in this report.
Accelerating success.
OuTlETs, OuTlETs, OuTlETsDuring the early days o the economic recovery, outlet projects were among the ew
ground-up retail projects palatable to risk-averse lenders. Higher sales productivity did, and still
does, make retailers more receptive to paying higher rents, and consumers surging demand or
value-priced product suggests continued opportunity or sector growth. Late marked
the beginning o the surge in outlet center openings. Within the U.S. and Canada, we have
conrmed nine projects that will open in , with an additional three dozen announced orrumored (and more than hal o that total slated to open during the next months). Even with
this deep pipeline, retailers expansion plans are robust enough to suggest a shortage o inventory
and uture demand or even more space. How many o the proposed outlets will actually get built?
I they all open, how many will perorm well? Time will tell, especially in markets such as Toronto,
Charlotte, and St. Louis, where multiple projects are competing ercely or the same set o tenants.
8 FOREIgNERs sTIll THE u.s.It remains one o our avorite analogies: The U.S. is the cleanest shirt in the laundry
with respect to real estate investment. The concentration o quality assetsapproximately % o
the world commercial inventory according to Prudential Real Estate Investorsas well as the
U.S.s sae haven status will continue to comort oreign investors and attract capital this year.
Overseas investors, even those ocused on capital preservation, are moving away rom Treasuries
and arther out onto the risk curve. Sovereign wealth unds have stepped up, led by NorwaysNOK. trillion (USD billion) Government Pension Fund Global, which announced beore the
holidays that it would begin investing in U.S. real estate: one-third o its ve percent target or the
asset class. Gr anted, its rst commitment, announced last week, was or Core ofce space (a .
billion deal with TIAA-CREF), but we see retail as a viable recipient o sovereign unds seeking
partial interest in trophy assets either as an acquisition or a recapitalization opportunity with a
good partner.
9 INCREAsEd COMFORT wITH sECONdARy MARkETsSavvy investors recognized improving macroeconomic trends during , but the markets
risk-averse nature diverted the lions share o U.S. retail investment capital to Core markets despite
their record-low yields. During our meetings with institutions last year, we heard many o them
express interest in non-core marketsonly to cite the execution challenge (especially or those
representing oreign capital) o coaxing investors away rom the top ve or ten U.S. cities with well-understood market undamentals. Since Colliers began tracking secondary markets more than
months ago, we have tracked their accelerating improvements in housing and employment relative to
Core markets. Aided in some areas by business-riendly corporate tax policies, strong secondary
markets are becoming the economic growth engines that lit the perormance and prospects o local
real estate, especially or retail space which is so dependent on employment and consumer spending.
This well-dened shit in risk-reward tradeo is creating attractive yield potential on develop-to-core
strategies or the acquisition o higher-vacancy properties. We project a signiicant increase in
secondary market investment, rom both domestic and oreign capital, in , especially given uture
interest rate risk and increasing pressure being placed on institutions to deploy capital ater years o
conservative investing.
CONClUSION
Even as the economy improves, the retail real estate sector remains vulnerable to shocks
that aect both consumer and investor sentiment. However, the slow recovery rom the
, while it damaged aspects o the sector, also let behind as its survivors rms primed
to outperorm: they better understand what dierentiates them in the eyes o their customers and
know how they must operate to compete eectively. We expect process renement and brand
evolution to continue throughout the retail sector as competition intensies, continuing to
marginalize weak perormers and reward those with the vision and condence to innovate.
7