2016 PLACES Magazine

places-magazine.com | 2016

PLAC

ES | 2016

Geofencing: An Industry Game-Changer

The Outlook for Online Sales Tax Legislation

The Rise of O-Price Retailers

FPO

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A Big Data approach to retail real estate solutions starts with the small stu� .

Like thousands of geo-fencing data points. Like the statistical permutations and

combinations derived from intercept and online shopper studies. Like transforming

multiples of consumer patterns and mindsets into Best Customer segments.

Contact David Lobaugh, President | [email protected] | 678.653.8082

Reconnoiter | Reposition | Remerchandise | Reimagine

And decades of connecting the dots.

THINK BIG.

START SMALL.

CREATING DESTINATIONSTHINK FORWARD.

Offices Located In: Washington DC, New York City, Los Angeles, San Francisco, Seattle, Philadelphia, Fort Lauderdale, Dallas

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1PLACES MAGAZINE

Welcoming PLACES Dear Industry Colleagues and Friends:

I am pleased to present our latest edition of PLACES Magazine where we report on the most signi�cant developments in invest-ment, management, merchandising and leasing of unique mixed use places and destinations. Our focus in this issue re�ects the continuing strength of the U.S. urban property markets. 2016 bene�ted from an expansive trend in international investment and strong overall demand for quality product. Premier markets

such as Boston (which is the subject of our marketplace feature), Los Angeles, Seattle, Washington, D.C. (our headquarters), San

Francisco (which we revisit) and New York have double-downed on core urbanization – with landlords striving for unique retailers, new eateries

and technology-driven experiential environments for tenants and visitors.

As this issue of PLACES goes to press, the economics of the United States remain strong – with declining unemployment, rising GDP, and stable in�ationary rates. As a result, there is renewed con�dence in our industry – substantial growth in sales, strong leasing production and declining vacancy rates. Within the portfolio owned, managed and leased by Madison Marquette, we are successfully deploying our teams’ creative merchandising, repositioning and redevelopment skills to create measurable returns and increased NOI across all platforms. We are also seeking to expand our presence in primary urban gateway markets that are increasingly attracting technology compa-nies and their dynamic and in�uential millennial employees.

Speaking of technology, this issue of PLACES explores the many new options available for the mobile consumer – from same day delivery to multi-platform access. We have also included an in-depth look at the newest approaches to building security as well as the cutting-edge technology tools that allow retailers to measure and analyze every aspect of the customer in-store experience. Technology has even permeated what we read – which, as we reveal in our Starting Places section, now encompasses twitter feeds, podcasts, YouTube channels and Instagram accounts.

We remain grateful to the many in-house experts and friends and colleagues who have contributed to this issue and whose wealth of investment management and retail services experience is unpar-alleled. For over twenty years, Madison Marquette has sought to create assets of distinction and durability for our investors, partners, clients, tenants and for the varied communities we serve. With them all in mind, and in a spirit of collaborative success, please enjoy this latest issue of PLACES.

Cordially,

Amer HammourChairmanMadison Marquette

places-magazine.com

PUBLISHERThomas Gilmore

Senior Managing Director, Real Estate Services

EDITORRobyn Marano VP, Marketing

DESIGNHung Nguyen, nuendesign

PLACES TEAMNatasha Stancill, VP Corporate Marketing, Madison Marquette

Marina Ein, Ein Communicaitons Shanna Wilson, Ein Communications

Carla Snyder, Director of Marketing, Madison Marquette

Asbury Park1100 Ocean Avenue

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EDITORIAL BOARDWhitney LivingstonMeredith McCreary

Lori Coleman

Heidi PiperChuck Taylor

Katherine McMillian

MadisonMarquette.com

A Publication of Madison Marquette 2016

Amer HammourChairman

Eric HohmannPresident

Peter JunChief Operating O�cer

John ElliottChief Financial and

Administrative O�cer

Gary MottolaSenior Managing Director,

Real Estate Services

David BrainerdChief Investment O�cer

Thomas GilmoreSenior Managing Director

Real Estate Services

MADISON MARQUETTE LEADERSHIP

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2 PLACES-MAGAZINE.COM

The Rise of Off-Price RetailersBy Chuck Taylor

The Beauty BoomBy Robyn Marano

Geofencing: An Industry Game-Changer By David Lobaugh

Policy Report: The Outlook for Online Sales Tax Legislation By Ksenia Sazanova

The Future Of Building and Retail Store SecurityBy Mark Ein

Same Day Delivery, Multi-Platform Access & the Mobile ConsumerBy Natasha Stancill

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06 Inside the Merchandising Mix By Dane Tekin

10 The Resilience of Shopping Centers Through Time

By Tom McGee

12 Appealing to a New Generation of Shoppers

By Whitney Livingston

14 Digital Trends: Getting Personal with Shoppers

By John Dee

MARKET WATCH18 Boston: One Of America’s

Smartest and Most Innovative Cities

By Heidi Piper

MARKETING PULSE36 Experience Design and

the Art of Building a Ship By Jordana Well

DIGITAL TRENDS38 The Future of Style Blogging By Marissa Mitrovich

Q&A40 Retail Spotlight Interview with Karla Gallardo

42 Investment Trends Interview with Peter Jun

46 Property Management Interview with Lori Coleman

48 Leasing Trends Interview with Marisa Michnick

50 Parking Trends Interview with Mark Fancher

04 STARTING PLACES

20 CRYSTAL BALL With Nick Egelanian

52 PLACES CONTRIBUTORS

54 RETAIL TRAILBLAZERS

By Katherine McMillian

where DC meets its

W H A R F D C . C O M

Phase 1 Opening October 2017.

Exciting things are taking shape on the shores of the Potomac.

Hot new restaurants. Luxury residences. World-class hotels. Trophy

office space. Live music venues. Year-round events. This is the

waterfront destination Washington has been waiting for—and we

can’t wait to share everything The Wharf has to offer with you.

water

16-63680-HMW-DistrictWharf_OverviewAd_Places_10x12_hz1.indd 1 11/16/16 2:02 PM

T A B L E O F C O N T E N T S

FEATURES

Galleria Vittorio Emanuele II, page 10

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where DC meets its

W H A R F D C . C O M

Phase 1 Opening October 2017.

Exciting things are taking shape on the shores of the Potomac.

Hot new restaurants. Luxury residences. World-class hotels. Trophy

office space. Live music venues. Year-round events. This is the

waterfront destination Washington has been waiting for—and we

can’t wait to share everything The Wharf has to offer with you.

water

16-63680-HMW-DistrictWharf_OverviewAd_Places_10x12_hz1.indd 1 11/16/16 2:02 PM37404_MRS_TXT_X.indd 3 11/28/16 3:51 PM


Starting PLACES

Each issue of PLACES starts right here. The “Starting PLACES” section of the magazine is devoted to providing updates from previous articles and suggesting new and engaging resources to better understand the ever-changing retail real estate environment.

Insights, highlights and key information to navigate the retail real estate industry

StartingPLACES Continued

San Francisco Market Update 2016 has seen multi-family rents in San Francisco stabilize and a substantial amount of new predominantly high-end multi-family units come online. Howev-er, the lack of a�ordable housing means new construction is not doing much to alleviate the city’s housing shortage. One-bedroom rentals are still the highest in the nation, averaging $3,500 a month, as new construction fails to keep up with job growth in the region. Housing prices have outpaced salaries, yet the Bay Area wage gap is one of the most drastic in the region. Jobs in the city’s tech industry increased by 5.1 percent in January, which was only half the 10.5 percent growth in the same period of 2015.

According to CBRE, San Francisco had the lowest metro o�ce-vacancy rate at the end of 2015 at 5.9 percent, and the area was ranked second in the country for o�ce investment. Recent news of Wells Fargo’s o�ce consolidation that vacated 81,000 square feet of space started rumors that its headquarters might be leaving the area. San Francisco-based Charles Schwab has also moved thousand of jobs out of San Francisco in the last few years.

Major transactions in 2016 include private equity �rm Blackstone Group’s plan to acquire the 720,000 square-foot o�ce Market Center, and Chinese developer Greenland Group’s purchase of a 42-acre property in South San Francisco to develop a $1 billion dollar o�ce and mixed-use project. Tech companies now occupy 29% of the city’s o�ce space, and two of its biggest names are increas-ing their presence this year. Apple’s new �agship store downtown is a futuristic vessel with 42-foot sliding glass doors and a 6K video screen on the second story. Google Developers are opening a new 14,000 square foot start-up space in Yerba Buena that will play host to community meetups, Codelabs and Tech Talks.

With its re-opening in May 2016, the newly expanded SFMOMA is now the largest modern museum in the nation, with seven �oors of exhibition space and 4,000 new works. Uber’s headquarters on Market Street is a prime example of companies that are expanding in both East Bay and South Bay, in an attempt to attract workers from around the city.

FIRPTA Reform Becomes Reality — But Not A Game ChangerIn our last issue, PLACES published articles from Congressional and business leaders calling for reform of the burdensome Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). And, �nally Congress heeded the call from us and countless others with a reform bill exempting quali�ed foreign pension funds and any entities they own from FIRPTA taxation. �e exemption now provides for American-owned funds and foreign funds to be treated equally with regard to taxation whenever U.S. real estate assets are sold. �is long sought tax leveling also applies to direct investments on any investments made through partnership structures or via private equity funds.

While the enactment of FIRPTA reform o�er advantages to foreign investors interested in publicly traded REITs, the new law will not provide any relief for other categories of non-U.S. investors like, for instance, sovereign wealth funds. �is omission limits the bene�ts of what otherwise would have been a game-changing reform measure. �at said, it is unquestionable that FIRPTA relief, even as constrained as it is, will help mobilize capital for real estate and infra-structure projects and will drive growth in development, construction and related jobs across the United States.

San Francisco, CA

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5PLACES MAGAZINE

Starting PLACES

What the Industry is ReadingPLACES brings you an inside look at some of the best retail and business podcasts, Twitter feeds, Instagram accounts and busi-ness books to add to your line-up in 2017.

PodcastsRetailer reporter at Bloomberg, Lindsey Rupp, hosts the bi-weekly podcast, Material World, slated to “guide you through the consumer universe, examining all the things people buy.” Flex your brain muscles with Freakonomics radio host Steven Dubner, where discussions range from lessons learned by former Fed Chairman Ben Bernanke, to the state of the Internet, and How to Make a Smart TV Ad.

Harvard Business Review’s IdeaCast covers everything from 21st Century Economics to Getting Growth Back at Your Company.

YouTube�e National Retail Federation’s You-tube channel has over 155 videos fea-turing news, interviews and insights from retail industry thought leaders with topics including Overregulation: Burdening America’s Small Retail-ers, and Mega Trends Rising: Future Proo�ng Brands.

Twitter• Shopify @Shopify Comprehensive e-commerce newsfeed featuring over

275,000 merchants selling online and brick-and-mortar • Google Retail Team @GoogleRetail Latest retail industry news, featuring brand

and consumer data• Vend HQ @vendhq Point-of-sale, inventory management, ecommerce & cus-

tomer loyalty for iPad, Mac and PC used by 15,000+ retailers• Retail Economy @RetailEconomy Covering retail and CPG strategies, innova-

tions, leading indicators and results• Retail Wire @RetailWire O�cial tweets from the retail industry’s premier

online discussion forum• Shelly Banjo @sbanjo Bloomberg consumer and retail columnist and former

retail reporter for the Wall Street Journal• AP Retail @AP_retail Retail news from the Associated Press

Instagram�e rise of social marketing has nearly eclipsed traditional static channels, compelling Pinterest and Instagram to add “buy” buttons to their sites. According to the Pew Research Center, 26% of adults are on Instagram, making it an essential part of any retail branding and marketing campaign. Top billing for the latest fashion, retail and millennial trends on Instagram go to the Cut, ASOS, Everlane, Starbucks (with a whopping 10 million followers) and WeWork.

Business and industry books that represent digital and data-driven forces shaping market trends in 2016 include:

Small Data: The Tiny Clues That Uncover Huge TrendsMartin Lindstrom

From New York Times best-selling author (Buyology) Martin Lindstrom, Small Data is his latest take on how brands are mining micro data to understand consumer habits. Named one of the “Most Impor-tant Books of 2016” by Inc. and a Forbes “Must Read Business Book,” Lindstrom’s focus is based on one observation. While big data churns out limitless terabytes of anonymous information in an attempt to predict the future directions of business and brands, it is “the uniquely human small data that reveals all the real truth and insights sparking brand turnaround.”

Platform Revolution: How Networked Markets are Transforming the Economy—and How to Make Them Work for YouSangeet Paul Choudary, Marshall W. Van Alstyne and Geo�rey G. Parker

Focusing on the disruptive platform models of companies like Uber, Amazon, PayPal and Airbnb, Platform Revolution identi�es the two-sided markets that are revolutionizing how we transact across in-dustry. Whether connecting sellers to buyers, hosts to visitors or drivers to riders, authors Choudary, Van Alstyne and Parker reveal how and why these businesses are the go-to model for 21st Century commerce. By identifying prime markets and networks, the book provides strategies behind some of the most in�uential and popular web-sites from Tinder to SkillShare.

The Third Wave: An Entrepreneur’s Vision of the Future (#1 in Business Books at NYT)Steve Case

�e co-founder of AOL, Steve Case, analyses what he calls the “�ird Wave” of the Internet, where 2016’s “Internet of Everything” will allow businesses and individuals universal connectivity to transform major sectors of commerce and development. Case traces the evolution of the Internet from its begin-nings to interpret the cycle of growth for the future. In 2016, we are embarking on a digital period in which entrepreneurs will vastly transform the health, education, transportation, energy, and agricultural sectors—disrupting the way we learn, consume, engage, develop and work. Case argues that emerging tech companies will not be based in Silicon Valley; they will be everywhere.

whopping 10 million followers) and WeWork.

2016’s “Internet of Everything” will allow businesses and individuals universal connectivity to transform major sectors of commerce and development. Case

nings to interpret the cycle of growth for the future.

which entrepreneurs will vastly transform the health, education, transportation,

Small Data: The Tiny Clues That Uncover Huge TrendsSmall Data: The Tiny Clues That Uncover Huge TrendsSmall Data: The Tiny Clues

Buyology) Buyology) Buyology is his latest take on

how brands are mining micro data to understand consumer habits. Named one of the “Most Impor-

limitless terabytes of anonymous information in an attempt to predict the future directions of business

Sangeet Paul Choudary, Marshall W. Van Alstyne and

companies like Uber, Amazon, PayPal and Airbnb, identi�es the two-sided markets

-dustry. Whether connecting sellers to buyers, hosts

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Inside the Merchandising Mix

Retailers have begun to transform brick and mortar into design showcases where customers can sample, try on, post to social and touch products and clothing before buying.

Regardless of whether shoppers �t neatly into a generational category, the ongoing trend in consumer merchandising lies in the distinctive experience received upon entry. Brands can no longer serve the marketplace by simply o�ering the takeaway of a product purchase. �ey have to di�erentiate by providing an interactive experience and a shareable Instagram moment for the consumer. Pop-up installations are arriving to market in stylized shipping containers, and other innovative, and eco-friendly display spaces o�ering limited runs of product lines and merchandise, creating a “Must get it before its gone urgency.” Window displays have been elevated to modern art at stores like COS, Bergdorf ’s, Isabel Marant and Bloomingdale’s, enticing passersby to enter a world of design and curated product.

Market concepts like virtual reality and touchscreens allow users to test electronics, or see a product within the context of a custom designed living room or bedroom before committing to a purchase.

Consumers these days also place importance on the charitable component and social conscious of a brand. Retailers who can provide an authentic voice for their ethos and a narrative of how their products are sourced fare better in today’s marketplace than mass-produced chain store brands. Merchandisers who are getting it right know that you can shop for a new pair of jeans, while also playing a round of pinball with a local craft beer on tap in the same dynamic environment where your signi�cant other is taking a yoga class and picking up a new pair of leggings on the way out. Many retailers are partnering with membership clubs designed to serve as an interface between brand sponsorships and their target audi-ence. Magnises, a private club and social network for millennials in NYC, DC and San Francisco, gives members exclusive access to fashion launches, discounts on concerts and sports events and a virtual assistant concierge.

Experience is EverythingMillennials are not the Prada and Gucci set of their predeces-sors. �ey spend money on tech, charitable causes, craft beer and

By Dane Tekin

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7PLACES MAGAZINE

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experiences like travel, specialty �tness and con-certs. �ey’re compelled toward a nostalgic hipster philosophy made famous by stylish Pinterest and Instagram users and brands that feature models clad in vintage coke bottle glasses and �annel in a renovated bowling alley. Retailers are using visual merchandising elements like LED lighting to provide high and low lighting to speci�c displays and areas of the store, video footage of runway looks and interac-tive imagery, Virtual Reality and sensory applications like scent marketing, interior design, great music and food samplings to elevate their brick and mortar space into a fully immersive experience.

Samsung’s 837 store has been called a “cultural desti-nation,” evoking a futuristic look at how technology is shaping our lives. �ere isn’t a single physically tangible product for sale in the store, yet the plat-form gives customers a fully engaged look into how Samsung products can enhance their daily lives. Tech product marketers are evoking a lifestyle for their audiences, while clothing retailers are trying to do the same. �e book industry is a compelling example of how independent retailers with an individual per-sonality have eclipsed their chain store counterparts in today’s marketplace. As shoppers �ock to support local businesses, the movement away from chains and toward local can be seen in report after report of independent bookshops growing year over year, while Borders liquidated in 2011, and Barnes and Noble shutters hundreds of locations.

“Humans are social creatures, we’re experientially oriented,” says Katherine McMillan, Director of Merchandising for Madison Marquette Real Estate Services. “Brands that are doing well know how to incorporate their product into the consumer’s daily life in a simple, meaningful way that also respects the charitable and socially conscious ethos of today’s generation.”

Digital Retailers According to RJ Metrics, ecommerce retailers founded since 2013 have grown at twice the rate as those founded in 2012 and prior. �e reason for this is both a focus on �ash deals for high-end cloth-ing and accessories, and a customized experience consumers aren’t able to get elsewhere. Coupled with the rise in mobile devices, buying apps, and SaaS (software as a service) investments that allow retailers to outsource support and vendor upgrades, retailers are implementing technology that can easily custom-ize loyalty programs and targeted e-mail campaigns. Subscriptions like Birchbox and Stitch Fix have also provided a unique way for customers to “sample”

products and return clothing they don’t want, all with a behind the scenes style curator.

Newer online brands like Everlane, Zady and MM.LaFleur cater to a thirty something set who want fewer, but higher quality, sustainably sourced products. �ey don’t need to see twenty versions of a sweater, but prefer two or three di�erent styles and colors cut in classic lines. Bonus points for videos on the transparency of production and sourcing.

An e-commerce brand that runs counter to the afore-mentioned, Modcloth’s loyal following is due, in large part, to its conceptual online storefront, where it envisions a unique style for all shapes and sizes, driven by a whimsical approach to fashion. Its travel-ing pop-up shop (“stopping and popping”) tours the country for limited engagements in select cities, and features appointments with stylists at every location.

�e shift in spending from baby boomers to mil-lennials has given online only retailers an advantage in that they can market via mobile, social and peer recommendations, have better control of their overhead without brick and mortar, and generate the convenience of a simple click and send transaction with generous return policies and loyalty programs with perks. Many online retailers are able to control inventory by having customer pre-order certain items before they’re made, so they aren’t left with overruns and aging goods in their warehouse. �ese days, shoppers rarely have to leave their comfort zone to discover pioneering new brands and products, whether they live in New York City, or somewhere

Samsung Store | New York, NY

days, shoppers rarely have to leave their comfort zone

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rural so if they do come out it’s for the experiential component.

How Big Brands Authenticate In the MarketplaceSweaty Betty and Outdoor Voices are two lifestyle athletic brands with a fresh approach to merchandising. Models are featured participating in everyday activi-ties from walking the dog to marathon training before heading back to the o�ce. Sweaty Betty features ballet, boxing and yoga videos on their website, furthering the lifestyle concept of the brand, while Outdoor Voices promotes the health bene�ts of communal exercise, yoga and running, and allows users to “shop the story” vs. presenting a static line-up of products.

West Elm recently opened a new location in an old tobacco warehouse in DUMBO using the space organically by maintaining the original exterior paint and retro�t-ting the interior to showcase their products within the original atmosphere. By modifying existing structures exclusive to the community, brands are endearing themselves to the local market, enhancing their corporate personality to embed within a community’s fabric. West Elm has also launched a nationwide local makers campaign, providing a platform for local craftsman and artists in their respective markets to sell their wares in store and feature their stories on the website. Restoration Hardware has launched their members loyalty program, in which $100 a year gets you 25% of all full priced goods and an additional 10% o� sale goods with complimentary design services.

Many brands deploy movement hashtags and social campaigns that feature con-sumers engaging in outdoor activities with their new paddles, concert going in their new dress, or wandering around town with the latest neighborhood co�ee logo emblazoned on their cup. Retailers like Kit and Ace have brand ambassadors presiding over 4th of July picnics and embedding with local in�uencers to help their products take o�. �ey also feature an online magazine with tech, fashion and lifestyle partners that provide another dimension to their style philosophy. Tom’s Shoes, with more than 800,000 Instagram followers, delivers a visual marketing campaign that narrates the brand’s lifestyle aesthetic whether you’re in your backyard or on a beach in Cannes.

Patagonia has often been the model of corporate accountability, both in the outdoor retailer industry, as well as retail in general. �e website lists their supply chain history, Fair Trade Certi�cations, partnerships with factories, and their commitment to protecting the rights of migrant workers in a fully transparent corporate responsibility outline that credentials the brand’s voice and authentic-ity as an exemplar of everything the outdoor retail space stands for. Consumers respond to brands that can authenticate the operations behind their product.

Fast Casual and Contemporary Merchandising With the rise of fast casual in food, clothes and accessories, Millennials have proven that they’re more into Uber and music festivals than a car purchase or

a new Fendi bag. But they do want interesting, limited edition style. Catering to this new market, Saks Fifth Avenue’s new downtown NYC location is more boutique than department store, featuring partnerships with emerging designers selling everything from sunglasses to Vetements jackets, all intermixed in curated vignettes throughout the store. �e store even commissioned a collection of New York themed clothing from local fashion cool kids Rag and Bone, Opening Ceremony, Public School and Jonathan Simkhai.

Taylor Stitch, an understated, yet sophisticated lifestyle clothier out of San Fran-cisco was founded on the belief that clothes should be well designed, but not pre-tentious. �ey should carry someone from day to night, and be versatile enough to withstand both a casual and catered setting. �ey sell their original designs on their website, and in select independent boutiques across the country.

O�-price retailers like T.J. Maxx, Find by Hudson Bay Company, and Backstage for Macy’s have eclipsed their full-price counterparts in sales and new store open-ings in the last few years by o�ering reduced prices, and a fresh inventory of new products nearly every week. Customers are responding by making multiple repeat visits over the course of a year, lured by the thrill of the hunt, and the opportu-nity to snag a good deal.

With the rise of fast casual dining, the truth lies in the sales numbers from Shake Shack to Chipotle. Customers today want convenience, value, and authentic-ity for their time and money. �ey want high quality, a�ordable and thoughtful products against a curated setting that they’re proud to show o� on social media, and compelled to include in their daily lives. Merchandisers that can provide these attributes are the ones rising to the top of today’s retail marketplace. G

Dane Tekin is Director of Merchandising for Madison Marquette Real Estate Services and is located in Washington, DC.

Who do you think you are?Seriously, do you know?

Because when you do, your customers wil l too.

IMGinDC [email protected] 202-861-0500

Brand Messaging & Integrated Media

Strategy

Interactive / Digital Signage

Web & Mobile

Media Planning & Buying

SEO / SEM

Creative Development

Studio & Location Production

Graphic Design & Animation

Editing / Compositing / Color

Sound Design

37404_MRS_TXT_X.indd 8 11/28/16 3:51 PM

Who do you think you are?Seriously, do you know?

Because when you do, your customers wil l too.

IMGinDC [email protected] 202-861-0500

Brand Messaging & Integrated Media

Strategy

Interactive / Digital Signage

Web & Mobile

Media Planning & Buying

SEO / SEM

Creative Development

Studio & Location Production

Graphic Design & Animation

Editing / Compositing / Color

Sound Design

37404_MRS_TXT_X.indd 9 11/28/16 3:51 PM


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Shopping is an activity as ancient as civilization itself. From the Greek Agora and Roman Forum to the Temples and Bazaars of the East, the marketplace has played an integral role in the social,

civic and economic vibrancy of communities since the beginning of time.

A testament to American consumerism, the shopping center has shown resilience since the 1920s, with the rise of the nation’s �rst strip centers. Over the next two decades, living in the suburbs became popular and the regional mall was born. In the 1980s, 16,000 shopping centers were built and the World Wide Web was created, forming the catalyst for the omni-channel retail model that we now have today.

�is past decade, the retail real estate industry has undergone a profound transformation. We have seen the industry rebound from the Great Recession and enter a state of stabilization and innovation. Today, with 93% of retail sales taking place at brick-and-mortar stores and a shop-ping center occupancy rate of 93.5% (the highest quarterly reading since 2008), it’s clear that the industry is quite healthy.

How has the industry maintained such strength? As society and technol-ogy evolve, so too has the shopping center. �e industry has embraced convergence between the physical and digital worlds, with the brick-and-mortar locations remaining at the epicenter of the omni-channel experience. �e rapid rise of technology and e-commerce has presented

By Tom McGee, President & CEO, ICSC

The Resilience of Shopping Centers Through Time

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11PLACES MAGAZINE

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an opportunity for the retail real estate industry to deliver an integrated experience across platforms and it’s taking full advantage.

Centers have reevaluated their value proposition by placing experience and conve-nience at the forefront. Developers are incorporating “retail-tainment” options like artisanal food courts and upscale eateries, �tness facilities and event space, which further cement centers’ role as the social hub for their communities. Properties are enhancing their tenant mix to include not only retail, but also residential and o�ce space and even medical facilities. Services include complimentary Wi-Fi, same-day delivery and concierge programs.

Retailers are embracing innovation as well. Gone are the days of waiting in line to pay, stock rooms running out of inventory and needing cash to buy goods. �ere are a variety of new touch points at retailers’ disposal, including RFID, beacons, interactive displays and big data, being used to digitize and personalize the con-sumer’s shopping experience.

Whether buying in-store, online, or utilizing click and collect, one thing is certain–shoppers want their merchandise as quickly and conveniently as possible. With more resources at their �ngertips than ever before, consumers are savvier than ever before. Retailers are developing multiple point-of-sales (POS) checkpoints and optimizing their supply chains to deliver products from any point where consum-ers want to buy them. A strategic alignment between technology and real estate is allowing developers to close the gap between e-commerce and traditional distribu-tion networks, helping solve the “last mile” equation. �e end result: minimized ful�llment costs with maximized customer satisfaction.

While technology will continue to play a major role, let us not forget that as the industry progresses to meet certain consumer needs, there remains an inherently social aspect of shopping. Social interaction, immediate grati�cation and the abil-ity to touch, feel and try products are just a few bene�ts that cannot be replicated online.

Unlike any other “place,” shopping centers are built around the needs of communi-ties, while building value at the same time. �ey provide a central place to congre-gate with friends and are signi�cant job creators, drivers of GDP and critical revenue sources for the communities they serve through the generation of sales taxes and the payment of property taxes that fund important municipal services. Shopping centers will continue to evolve to meet the needs of the ever-changing consumer, and they will continue to thrive for many years to come. G

Thomas (Tom) McGee is the President and Chief Executive O�-cer of the International Council of Shopping Centers (ICSC). Prior to joining ICSC, McGee served as Vice Chairman of Deloitte, LLP. During his 26 years with Deloitte, he held major global and U.S. leadership roles in addition to Vice Chairman, including, Deputy CEO, National Managing Partner of M&A Services and Global Chief of Sta�. He was also a member of Deloitte’s Global and US Executive and Operational Leadership Committees. A noted business speaker, McGee also has significant media experience, with appearances on CNBC, Bloomberg and Fox Business and is frequently quoted in national media outlets including The Wall Street Journal, USA Today and CFO Magazine.

Galleria Vittorio Emanuele II | Milan, Italy

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TOOLBOX

As the shopping experience continues to evolve, shopping center owners are challenged with the ever-changing consumer, their broadening spending habits, and the

trendy, cutting-edge competition. �e key to appealing to consum-ers is providing a destination with amenities that take them on a journey, that ful�lls all of their lifestyle needs and desires. Madison Marquette has developed a pioneering approach to redeveloping an asset, which the company refers to as their “playbook.” Like in football, Madison Marquette’s playbook is a strategy of tactics and a plan of action. When buying a property, most developers begin with leasing and then focus on a vision however Madison Marquette approaches this process more holistically; the �ve-phase playbook was designed speci�cally to create and drive value.

>Vision�e playbook process begins with vision. �is is the roadmap for the operations, experiences and marketing, and eventually describes what the property “wants to be when it grows up.” With a comprehensive understanding of the true trade area and the competitive landscape, Madison Marquette crafts a clear vision unique to each property. �e vision de�nes the essence of what the asset strives to become, and that drives all future transformational initiatives including communications, merchandising, amenities, experience and design.

By Whitney Livingston

Appealing to a New Generation of Shoppers

Asbury Park Boardwalk | Asbury Park, NJ

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13PLACES MAGAZINE

TOOLBOX

>BrandingBranding di�erentiates and distinguishes an asset from its competitors. It’s the promise to consumers, tenants and the community to see the property through its transformation. Branding is also an “experience blueprint” — what consumers can expect to see during peak and non-peak hours at the property. Branding helps create a “leasing story” that appeals to potential, desired tenants, which can include a new logo, a fresh color palette, captivating tagline, or name change, if applicable.

>CommitmentWhile vision demonstrates forward-thinking, a stated vision is not enough to ensure a successful execution. Many times, developers make claims that they are redeveloping properties but, often, the community sees very little action. When redeveloping a property, an owner must “move dirt” to show tenants they are willing to invest in the project. Demonstrated commitment signals to prospective tenants an owner’s desire and ability to achieve the vision, and it’s a way of showing an investment in the property’s future. Madison Marquette doesn’t see barricades or construction signage as negative publicity – these elements express to both the consumer and tenant a pledge to see the transformation from ground breaking to ribbon cutting. �e promise of giving value to customer and tenant needs and lifestyle changes, such as adding multi-family units, new parking, upgraded common areas, or owner-investment in robust programming (i.e.: Maker Market programs), exhibits the worth a developer puts on a property, com-munity and its inhabitants.

>Activation/PromotionActivation and promotion go hand-in-hand. �ese tactics include PR, social media, social in�uencers and getting the word out in a way that makes sense in that area. To be successful, activation must be strategic and �ow directly from the vision and branding. �e goal of an activation plan is to create a consistent rhythm of activ-ity and buzz that generates tra�c and will resonate with desired prospective tenants. Activation happens both on and o�-site. It can include a well-curated specialty leasing program, common area and in-store events, outdoor events such as live-music, community and non-pro�t events, as well as property graphics and innova-tive social media and public relations campaigns. Promotion tells the story to consumers and the community. For example District LaBrea, a 85,000 square feet block and a parking structure located on the west side of La Brea Avenue between 1st and 2nd Streets, needed to stand out. �e vision for this asset was to transform the property into a creative collective that incorporated a complimen-tary mix of retail, food and o�ce by a shared creativity, design and style. �e LaBrea team used events, the local art community and pop up stores to generate buzz about the project. LaBrea hosted many events, such as art gallery openings, block parties, seasonal

tenants and food truck events to activate the site. To further extend the LaBrea brand repositioning, Madison Marquette identi�ed a unique opportunity to partner with renowned urban artist Shepard Fairey to design and install a mural on the three-story parking garage. �e mural re�ects the vision of LaBrea and the artistic and creative landscape of the neighborhood

>LeasingLeasing may be the last phase, but it is an ongoing conversation throughout the playbook strategies. Ultimately, it’s the tenants that are the targeted audience of all of the phases. Curating the right mix of tenants drives tra�c and sales. A clear vision, articulated brand, activated property and energetic buzz combine to de�ne the leasing story, support the leasing e�ort and ultimately facilitate its success. While seemingly just another step in the process, leasing is what yields developers’ ultimate goals and creates a value that consumers and communities are searching for. Successful redevelopment strate-gies in an evolving retail landscape can be challenging. Madison Marquette’s proven and e�ective redevelopment playbook gives developers and owners critical skills to create quality retail assets that truly re�ect the consumer, the tenant and the community. G

Whitney Livingston is Senior Vice President of Management and Marketing Services for Madison Marquette Real Estate Services and is located in Dallas, TX.

Madison Marquette Playbook

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Digital Trends:Getting Personal with Shoppers

Digital and mobile media devices have forever changed the landscape of brick and mortar shopping. 84% of shoppers claim to start their

shopping trip online before they visit a store1 and this digital behavior in�uences 64% of all in-store sales.2 It is as if a new “virtual doorway” on a web browser or a mobile device is replacing the physical entrance to your property. And along with this come new opportunities to engage, upsell or cross promote to shoppers using your digital assets.

�e opportunity we’re really talking about here is person-alization. �ink old time shopkeeper who knew what his customers wanted and he wasn’t shy about presenting it, only it’s powered by modern algorithms and technologies.

Personalization is a trend that is spreading quickly across the retail world and is fast becoming the expectation not the exception for consumers as they navigate the Internet. Amazon has paved a clear path and set an expectation in the shopper’s mind. Facebook has conditioned us to a

By John DeePresident & CEO, Placewise Media

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15PLACES MAGAZINE

TOOLBOX

personalized newsfeed. Omni channel retailers are following suit and shopping centers are right behind them.

How does this a�ect your shopping center and how can you harness the power of personalization to deliver an elevated shopping experience for your digitally armed shoppers?

Many of the visitors to your shopping center website (mobile and desktop) are look-ing for two primary things - the directory and the hours (42%). And while there may be lots of interesting content they might like, consumers today a�ord little time to all but the most relevant messages. With decisions made as quickly as a click or a tap, communications need to be obvious. �e marketing message needs to not only cut through the clutter of competing messages, but it needs to be worthy of the con-sumer’s attention.

Personalization delivers a relevant experience to website visitors based on who they are, what they are doing and what interests they might have. �e goal is to engage the visitor more deeply by presenting content that has greater relevance.

Consider a content heavy site like ESPN.com. As an anonymous visitor we see general daily and seasonal sports news. By determining my location they make it easy to “follow” hometown teams. �ey are doing basic content personalization based on location. Its when we create an account and share our preferences that ESPN.com becomes truly interesting and shows me just what I want to see about my sports and teams plus a sampling of “related news.” �is is a good example of personalization using volunteered customer information.

Publishers have done this for years. So has Amazon. Increasingly these approaches, enhanced with social media integrations, are �nding their way into the marketing operations of retail and e-commerce companies. Retailers are looking for personaliza-tion across all points of contact with their customers. Shoppers expect this.

For shopping centers, online personalization starts with content. Without a good cross section of content to serve, the shopping center site is little more than an online directory. Beyond directory and hours, shoppers want information on their favorite stores and events. With sometimes up to 200 tenants at a large property, there is more information than can be reasonably consumed. It needs to be �ltered somehow.

For example, if we know a site visitor is a mother with an infant, we can put information about strollers to borrow, reserved parking spaces, 40% o� the Children’s Place and an article about that �rst trip to see Santa on the homepage. We can sort retailers and o�ers with her interests consid-ered �rst. For a known repeat visitor we can feature information from or relating to the stores and brands they follow on our site.

When content is personalized, we get greater engagement in the form of clicks, shares, downloads and conversions. We have the opportunity to present alternatives or upgrades to the shopper trip including dining, events or visits to additional stores. By bringing in 3rd party informa-tion like prior purchase data, we can make informed choices about what content to present in literally less than a second.

Customer volunteered information can be collected and attached to user pro�les. Stores can be “followed,” emails customized, content dynamically sorted to put the most relevant information at the forefront. Personalization can happen at many levels that include user driven self-personalization, anonymous and volunteered info. Since the bulk

Bell Tower Shops | Fort Myers, FL

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TOOLBOX

of your shoppers will always be anonymous, its important to apply even basic personalization for anonymous users to increase the odds of driving deeper engagement.

Shopping Centers need to take an active voice in promoting their presence online and in their local communities. �ey should be an active part of the online dialogue in the local market to maintain and grow their market share. �ey should take an active role in countering the narrative that the mall is a hassle and you can shop in your pajamas online. As the on-prem-ise experience evolves, it should be presented and promoted online where so many shopping trips begin. Personalization can help this.

Shoppers value personalization. It makes their shopping easier. More inter-esting. Today more than ever, we are able to connect with consumers and achieve personalization at scale. For shopping centers, 2017 will see even more personalization. G

1 Deloitte. �e New Digital Divide, 2014.2 Deloitte. Navigating the Digital Divide, 2015. Digital will in�uence

$2,200,000,000 of retail sales. Yes, that’s 2.2 trillion.

John Dee is President of PlaceWise Media. PlaceWise delivers online experiences and media that drive shoppers to brick and mortar retail. In 2016, nearly 200 million digital engagements will be delivered by PlaceWise to shoppers who are on the path to purchase. John has led the company since 2006 and has grown it from servicing less than 60 shopping centers in 2006 to over 750 shopping centers under 110 shopping center operators today.

With twenty years of experience in Internet based services, John is a passionate believer that digital media is a strategic priority for this industry. He has relied upon this passion and experience to grow the PlaceWise service o�erings from website hosting to content services, loyalty programs, direct mail, digital advertising and a full spectrum of digital to brick and mortar media services.

600%

74%

from 2010 to 2016 - the increase in mobile device usage to connect with shopping center websites

(PlaceWise, “Mobile’s Role in Precision Targeted Shopping”, 2015)

65%

the percent of shopping center

website visits coming from

mobile devices (PlaceWise,

“Mobile’s Role in Precision Targeted Shopping”, 2015)

50% the increase in

open rate for personalized

emails for shopping centers

(PlaceWise study of 65 million shopping

center emails, 2015)

Getting Personal on the Web

74%74%74%of users get frustrated with

websites when content, o�ers, ads, promotions, etc. appear that have nothing to

do with their interests (Janrain, “2013 Online Personal

Experience” study)

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www.eincomm.com

MARKETINGPUBLIC RELATIONSSOCIAL MEDIABRANDING

SOLUTIONS

Ein Communications

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MARKET WATCH

BostonOne Of America’s Smartest and Most Innovative Cities

With more than 70 development projects underway in 2015 and 2016, Boston’s urban commercial center is growing its skyline, making it one of the largest build-

ing booms in the city’s history.

Home to some of the world’s leading institutions of higher educa-tion, medicine and innovation, it should come as no surprise that Boston is ranked as one of America’s smartest and most innovative cities. With an estimated population of almost 700,000, Boston is the largest city in New England. While this may seem small, the city is the anchor of a substantially larger metropolitan area called Greater Boston, home to 4.7 million people and the tenth largest metropoli-tan area in the country.

Rich in American history from the Revolutionary War, including the Battle of Bunker Hill, the Boston Massacre and the Boston Tea Party, Boston has a robust tourism sector, with over 20 million annual visi-tors to Faneuil Hall alone. World-class cultural o�erings such as the Boston Museum of Fine Arts and the Boston Symphony Orchestra (one of the nation’s Big Five) combined with the city’s literary culture make Boston one of the country’s intellectual capitals. �e giants of American literature from Emerson and �oreau to Hawthorne and Longfellow all drew inspiration from the city, and the Boston Public Library was the �rst free library in the United States.

The Boston Economy Small start-ups, mid-size growth �rms and large corporations all want to be near top talent in Boston. TripAdvisor, Constant Contact, HubSpot and e-commerce giant Wayfair are all headquartered in Boston, while the city also serves as an incubator for tech start-ups such as Adelphic, Harmonix and FormLabs, a spinout from the MIT Media Lab that delivers the world’s most advanced desktop 3D printing. Two of the three largest management-consulting �rms, Bain Capital and �e Boston Consulting Group, are also headquartered in Boston. According to the New England Economic Partnership, Boston’s annual growth rate for the labor force is around 2.3%, and the combination of signi�cant growth opportunities in the life sciences, biotech and higher education sectors provide a competitive network of career prospects for highly skilled workers.

Another major force in Boston’s economy are the 20 plus research and teaching hospitals that provide jobs and produce billions of dol-lars in revenue each year for the local and state economy. Combined, Massachusetts General Hospital, Brigham and Women’s Hospital, Dana-Farber Cancer Institute, Beth Israel Deaconess Medical Center and Boston Children’s Hospital, are the recipients of more grant funding from the National Institute of Health than any other medi-cal centers in the country. According to the Boston Redevelopment Authority, 13 of Boston’s 50 largest employers are hospitals.

By Heidi Piper

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19PLACES MAGAZINE

MARKET WATCH

Greater Boston has also quietly become one of the country’s primary hubs for private equity and venture capital funding in the biotech, healthcare and life sci-ences sectors. In the past �ve years, overall funding has tripled from $2.6 billion in 2010 to nearly $6.6 billion in 2015. One reason investors have their eye on Boston is the density of a highly educated research, technology and engineering workforce churned out of Harvard and MIT. Boston’s lower cost of living and business taxes relative to San Francisco and New York make it a top choice for employers and employees alike.

New Development Greater Boston has an o�ce inventory of 215 million square feet, and Boston’s development boom is breathing new life into Fenway and downtown, as well as former industrial districts in the South End and East Cambridge. �e success of InkBlock South End, a mixed-use residential and retail project in a former indus-trial neighborhood, led the way for an emerging luxury residential market across the city. In 2018, 345 Harrison Avenue will join InkBlock in the South End as a new 560-unit apartment complex with 30,000 square feet of retail. Increasing rents are driving opportunity for investors and developers, while several major residential and mixed-use developments, including Millennium Tower, 101 Beverly Street and the Hub at Causeway are underway in the North End, Back Bay and downtown.

�e Hub on Causeway will feature 1.5 million square feet of shops, restaurants, of-�ces, hotel rooms and residences, including what will be the city’s largest supermar-ket, a 15-screen movie theater, 10,000 square feet of outdoor space and 175,000 square feet of creative o�ce space. Boston Landing, a 15-acre project in Brighton, will house the 250,000 square feet New Balance headquarters, and will include a hotel, practice facilities for local sports teams and a new commuter-rail station.

Bul�nch Crossing, the redevelopment of the Government Center Garage, is a prime example of the new development under way in downtown Boston. Breaking ground in 2015, this two-block, 2.9 million square foot project, includes a condo-hotel hybrid, a multi-story retail property, boutique o�ce buildings and a high-rise residential building that will become Boston’s tallest apartment tower, with 486 units. Once complete in 2017, One Seaport Square will be the largest mixed-use project to break ground in Boston. �is residential/mixed-use building will consist of twenty-two stories of 832 units in two towers, atop three levels of retail, with three underground parking levels.

Other notable additions to Boston in 2016 include the development of a $2.1 bil-lion dollar outpost of the Las Vegas-based Wynn casino, slated to open at the Bos-ton Harbor Waterfront with 24-stories and over 3,000,000 square feet of casino, restaurants, hotel rooms and retail.

General Electric has just released plans for a 2.4-acre campus in Boston’s South End Seaport District, encompassing over 388,700 square feet slated for 2018. When completed, GE will be the largest public company in the state of Massachusetts, drawing a number of programming and design-based jobs to the market.

InvestmentAt 4 percent unemployment and in the midst of a population boom, Boston’s retail, o�ce and residential inventory is in the midst of an unprecedented development and redevelopment phase. In the o�ce market, demand for high performing Class B and low-rise Class A space that can be redeveloped as either brick and beam style space and/or adapted to meet the demands of today’s workforce remains high. In fact, the shift in demand has led to vacancy in low-rise o�ce falling below that of high-rise and pushed average asking rents over $50 per square foot. Scarcity in the

low-rise inventory has pushed unwilling tenants into premium price Class A space. Going forward, changing tenant preferences will continue to push the envelope; however, new inventory should be better poised to meet these demands with own-ers understanding that unconventional space and amenities are now necessary in order to attract tenants.

While urbanization is a continued trend in Boston, suburban o�ce owners are still able to command rental rate increases. �rough large capital investments, older, suburban o�ces are being transformed into highly amenitized buildings that appeal to mid-level and younger employees. �ese re-imagined buildings include gyms with spin and yoga classes, game rooms, indoor and outdoor activity areas, healthy and fresh food solutions like LeanBox and Bevi, and cafes.

Boston’s retail base rents are at near historic highs and leasing remains strong. �e strength in Boston’s economy has led to the expansion of core submarkets and revived or created emerging districts such as Fenway and West End. Newcomers to the Boston market include both U.S. and global retailers, including Dublin-based Primark, �e Boston Wax Museum and recently announced Italian specialty-grocer Eataly and New York-based �tness club Equinox.

�e Boston residential market is growing at a rapid clip and simple growth is part of the resiliency: the city will have at least 709,000 residents by 2030, an increase of 8% from the current population. According to the Massachusetts Association of Realtors, in 2016, home prices fell 2.3 percent while pending home sales were up 75 percent, the highest they’ve been since 2004. Condo sales were up 61 percent, while pending sales of single-family homes have posted year-over-year increases in all but one of the past 41 months. JLL reported that high-rise sales had reached a �ve-year high in 2016.

With demand pushing rents and cap rates, investors are loosening their geographic parameters and allocating money outside traditional downtown regions, which has impacted asset prices in those regions. Development in the city’s core will bring new inventory online in 2016 and 2017; however, analysts expect to see more investment in suburban markets, which have previously been a slower growth area. Overall, Boston is on track to see continued growth in both residential and mixed-use construction in the coming years, with more and more public companies and start-ups eyeing the city as a potential base. G

Heidi Piper is Senior Associate of Capital Markets for Madison Marquette and is located in Washington, DC.

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CRYSTAL BALL

Ask any consumer or industry professional to estimate the impact of the Internet on retail, and you will get wildly divergent responses,

each backed by expressions of passionate con�dence. What share of retail sales occur on the Internet? Who is the largest retailer in the world? Why are Macy’s and Sears closing stores? If you answer these questions with “60 percent,” “Amazon” and “Internet competition,” your answers would match those of most other respondents—and you would be wrong on all three.

�e correct answers are 8.4 percent, Walmart ($500 Billion) and 30 years of “category killer” retail competi-tion. In the world of retail, the growing disparity between market perception and reality has never been greater, representing one of the central issues facing the industry. While dramatic changes in technology routinely occur in one or two years, retail changes occur at a glacial pace by comparison.

Yes, while iPhones change annually, retail formats often change and evolve over years or decades, and understand-

ing the dynamics driving these changes is more impor-tant than ever. Getting it right can propel retailers to new heights, while getting it wrong can result in fatal strategic mistakes, di�erentiating success and failure, winners and losers.

Two fundamental realities lie at the heart of how most retail works today: the commoditization of most retail going all the way to Toys “R” Us in the 1960s and the expanding role of technology in retail. Both are not only misunderstood, but barely understood at all.

Category Killers and the Commoditization of RetailFor department stores like Macy’s and Sears, fundamental change began to take place more than 50 yeas ago with the introduction of Toys “R” Us, the �rst category killer. Prior to the introduction of Toys “R” Us, full-line depart-ment stores, the general stores of modern-day retail, car-ried virtually all commodity retail products consumed in average American households. However, the undermin-

Reality CheckAn Internet

By Nick Egelanian

Nick Egelanian, President & Founder, SiteWorks

While dramatic changes in technology routinely

occur in one or two years, retail changes occur

at a glacial pace by comparison.“While dramatic changes in technology routinely “While dramatic changes in technology routinely

”occur in one or two years, retail changes occur

”occur in one or two years, retail changes occur

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21PLACES MAGAZINE

CRYSTAL BALL

CRYSTAL BALL

ing of this model began even before the department store and regional mall industries had fully matured.

One by one commodity retail categories once exclusive to department stores and malls, were duplicated in low-er cost big box category killer outlets like Staples, Best Buy, Michaels and Bed Bath & Beyond. �ousands of these new discount stores were built by the turn of the century, and the number of malls operating nationwide began contracting from a high of near 3,000 at the peak of the industry to fewer than 1,000 today. By the year 2000, most department stores had been reduced to underused cavernous boxes carrying a bloated sup-ply of overpriced soft goods and housewares, leading to high-low pricing strategies and endless sales.

Today, with T.J. Maxx, Marshalls, Ross Dress for Less and Nordstrom Rack, as well as specialty stores like Bed Bath & Beyond and Home Goods, o�er-ing everyday low pricing and still opening hundreds of stores annually, the entire U.S. department store industry is responsible for less than $72 Billion (and shrinking). With the entire department store industry now dwarfed in size by single commodity retailer chains like Target, Home Depot and Costco, we expect that the industry will continue to shrink in an-nual and market share, with only between 150 to 250 malls surviving as high-end specialty retail mega-hubs when the process is complete.

Technology and Internet RetailWhen Macy’s recently announced 100 more store clo-sures and new asset sales, the company cited pressure from online competition as the primary reason for the closures; moreover, Macy’s announced an aggressive Internet expansion strategy to stem the tide. Macy’s explanation, along with its strategy for recovery, couldn’t be further from reality. �e department store industry had begun its long slide into obscurity well before the rise of Amazon, and in fact, Internet sales may well have helped slow Macy’s decline. Macy’s itself has reported that when it closed its only Minne-apolis Bloomingdale’s unit at the Mall of America two years ago, Internet sales in the market not only failed to pick up the slack, but fell by 75 percent—hardly a saving grace.

�e reality is that not only is online competition not a meaningful part of Macy’s (or any other depart-ment store’s) basic challenge, it barely plays a role at all. Despite all the hype, total U.S. online retail sales just passed eight percent of last year, 25 years after Amazon’s �rst sale, and online retail sales models have serious challenges of their own. Even the Internet’s 500-pound online gorilla, Amazon, with $85 billion in annual sales, has struggled to generate any pro�t on

its online sales, making all of its pro�ts to date from its “web services” division.

Make no mistake about the impact of technology and Internet-initiated sales, they are real and most retailers must o�er this option. Analysts and retailers now rou-tinely cite Internet sales as both cause of failure and the path to salvation, but they are taking a shortcut in logic that they will eventually pay for dearly. �e rea-son is the high cost of operating online sites and high shipping and handling costs associated with online sales that both dilute margins and limit the Internet as a ful�llment option for the vast majority of commodity retail sales.

While consumers certainly �nd Amazon’s free two-day shipping for Prime customers appealing, Amazon loses billions of dollars annually shipping to these customers, and they will lose even more on same-day deliveries by ground and by the drone delivery �eet now being touted. And, can you imagine what a large-scale Amazon drone delivery “airport” would look like? Do we really believe this can become a reality, or are we being drawn in by the allure of change and the hype of a seasoned marketing machine? As seasoned retailers know, the cost of over handling merchandise and ine�ciencies of shipping are pro�t killers.

Walmart’s recent $3 billion acquisition of Jet.com is yet another example of misinformed decision-making. After spending $3 billion to purchase Jet, $500 billion Walmart will now need to fund billions of dollars of

additional development costs and absorb annual losses at Jet for as far as the eye can see. In the end, Walmart will almost certainly be forced to realize what Amazon already knows. Developing a large Internet sales platform is very expensive, and shipping costs eat up pro�ts, especially when shipping low cost commodity retail goods like those most often sold by Walmart.

Meanwhile, back in the real world, while Walmart experiments with Jet, Dollar General will open 1,000 stores in 2017 alone, and basics commodity retailers like Aldi, Lidl and Five Below will open hundreds of additional stores. As these more nimble retailers take market share from Walmart, Walmart itself will be racking up billions in losses from its ill-advised foray deeper into Internet retailing, reminiscent of Kmart’s fatal strategic detour into category-killer retail while Walmart zoomed past it in the 1990s. Contrast this strategy to mega-retailer Ikea, which, cognizant of the cost and ine�ciency of picking and shipping from a retail warehouse, does not o�er free shipping at all, opting instead to charge customers $40 to “pick and pull” an order and another $59 to deliver it.

Compare the Walmart initiative with that of TJX Company, when it purchased Internet darling Sierra Trading Post several years ago. TJX purchased the small, but well-established Internet company to gain Internet sales expertise and experience. Today, how-ever, it is aggressively rolling out the Sierra Trading Post brand as its latest high-growth brick-and-mortar retail brand.

Make no mistake about the fact that most retailers must o�er an Internet sales option, especially in ap-parel where Internet sales account for nearly 30 percent of total industry sales. �ey must, however, also be re-alistic about the business model they adopt. In the end, the same shortsighted analysts that encourage poorly thought out and expensive investments in Internet retail infrastructure will be the �rst to run for the door when the red ink piles up with no end in sight. G

Nick A. Egelanian is president of SiteWorks, a strategic retail real estate consulting firm providing highly targeted retail and mixed-use development consulting services to retailers, developers, owners and municipalities. The firm applies its knowledge of specialty and commodity retail shopping centers throughout the United States and internationally — along with leading research, development, and leasing capabilities — to provide real-world solutions to the ever-changing issues facing today’s increasingly global, post-department store era retail industry. Connect with Nick at [email protected].

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FEATURE — Legislative Update

The Outl kPolicy Report:

for Online Sales Tax LegislationBy Ksenia Sazanova

T

A X

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23PLACES MAGAZINE

Legislative Update — FEATURE

The long-running e�ort to impose taxes on online sales across state lines may �nally make progress on Capitol Hill this fall. �at’s

because House Judiciary Chairman Bob Goodlatte (R-Va.), who’s resisted Senate-negotiated compro-mises on the issue for the last three years, recently released his own proposal and is pushing for a vote in the chamber before the November election. Time is short, however, and the remaining hurdles are many.

�e Goodlatte plan won early plaudits from House Speaker Paul Ryan and Amazon.com, the online retailing behemoth, which already collects sales tax from customers in 28 states. But other retailers remain lukewarm, and their support likely will be crucial to completing work on a measure this year. Of the House Republican’s proposal, the Marketplace Fairness Coalition, the umbrella group for brick-and-mortar retailers and other supporters of an online sales tax, has said only that it was “pleased to see en-gagement in the legislative process on an important is-sue” and looked forward to reviewing the bill’s details.

Since the rise of e-commerce, the failure of federal policymakers to enable states to collect sales taxes from online retailers has placed brick-and-mortar operators at a competitive disadvantage. A 1992 ruling by the Supreme Court found states can only

force a company to collect sales tax if it has a signi�-cant presence in the state where the sale occurred. Consumers still owe the tax otherwise, but the state government has no way to compel its payment.

Under Goodlatte’s proposal, an online retailer would use the rules of the state in which it’s based to collect sales tax at a rate set by the buyer’s state. �e Senate version that Goodlatte shunned adopted a simpler system. Under it, a state could force an online retailer based elsewhere to use both its rules and rates to col-lect taxes on sales there.

Ryan is expected to try to force a vote on Goodlatte’s bill during the Congressional work period preceding the election. But it’s so far unclear whether it has the support to pass, since conservative House Republi-cans remain skittish about embracing anything that could be construed as a tax hike. And even if it does, it isn’t immediately evident whether the measure has a path forward in the Senate before the end of the year. Failing to secure passage of a harmonized pack-age in both chambers by the end of the year would mean supporters of an online sale tax would need to start again next year with a new Congress.

Goodlatte’s bill tries to address some concerns that conservatives raised about the Senate approach. One

complaint they lodged: �e Senate bill violated state sovereignty by empowering states to collect levies beyond their borders. In allowing the seller’s state to choose what gets taxed, the Goodlatte version aims to hand companies more authority to determine the taxes they face, as opposed to subjecting them to the whims of lawmakers in other states. (Since unlike many major online retailers, Amazon.com already claims signi�cant physical presences across the map thanks to its distri-bution network, the company simply wants to see the imposition of a uniform national standard.)

If Congress fails to act, the Supreme Court has signaled it could move to revisit its 1992 ruling. Last year, Justice Anthony Kennedy noted in an opinion on a related case that state co�ers and retailers con-tinue to su�er under the current system and that the Court should weigh in. �e comments moved state lawmakers in several states to pass proposals with the aim of bringing a legal challenge to the high court.

In the months ahead, PLACES will continue to monitor progress on this crucial issue for retailers all across the country. G

Ksenia Sazanova is Tax Director for Madison Marquette and is located in Washington, DC.

TA

X

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FEATURE — Rise of the Mobile Consumer

Over 90% of the time, the average individual researches a service or product online before making a purchase. Amazon, Uber, delivery innovation and smartphones

have revolutionized consumer behavior across just about every category. As Pinterest and Instagram provide a platform for swoon worthy wardrobes, home décor and recipes for a year’s worth of family-friendly meal planning options, the physical retail space has taken a secondary role to merchandising goods and services.

In 2014, Deloitte reported that as a result, retailers were likely to downsize stores by 30-40% in the medium to long term, due to emerging mobile platforms and the fact that even consumers in rural zip codes who once had limited access to popular urban brands, now have equal access to retail o�erings with the Internet.

Users check their smartphones more than 200 times every day, and it’s changing the way we discover, compare and purchase products and services. According to the Google Shopper Market-ing Agency Council, 79% of smartphone users are smartphone shoppers, and the more a consumer uses their phone to research or compare products, the more apt they are to spend (up to 25% in store). �is is indicative across consumer categories from gro-ceries, to appliances and clothing, and is forcing retail brands to rethink merchandising, inventory and virtually every traditional aspect of the brick and mortar business model.

Same Day Delivery, Multi-Platform Access & the Mobile Consumer

How Retailers are Shifting to Omni Channel and Instant Delivery

By Natasha Stancill

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25PLACES MAGAZINE

Rise of the Mobile Consumer — FEATURE

Clarifying how brick and mortar and digital merchandising can meld together successfully, Oliver Guy, retail industry director of Software AG says, “Mobile, cloud, analytics and social media will be fully integrated into a uni�ed merchandis-ing system designed to vastly improve customer engagement.” �e evolution is happening round the clock with streamlining payment options, and same day delivery.

Mobile e-commerce also provides retailers an even more sophisticated and geo-targeted platform for market research on consumer trends and habits, further enabling shoppers to access and source desired products and services. An estimated 73% of in-store shoppers �nd waiting in line their least favorite aspect of shopping, making same-day delivery services all the more appealing. In a recent report by MobStac, (a cloud-based mobile commerce platform delivering apps for e-commerce sites) by 2017, nearly half of all in-store transactions will be completed via mobile point of sale or a self-checkout feature.

Clicks Are Only a Small Percentage of Retail Sales Now, But Have Exponential Growth ProjectionsMass adoption of universal pay options will make it increasing-ly easier to purchase everything from shoes to cat food through a quick click secure transaction on a smartphone. Still, while shopping online has become a popular pastime for some, Jona-than Alferness, VP/Product Management at Google Shopping claims that, “while 87% of shopping research happens online, 92% of goods are still sold in retail stores.” And according to Women’s Wear Daily, mobile is still just a small part of most companies’ top lines.

Retailers are downsizing physical locations to devote more mindshare to digital sales points. A telling indicator of the changed psychology behind new retail development comes from a comment Denver-based developer John Frew made in the Wall Street Journal recently when referring to the new Westdale development in Cedar Rapids, IA. “�e new project will include a hotel and o�ces…and when complete, there will be about a third less retail space than there was before. We think it �ts the market.”

While online sales made up only about 7.7% of personal consumption expenditures for apparel, home and accessories categories in 2014, according to Goldman Sachs, that number is expected to nearly quadruple to 26.6% of sales by

Same Day Delivery, Multi-Platform Access & the Mobile Consumer

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FEATURE — Rise of the Mobile Consumer

STRATEGIC MERCHANDISING RESULTS-DRIVEN LEASING

madisonmarquette.comINVESTMENT MANAGEMENT • LEASING • PROPERTY MANAGEMENT • DEVELOPMENT • MARKETING

MELROSE PORTFOLIOWEST HOLLYWOOD, CA

PACIFIC PLACESEATTLE, WA

BAYFAIR CENTERSAN LEANDRO, CA

MERCATONAPLES, FL

TRANSFORMING SHOPPING CENTERS INTO VIBRANT RETAIL DESTINATIONS

THE EDGEBROOKLYN, NY

BELL TOWER SHOPSFORT MYERS, FL

MARKETFAIRPRINCETON, NJ

2018, which could correlate to a further decline in brick and mortar foot tra�c and in-store sales �gures. Software AG’s disruptive digital trends predictions for 2016 include predictive analytics that enable stores to know what customers are going to want and when, as well as real-time monitoring capabilities that will sense, correlate and automate processes from sta�ng to inventory. With the precision of these metrics, excess store locations will get eliminated in the process.

The Rise of Same Day Delivery ServicesWhat was once known as a business model for failure, same day delivery platforms have become increasingly the norm and expected for modern consumers. In 2015, Business Insider reported that same day delivery companies would partner with retailers to “grow

e-commerce’s customer base, siphoning o� one of brick and mortar retail’s last real competitive advantage.” According to their research, one in four shoppers said they would consider abandoning online shopping if same-day delivery was not an option, and the most com-mon shopper demographics were urban-dwelling millennial males. However, 92% of consumers said they were willing to wait four days or longer for their purchase to arrive.

Inc. Magazine recently identi�ed several companies that are de�ning the same day delivery option including, Instacart, Amazon’s same day grocery delivery platform, and Zookal, an Australian-based textbook delivery that plans to employ delivery drones using the �ying-bot service called Flirtley. Most notably, San Francisco-based Postmates is positioning to compete with Uber’s market share to de

Untitled-3 2 11/23/16 7:06 AM

Rise of the Mobile Consumer — FEATURE

liver everything from lunch to clothes and o�ce supplies. Google Express is in on the game, launching a new grocery delivery service in 2016.

UberRush, launched in New York City, and now available in Chicago and San Francisco, is a local messenger service arm of the ridesharing company, allowing users to order local items for quick delivery. Deliv, based in San Francisco, allows retailers to o�er same-day delivery to customers for as low as $6.25 per order within 15 miles. London-based Shutl, purchased by eBay in 2013, uses local courier services to deliver packages from retailers within a few hours. Amazon Prime’s same day delivery is now available in almost 30 cities nationwide, (more than double the locations available just two years ago) and has expanded delivery service to seven days a week. EBay now o�ers one- to two-hour delivery of products ordered from local stores to over 25 cities.

Ready to battle for part of Amazon’s customer base, Daphne Car-meli, the founder of Deliv has developed the company’s e�ciency model on the idea that local businesses and retailers have inven-

tory within a �ve-mile radius of their customers, which is the one thing Amazon doesn’t currently have. Potential venture partners in Silicon Valley have met her with skepticism, but she remains con�dent. “One way you know you are on to something is when you get polar opposite responses, that is a good sign you are on to something disruptive.”

If there’s one takeaway from the collective methodology emerging from big data, mobile access and same day service, it is that we are in an era of disruptive technology that is in�uencing and advanc-ing the retail landscape at a rapid pace. Only brands that can fully employ the data on their customer demographics, streamline and automate purchasing and delivery, and develop customized, well-crafted goods and services will survive the pace of progress. G

Natasha Stancill is Vice President of Corporate Marketing for Madison Marquette and is located in Washington, DC.

What was once known as a business model for failure,

same day delivery platforms have become increasingly

the norm and expected for modern consumers.

STRATEGIC MERCHANDISING RESULTS-DRIVEN LEASING

madisonmarquette.comINVESTMENT MANAGEMENT • LEASING • PROPERTY MANAGEMENT • DEVELOPMENT • MARKETING

MELROSE PORTFOLIOWEST HOLLYWOOD, CA

PACIFIC PLACESEATTLE, WA

BAYFAIR CENTERSAN LEANDRO, CA

MERCATONAPLES, FL

TRANSFORMING SHOPPING CENTERS INTO VIBRANT RETAIL DESTINATIONS

THE EDGEBROOKLYN, NY

BELL TOWER SHOPSFORT MYERS, FL

MARKETFAIRPRINCETON, NJ

Untitled-3 1 11/23/16 7:04 AM


FEATURE — Evolution of Data

An Industry Game-Changer

Geo-fencing is a game-changer in the shopping center business – an industry constantly challenged to increase shopper visit share in the face of online competitors, store-

closings, aging assets and a rapidly evolving customer.

With this relatively new methodology, owners/operators can pre-cisely de�ne trade areas, perform competitive visit share analysis and pre-acquisition studies, compare center vs. competitor shopper pro-�les, make the case for retailer locations/re-locations, track shopper visit patterns over the course of the year – down to days and dayparts

– and even examine shopper tra�c concentrations within a center.

Instead of drawing the usual 3-5-7 mile circles around a property and pulling demographics, industry professionals can map market penetration and frequency-weighted trade areas that re�ect true-market shopper dynamics.

How it Works�e geo-fencing process (Fig. 1) begins with creating a “shape �le,” in which the subject center is digitally outlined. �e shape �le is transmitted to a data provider (in this case a digital ad exchange typi-�ed by companies like DoubleClick, OpenX, etc.) which, in turn, transmits the GPS signal data they have harvested over a set period of time. In most cases, signal data goes back to 2014 and extends to the present date.

Fig. 2 visually depicts the geo-fencing process (disguised) and a resultant micro-grid map of the center’s trade area – based on frequency-weighted signals.

�ese data sets break out shopper visits by days and dayparts and are aggregated at monthly levels to foster shopping pattern analysis.

By David Lobaugh

President, August

Partners

Ge fencing Fig. 1

Fig. 3 Fig. 4

The GPS signals picked up here are tracked back to the points of origin — home and workplace. Each GPS device is measured on its incidence level (i.e. a one-time basis) and on its visit productivity level (i.e. a frequency basis).

In this illustration, we show how the geofenced signals (over 30-month time period) translate to a frequency-based, micro-grid-mapped trade area. The black line represents the average shopper drive time as revealed in an online consumer survey.

Fig. 2

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29PLACES MAGAZINE

Evolution of Data — FEATURE

As an example (Fig. 3 left; rolling 12-month data), in a Florida center, we see a traditional rise in November/holiday tra�c because this center has a strong local TA draw that is exhibiting “typical” shopping patterns. We also see how this center tails o� a bit post-Christmas, but then begins its upward visit-generation trending as “snowbirds” return in-force to the market.

Because the GPS device signals are traceable back to their source, demographic and lifestyle, etc. data can be appended and are thus re�ective of the center’s shoppers as opposed to traditional “market” data. Essentially, we are able to quantify shopper characteristics and compare them to overall market characteristics as in Fig. 4.

The Future of Geo-FencingAs this methodology evolves, we envision a future in which chain retailers will rely on geo-fencing to examine existing and optional sites as their leases come up for

renewal. As exempli�ed by the store relocation visit share case above, we are also seeing how center owners and management companies are aggressively pursuing tenants from other centers in their market and how these same companies are pro-actively working with their existing stores to provide tra�c pattern and customer demographic data.

In the broader picture, geo-fencing has the potential to build and strengthen the brick-and-mortar partnership between owner and retail tenant, as the two entities work in tandem to strengthen shopper appeal and visit frequency. G

David Lobaugh is founder and president of August Partners – established in 2000 and backed by more than 25 years of experience/expertise. His company is a Big Data research and consulting firm specializing in the shopping center/retail industry, with projects encompassing malls, lifestyle and outlet centers plus mixed-use developments.

Ge fencing Case Study – The Visit Share StoryCompetition for the best retailers is fierce. In this case study, Site A was talking with a major tenant prospect at Site B, who was con-templating a significant store expansion. The Site A team wanted to convince this retailer – extremely dependent on high store visit counts – that its prospects for such an expansion were better at their center.

Both sites were geo-fenced (Fig. 5). The shopper penetration mapping demonstrated a significant market penetration reach and density advantage for Site A. The frequency-weighted visit share calculation quantified a visit share advantage of almost 2 to 1.

The relocation deal is currently in-progress.

Case Study – Outside and InsideThis 45-year-old Midwest-ern regional center – located between two major MSAs – is challenged by being in a low-population-density market, and brack-eted by significant retail competitors in those MSAs.

Fig. 6 shows a disguised shopper tra�c penetra-tion map (the drive time boundary was determined by data from an accompa-nying online consumer sur-vey) and a disguised micro-grid trade area definition map:

The penetration map showed us that the center did have a degree of reach into the Southern MSA, but the micro-grid map showed that we had a shopping frequency issue to overcome. Based on these and other findings from the online survey, it was determined that a frequency-driving food & beverage strategy would constitute the first phase of this center’s repositioning.

An in-center analysis of tra�c patterns within the mall indicated that there were strong areas of shopper-flow – most notably in the com-mon area adjacent to the eastern anchor store – that would provide a maximized setting for an F&B makeover (Fig. 7).

Fig. 5

Fig. 7

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FEATURE — Advancing the Security Frontier

The Future Of Building and Retail Store SecurityCommercial real estate property managers and building own-

ers today are faced with a dizzying array of security options – the newest of which focus on fully utilizing innovative

and e�cient technological advances. �ese technological advances make it easier to balance the demands of security and convenience. Since a recent McKinsey Global Institute report showed that there is a $150 billion opportunity for commercial real estate to save money on energy, security and human productivity, there is no better time than now for CRE professionals to consider upgrading existing security systems or adopting the most cutting-edge ones available for any new build.

Earlier this summer, Kastle Systems introduced KastlePresence, an innovative Internet of �ings based platform which o�ers a myriad of bene�ts including hands-free access and location-based services such as a personal panic button right from the user’s phone. �e platform has already been adopted by over 50 Class A o�ce buildings across the country. KastlePresence is more secure than predecessor systems – it is actually encrypted so that each time a door is opened, the app creates a one-time-use key. �e app can be downloaded and managed electronically obviating the need for cumbersome plastic cards that could be damaged or lost. KastlePres-

ence is one example of what the future holds for building security and safety.

While we expect KastlePresence to become the new standard in building security with its adoption of smartphones and Bluetooth technology, building owners need to also consider intelligent video solutions, �rewalls and visitor management software as primary steps in strengthening overall protection readiness. For as little as $2 per day, intelligent video solutions can monitor properties more e�ciently and e�ectively than a guard service. Using a combination of video analytics and a 24/7 central monitoring station, buildings and retail operations can be monitored comprehensively and with state-of-the-art precision.

Unquestionably, security is moving to the Cloud. Indeed, cloud-based applications for security systems – o�ering application access from any location with an internet connection - are rapidly replac-ing cumbersome pre-millennial approaches. Cloud-based systems are also inherently more reliable and more cost-e�ective as there is less infrastructure investment required and no dependency on local technologies.

By Mark Ein

Chairman, Kastle

Systems International

The Wharf | Washington, DC

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31PLACES MAGAZINE

Advancing the Security Frontier — FEATURE

One great example of a cloud-based application for security is video monitoring. As mentioned above, intelligent video monitoring is key to securing both buildings and retail centers. Cloud-based video monitoring systems allow the user to view and manage multiple locations from anywhere on any device (mobile phone, tablet or computer). �e basic principle is that when something concerning happens, that activity is captured in real-time for immediate or later viewing. Other bene�ts include managing the system from a single dashboard – with footage that can be easily shared and with unlimited storage capacity.

As with any access control installation, the process of choos-ing which doors to secure and which hardware to select must also adhere to �re and life safety regulations. But, with a cloud-based system, it is only necessary to install door hardware (readers or electronic locks wired to an intelligent door controller that connects to the cloud). �is allows users to log into a computer to set up, de�ne schedules, create access privileges and provide credentials. In addition to less upfront installation time, cloud-based access control systems require less maintenance (as all software upgrades are automatically man-aged by the security provider). A newer development within the security industry is the introduction of wireless locks. �ese locks eliminate the need for costly wiring and conduit associated with traditional wired electronic locks, and can easily and cost e�ectively convert a traditional metal keyed lock into electronic lock.

As urban and suburban markets continue to grow, security imperatives will increas-ingly demand more sophisticated and more fail-safe options for building owners and managers. Whether through secure building entry, video monitoring, visitor

management solutions or other critical facets of overall site safety, real estate and re-tail professionals will have extraordinary opportunities to protect lives and property by delivering security as an amenity. Kastle Systems is fully focused on providing those opportunities with �rst-of-its-kind data and connectivity in a single, custom-izable and streamlined approach. G

Mark Ein is the Chairman of Kastle Systems International, a company that successfully protects more than 2,000 properties with over 37,000 tenant spaces totaling 400 million square feet of space nationwide and internationally. Mr. Ein is also the founder of Venturehouse Group, LLC, a technology holding company that creates, invests in and builds technology and telecommunications companies and has served as its Chief Executive O�cer since 1999.

FPO

open space for use with

the feature or half page ad

WHEN WORDS COUNT, WE DELIVER RESULTS.

Blackford & Associates provides strategic public relations and marketing services to the nation’s leading shopping centers, retailers and real estate developers. With nearly two decades of industry-specifi c experience, we know retail, and we have the winning track record to prove it.

• Consultation & Plan Development

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AWARD-WINNING AGENCY�|�MULTI-MILLION-DOLLAR PR RESULTS�|�LOCAL & NATIONAL COVERAGE

37404_MRS_TXT_X.indd 31 11/28/16 3:52 PM


FEATURE — Emerging Retail Categories

BeautyThe

BoomBeauty is Flourishing from Sephora and Ulta to Bloomingdale’s and Youtube

From sculpting kits, highlighting, lowlighting, brow shaping and contouring, in today’s beauty landscape, the options are limitless. �e projected year over year growth of the industry

has proven that beauty is one of the most successful categories in retail, with Target, Sephora and Ulta leading the charge. �e U.S. beauty industry pulled in over $46.2 billion in 2015 and is projected to rise to $51.8 billion by 2020. According to another recent report by Indix, the global skin care market will be worth an estimated $121 billion by the end of 2016.

Millennial women comprise the highest concentration of spend-ers on make-up and skincare, purchasing more than 10 products a year, often double or triple that amount. According to a recent report from the NPD Group, “prestige beauty” saw a seven percent increase in sales in 2015, made possible in part, by the rise in both celebrity and social media in�uencers who promote make-up tips like “contouring” and “shading” on their personal platforms. And with Sephora and Allure Magazine jumping on the bandwagon of popular monthly subscription boxes like Birchbox and Glossybox with their own versions hand-selected by beauty editors, there’s never been more brand competition in the marketplace.

LVMH-owned Sephora reported an eight percent increase in revenue in 2014, followed by the launch of 100 new stores glob-

ally in 2015. �ey also launched the Sephora Innovation Lab, a digital think tank designed to groom leaders, as well as a mobile augmented-reality app, “virtual beauty makeover.” Ulta, meanwhile, reported double digit earnings growth in all three operations seg-ments in 2015: retail stores, salon services and e-commerce. Why the strong success? In the same way that stores like T.J. Maxx and Nordstrom Rack have proliferated with record sales growth in recent years, consumer analytics �rm Tabs Group, reports that customers approach beauty buying as a treasure hunt, where they can see and test multiple brands, products and tools all in one place. �ey have brand loyalty to mascara from Smashbox, for example, but prefer foundation from Laura Mercier.

One remarkable growth factor is the emergence of all-in-one toolkits for shading and contouring. In a recent Washington Post analysis, Bluemercury (recently acquired by Macy’s for $210 million) co-founder Barry Beck stated that 55% of the company’s top-selling items were ones that didn’t exist �ve years ago. �e retailer is planning expansion to 150 locations over the next two years, competing with rivals Sephora and other department stores. With the launch of new and re�ned color palettes and gift sets, department store gifts with purchase, dual-use brushes and foundation tools, and samples with every purchase, it’s easy to see why shoppers �ock to beauty counters from Sephora to Barneys for a quick way to look and feel good. Even

By Robyn Marano

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33PLACES MAGAZINE

Emerging Retail Categories — FEATURE

drugstore cosmetics, hair and skincare products have upped the ante with better display, lighting and higher-end active ingredients and anti-aging properties.

Now, clothing retailers are capitalizing on the e�ect with Forever 21 and Express branded nail polish, blush and lip gloss lining the checkout aisles where a captive audience can grab one or two more items before they swipe their card. And with increasingly sophisticated packaging and labeling, emerging beauty labels touting all natural ingredients are springing up all over Etsy, Instagram, YouTube and independent beauty boutiques around the country.

As social media has shaped consumer behavior and delivered countless introductions to new and familiar brands, the meteoric rise of “beauty tube” stars have developed a new platform for product marketing like never before. Youtube star Michelle Phan has over 8 million subscribers, and is considered one of the most in�uential beauty vloggers on the Internet. Another Youtube in�uencer, Kandee Johnson, has more than 3 million subscribers, while NikkieTutorials make-up videos and product reviews have garnered more than 30 million views each. �ere are certain brands like Sigma Beauty, and BH Cosmetics that live exclusively online, buoyed by this type of Instagram and Youtube word of mouth. For established boutique brands like Tarte, Urban Decay and Smashbox, the how-to contour, highlight and shade videos on their websites and Youtube channels have become a one-stop for turning the average consumer into a budding make-up artist.

As soon as a new make-up technique is on trend, brands send “kits” to social media in-�uencers, often selling out products that were previously only steady sellers. Bene�t’s marketing team capitalized on the “strobing” craze, packaging several classic products into a “Strobe Your Ego” kit. �e kits quickly sold out on Sephora as a result. In Spring 2016, Tarte used social media in�uencers, rather than its own website, to launch its new product line, result-ing in over 20 million Instagram impressions prior to the collection being available for sale. It’s possible that soon, consumers will be able to purchase directly from Instagram, Periscope and other social platforms. A re-search student in the UK found that in a comparative study, “the average number of YouTube subscribers to vlogger channels is 22 times higher than the average number of subscribers to brand channels.” �is shift is due, in part, to individual in�uencers having more authenticity, honesty, and a relatable approach to daily lifestyle and personal care than a brand or celebrity spokesperson.

So what’s happening to some of the tried and true department store brands? Despite the seemingly high price of a Chanel lipstick or a YSL mascara, high-end lines are still solid, o�ering consumers a chance to

own what they consider to be a luxurious brand for a smaller amount than the cost of a Chanel handbag or Dior shoes. Another big growth sector within the industry is natural and organic product lines. In a recent Nielsen survey, 53% of respondents felt “all-natural” was imperative in their choice of product and brand. With an increasing awareness of and distrust for chemical-laden products, animal testing and poor manufacturing, consumers are choosing all natural and “cruelty-free” products and brands at a 24% higher rate than in the years prior to 2012.

BeautyCon, an industry show created by a collective of social media in�uencers, draws thousands of people to its interactive extravaganzas in New York, Dallas, London and Los Angeles, including vloggers, celebri-ties, brand ambassadors and renown make-up artists who are �rst on the scene for new product launches,

industry trends and make-up techniques. But you won’t see the likes of Chanel, Dior or Estee Lauder in attendance. �e brands leading the charge in the Gen Y and Z set are what were once tertiary boutique

brands like Bene�t, Bare Minerals, Urban Decay and now IT Cosmetics and Soap & Glory, even if some of these are owned by larger beauty conglomerates. Estee Lauder is known for being the �agship department store brand among an aging set, so in order to target the next generation, they hired Kendall Jenner as their new spokesmodel, hoping to tap into her nearly 45 million Instagram fol-lowers. Likewise, they are looking to copy the success of their own smaller brands like Bobbi Brown, Smashbox and MAC for marketing in�uencer inspiration.

If there’s one thing consumers respond to with brands from Fresh and Origins to Aveda and Bene�t, it’s their commitment toward charitable campaigns on behalf of the community and the environment. Packaging has become more streamlined and eco-friendly, while products are implement-ing fewer chemical and more natural pig-ments. Likewise, the Personal Care Products Council Foundation, in conjunction with the American Cancer Society and the Professional Beauty Association’s Look Good Feel Better campaign partners licensed aestheticians and hairstylists with hospital cancer units around the country delivering make-up, hair and wig tutorials for women battling cancer. �e MAC Aids Fund donates 100% of every Viva Glam lip purchase to alleviating poverty and HIV/AIDS support groups around the globe, and has raised over $270 million for the cause since 1994. Philosophy donates one percent of every product to community-based mental health organizations through their “Hope and

Grace Initiative,” and Lush’s Charity Pot program has donated over $10 million dollars to more than 850 grassroots organizations around the world supporting humanitarian, human and animal rights causes. Shop-ping for beauty and getting a return on investment through a charitable donation is something everyone can get behind. And with original YouTube channels launching every day, and fresh product lines being developed by brands both independent and multina-tional, it’s never been a more diverse and collaborative environment for a new lipstick or eye palette to �nd its following. G

Robyn Marano is Vice President of Marketing for Madison Marquette Real Estate Services and is located in Philadelphia, PA.

As social media has shaped

consumer behavior and delivered

countless introductions to new and

familiar brands, the meteoric rise of

“beauty tube” stars have developed

a new platform for product

marketing like never before.

As social media has shaped

consumer behavior and delivered consumer behavior and delivered

a new platform for product

marketing like never before.

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FEATURE — Transitioning Traditional Retail

The Stores Replacing the Traditional Department Chain

The Rise of O�-Price Retailers

A mega-trend that has shaped the retail industry over the last several years has been the successful growth of o�-price retailers like T.J. Maxx, Nordstrom Rack and online �ash

sale sites like Gilt and Rue La La. H&M and Forever 21 are gaining more and more ground and back�lling anchor spaces, while Ameri-can retail icons J.Crew, the Gap, and department store mainstays like Ralph Lauren and Michael Kors are �ailing. According to the National Retail Federation, the turmoil in apparel retailing manifests itself in the negative year-over-year sales performances of clothing dependent retailers as Macy’s, Gap and Dillard’s, while even Target, Kohl’s (No. 24) and Ascena Retail Group (No. 87) saw gains of 1 percent or less.

Meanwhile, TJX Companies, Nordstrom Rack and Amazon are cit-ing record sales numbers.

Revenues at department store chains Macy’s, Nordstrom and Kohl’s in 2015 were down $640 million from the prior year, while Amazon

reported a $6.4 billion sales gain. So what exactly is accounting for this disruptive change in consumer buying habits from full-priced, well merchandised stores to o�-price and online? Analysts say there are two major factors, starting with the fact that brands have conditioned shoppers to expect a sale of 30-40% the retail list price. Second, the demographic with the most buying and trend-setting in-�uence is looking for something far di�erent from prior generations.

�e millennial mindset is interested in custom, curated, American-made quality products at a�ordable prices. If Baby Boomers and Gen X were label conscious with Gucci and Burberry logos, millen-nials want a pair of jeans from a micro-fashion start-up in L.A. that are produced in small and sustainably sourced quantities. Equally, they value experience over amassing product, despite still needing to make everyday personal and home product purchases. Enter Amazon, T.J. Maxx, and the proliferation of online �ash sales and luxury consignment sites where the 25-44 year old crowd is likely to be found.

By Chuck Taylor

Mercato | Naples, FL

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35PLACES MAGAZINE

Transitioning Traditional Retail — FEATURE

Department Stores vs. Their O -Price CounterpartsO�-price conglomerates like Amazon and TJX Companies have become the go-to for consumers looking for a Calphalon skillet, new sheets or a pair of sneakers at half the price they would pay at Williams-Sonoma or Macy’s. By 2020, Nordstom Rack is position-ing to add 120 more stores to their current 300 in operation. Part of the lure of a visit to T.J. Maxx or Saks O� Fifth is the treasure hunt; the magic of which is their constantly refreshed inventory. TJX Co. sources from more than 16,000 vendors in over 75 countries, al-lowing customers to experience constant surprise and discovery over what they may �nd.

�e psychology behind what some consider the rising and steady popularity of the o�-price retailer is that when the cost of goods appears to be less, shoppers end up buying more. �e excitement of the �nd disrupts the rational decision making as to whether the item is a worthwhile or necessary purchase. Part of what constitutes the low prices at T.J. Maxx comes by way of a direct from manufacturer supply chain strategy employed by the company.

While the last several years have seen the demise of o�-price stores like Da�y’s, Loehmann’s and Filene’s Basement, T.J. Maxx, Nordstrom Rack and European discount chains are soaring in popularity and sales numbers. TJX shares have risen over 200% since 2010. Nord-strom Rack now has more stores than its full-price equivalent, and has opened 27 new stores in 2014 alone. Last year Macy’s launched its Backstage o�-price store, with six brick and mortar locations, hoping to replicate some of the success seen with Nordstrom Rack.

Consider the number of o�-price luxury brand outlets, compared to their full-price counterparts. O� Saks has 82 locations, compared to 31 full-priced department stores, while Neiman Marcus has 43 o�-priced stores compared to 41 full-priced. Nordstrom Rack makes up 40% of overall sales for the company, a 10% increase from three years ago. According to Buzzfeed, Nordstrom Rack brought one mil-lion new customers to their full-priced stores and Nordstrom.com in the last year, and reported 26 straight quarters of double-digit gains; further cementing plans to add new Rack locations in the U.S. �e news was not so good for the full-priced stores; with recent reports of a 5.4% drop in business, and less than predicted gains in online sales.

Another argument by retail analysts on the success of o�-price retail-ers is that they are typically not located in traditional mall settings, but rather in strip mall, and urban centers where customers are likely to be shopping or running errands. And the Economist reports that fast evolving trends and �ckle consumers make it harder for brands to predict which clothes will sell, “leaving more inventory for TJX and Ross to buy at discount.”

Alternatives to O -Price Department Store BrandsOnline auction and �ash sale sites specializing in both discounted designer ware and consignment have exponentially increased over the last �ve years. �e rise of Tradesy, Gilt, Nordstrom’s HauteLook,

Vestaire Collective, Yoox, FarFetch, the RealReal and �readFlip have lured shoppers toward the thrill of the hunt, as well as the thrill of the deal where a twice-worn $700 Isabel Marant jacket goes for $95 on Tradesy.

�e news that o�-price is king in America has made its way to Europe. Strong sales numbers for low price international chains like Primark, Aldi and Lidl have allowed them to expand further into the U.S. market. Irish apparel and home goods retailer Primark has announced 10 new stores in the U.S. for 2016 alone, and by 2018, Aldi and Lidl will each have 2000 new stores in the U.S. According to the Local Data Company and BBC, the UK’s Poundland, along with supermarket chains Aldi and Lidl have grown 48% over the last �ve years.

From the sales declines at Saks Fifth Avenue, Barney’s and Nord-strom, and the rise in reach and popularity of o�-price retailers, one thing is markedly clear. Today’s consumers are keeping increasingly close tabs on their purse strings; they’re making online and mobile price comparisons an American sport, and are unwilling to pay full price for moderate quality. �e brands that are able to compete in the 2016 marketplace are o�ering an experiential atmosphere in their brick-and-mortar locations and brand-name product for lower than market prices. �ey keep their inventory fresh and inventive; and have diverse, high quality products with fair and transparent pricing in exchange for the quality, curation and construction of goods. As the universe of national retailers continues to shrink, the next evolution of brands cannot totally �ll that vacuum, so the ques-tion remains, will the retail footprint continue to contract or will there be enough new retailers that grow in size and customer base to �ll the void? G

Chuck Taylor is Senior Vice President, Leasing for Madison Marquette Real Estate Services located in Fort Lauderdale, FL.

The news that off-price is king in America has made

its way to Europe. Strong sales numbers for low price

international chains like Primark, Aldi and Lidl have

allowed them to expand further into the U.S. market.

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MARKETING PULSE

Creating a lasting, impactful experience is every company’s biggest asset. It’s also the biggest challenge: whether it’s a physical

building or a website, you aren’t simply gathering together materials to create an end product. You’re creating something memorable and meaningful for people to interact with you and your brand. But how do you know it will be memorable or meaningful while you’re building it?

Great success starts and ends with making sure ev-eryone involved is continuously focused on the larger collective goal. It’s a tall order considering how many details and items we have on our to-do lists every single day. But this kind of thinking allows a project to go from good to unforgettable. In our world, we

often incorrectly de�ne the goal as the physical prod-uct we are creating: a sports arena, a museum exhibit, a video. �e goal is actually the experience we get using that product. So how do we correctly de�ne the goal? Let’s take this powerful quote by author Antoine de Saint-Exupéry:

“If you want to build a ship, don’t drum up men to gather wood and assign them tasks and work. Instead teach them to long for the endless immensity of the sea.”

�e “wood” are the tools, gear, and equipment. �e “tasks and work” are the product we create from the tools, gear, and equipment (the ship in this case). �e “sea” is the goal, that connection between product

and the Art of Building a Ship

Experience Design

By Jordana Well Creative Director,

Experience Design at IMG

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MARKETING PULSE

and user, between ship and sailor. �e “sea” is the experience. Identifying the “sea” and making sure everyone else does too is core to the practice of Experience Design.

Let’s take Apple, who practically invented Experience Design. �eir stores are so popular, not just because of the products they sell, but because of the actual experi-ence you get while being there. Easy to use technology is strategically spaced to give you room to explore and make decisions; “genius” sta� diligently work on your problems. And lofty, light-�lled store rooms make you feel relaxed. �e goal—peo-ple’s lives are better with Apple—is achieved.

Museums are another great example. Our client-the National Museum of the American Indian — wanted 7 videos and interactive kiosks for an exhibit on the 300-year relationship between the US and the American Indian Nations. �e vid-eos and kiosks that displays videos and interactive games aren’t the goal themselves, they work toward a single goal: the experience of visitors connecting to a part of the American Story that has been long ignored, and emerging with a new perspective on the Native Nations.

Identifying the collective goal, the “sea,” that unforgettable experience, is what Experience Design folks do on a daily basis, and it doesn’t end the moment we �rst identify it. Everyone involved must recognize that experience as well. A plan must then be put in place to reach that goal. And throughout the process, Experience Designers will constantly ask: Does this particular task or product still work toward achieving the �nal experience? If the answer is yes, we keep moving forward.

But what if the answer is “no?” What if, despite all the best strategy and planning, that unforgettable experience is not taking shape? Companies that don’t employ Experience Design will often keep going, because it’s easier than going back a few steps, it’s cheaper than devoting more time and money, but mostly because we are taught to never give up, not even when it gets bad. We also get too caught up in

the execution of things to remind ourselves that the sea is still out there. Experience Design practices help keep that desired experience attainable despite small changes in course.

�ere’s one more part of St. Ex’s quote that is vital to that unforgettable experience: teach them to long for… the sea. Whatever the project, however big or small, we must inspire—those we work with, those we work for, and those who are support-ing us even beyond the project. So no matter what challenges arose throughout the project, inspiration to meet those challenges will always be there. For NMAI, the media team was constantly reminded about the members of the Native Nations who fought to stay alive, who fought for their rights, and who kept their people alive despite all the odds.

In your project, how do you inspire the people around you? How do you teach them to long for the sea? If you remember that you are not creating a project or a building but rather an experience; if you remember that you are not working for a person or a company but rather for that indelible experience; if you yourself remember to long for the sea, you will have it. G

Jordana Well was doing Experience Design long before it be-came an industry term. She has spent her career working across several media formats beyond traditional linear storytelling video, including interactives, websites, mobile apps, and animation. Jordana has spent the last few years focused on museum and immersive experiences for clients such as the National Museum for the American Indian and Children’s National Medical Center. Jordana has won several industry awards, including an Emmy, as well as, several Cine Eagle and PEER Awards. She obtained her EdM in Educational Technology from Harvard University and her double BA in Biology and English.

“If you want

to build a ship,

don’t drum up

men to gather

wood and assign

them tasks and

work. Instead

teach them to

long for the

endless immensity

of the sea.”

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DIGITAL TRENDS

Style BloggingI recently met an iconic fashion writer for Vogue magazine

and was excited to share with her that I published my own DC-based style blog. She gave me a look of disapproval and

proceeded to condescendingly say to me “how cute.” While her response was unusual, it demonstrates that there is still a school of thought that style blogging isn’t credible or on the same level as more traditional media outlets.

I am one year into running my small business, which is the founda-tion for publishing my style blog Politiquette. I have met with fashion designers, magazine editors, large and small business own-ers, other style bloggers, individuals who want fashion advice and/

or a stylist and real estate companies. �rough these meetings and conversations, I have learned that there are many ways my blog and brand can add great value to all of these entities and that this is in fact a profession that is here to stay.

Professional Styling Platforms and Influencers As more and more people �ock to the Internet and social media platforms to seek fashion and lifestyle trends, the growing market-place allows for style bloggers to in�uence. As Valentine Uhovski the “Fashion Evangelist” for Tumblr says, “a blogger from Croatia is

Marissa Mitrovich, Founder and Editor of Politiquette, LLC and Politiquette.com

The Future of

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DIGITAL TRENDS

just as important as Prabal on Tumblr,” referring to highly acclaimed fashion de-signer Prabal Garung. When an individual style blogger creates great content they are able to have a powerful voice online that translates into key audiences looking to emulate or purchase a similar look — or even lifestyle. Algorithms have gener-ally created a level playing �eld for bloggers to compete with major brands and succeed as in�uencers that go far beyond traditional forms of marketing.

Consumers are constantly looking for new inspiration. Fashion bloggers bring their own unique and creative presence to the table by innovating through their art form on a daily basis. �e late Bill Cunningham, legendary fashion photog-rapher for the New York Times, was a genius when he began taking street style photos of individuals who dressed well and had no other platform to promote their style. He showed that models and traditional forms of fashion marketing weren’t the only way to in�uence fashion. Style blogs allow formerly anonymous people to have a voice and to be the next, powerful trendsetter in fashion. �e creativity of these individuals is valued and people want to follow them. Brands likewise want to be cutting edge and have the most desirable partner. Working with emerging bloggers can be mutually bene�cial. �ese bloggers have an op-portunity to grow their brand, as does a retailer or business. �is is a smart and cost-e�ective and creative way to in�uence and reach various markets.

Style bloggers know their audience and how to communicate with them. Style bloggers create a personal and authentic connection with their readers. Because of the lean structure of the organization, most often a one-person operation, the blog becomes a labor of love and the blogger has to deliver something of qual-ity that their audience wants. As Experticity published in a study about brand in�uence, “consumers rely on conversations driven by friends, family, and trusted experts.” Bloggers have become the trusted expert many times more than a

celebrity or fashion magazine. �is relationship works both ways. Once a blogger becomes a “trusted source” they foster a quality audience. A speci�c number of followers have nothing to do with this. I know that my blog is primarily followed by professional women and men in their mid-twenties to late forties. I know what types of items they like and can a�ord. With 1100 followers, I was able to help a European luxury brand have their most successful day of sales since opening their doors in DC two years ago. Style bloggers across the country have diverse follow-ings that will reach any market if you �nd the right one to work with.

I continue to challenge my own business model to ensure the value of Politiquette continues to grow and succeed. With more style bloggers entering the market-place, I want to make sure that my followers continue to see me as a trusted source as I continue to grow my partnerships. �ese are the sorts of people you will want to pay attention to and that you should have on your team. G

Marissa Mitrovich is the founder and editor of DC-based style marketing company, Politiquette. She publishes a style blog under the same name. With a background in business and poli-tics and a passion for the arts, Marissa has been able to bring greater substance to the conversation when it comes to fashion and design in the nation’s capital. She advises brands on how to engage customers and grow their business in the DC market. Marissa holds her Masters in Political Management from the George Washington University and received her Bachelor of Arts in Anthropology and Sociology from Agnes Scott College.

Style blogs allow formerly anonymous people to have a voice and to be the next, powerful trendsetter in fashion. The creativity of

these individuals is valued and people want to follow them.““Style blogs“Style blogsto be the next, powerful trendsetter in fashion. The creativity of “to be the next, powerful trendsetter in fashion. The creativity of ””

allow formerly anonymous people to have a voice and

” allow formerly anonymous people to have a voice and

to be the next, powerful trendsetter in fashion. The creativity of ”to be the next, powerful trendsetter in fashion. The creativity of is valued and people want to follow them.”is valued and people want to follow them.

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Q&AAAQ&AQ&Q&A with Karla Gallardo

Retailer Spotlight

Interview with Karla Gallardo, CEO and CoFounder of Cuyana

PLACES sat down with Karla Gallardo, CEO and CoFounder of Cuyana to learn about FASHION and future expansion plans.

Q: What inspired the Cuyana concept?

KG: Both Shilpa and I shared a love of fash-ion, but felt unful�lled by the way the industry was pushing us to consume in an unthoughtful way. Fashion should be empowering and when it came to a woman’s go-to essentials, there was a lack of quality available in the middle range, between fast fashion and luxury goods. So, we set out to �ll that gap. We believe you can have amaz-ing quality and beautiful design, and it can still be accessible.

Q: You have established storefronts in Washington, D.C., San Francisco, Chicago and Los Angeles - do you expect to grow further?

KG: We want to bring our retail experience to as many of our customers as possible and con-tinue growing our presence in cities around the country, and eventually the world. Cuy-ana’s showrooms are designed to re�ect the same level of detail that makes up our prod-uct designs. �ey embody our fewer, better philosophy with a clean aesthetic �lled with curated corners and beautiful product mo-ments. We will be opening a pop-up in New York City in the weeks to come, and also plan on bringing our collections to Chicago and beyond before the end of the year.

Karla Gallardo, CEO and CoFounder of Cuyana

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41PLACES MAGAZINE

Q&A with Karla Gallardo

Q: Is there a typical Cuyana customer? If so, could you describe him/her?

KG: We design for a modern woman who has set out to accomplish so many things, and wants a beautifully curated wardrobe that will not only keep up with her, but will last a lifetime. Our woman is very intentional about what she invests in. She cares for the pieces in her closet, she is thoughtful about the fabrics and the countries they were crafted in. Each customer styles our essentials with their own personal touch.

Q: Would you recommend retail entrepreneurship to young people pursuing a business career?

SS: Retail is an exciting space to be in right now. It is changing and evolving with the digital fashion age, and currently allows for more creativity and innovation than ever. �ose who are passionate about innovating the fashion landscape will �nd it to be both challenging and exciting.

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Q&AAQ&AQ&Q&A with Peter Jun

Interview with Peter Jun

Investment Trends

PLACES sat down with Peter Jun, Madison Marquette’s Chief Operating O�cer to discuss global real estate investment trends as they are shaping up now and as they may evolve in the near term.

Q: Since 2001, top gateway cities were magnets for major real estate investing - is that trend continuing or are institutional (and other) investors now looking at secondary markets (Austin, Houston, Denver, San Diego, Tampa etc)? PJ: Investment trends by market depend on the type of institutional investors involved. Asian capital investors are still quite risk averse compared to other investor groups, and due to the fact that a lot of Asian institutions are still fairly new to the U.S. market, it’s not surprising that they are still focus-

ing on the top tier gateway cities, ones that they are familiar with and comfortable with. However, as this group of investors start to gain some experience in and knowledge of the US CRE market and see that their expected return in these top tier markets is being squeezed beyond their comfort zone, I believe they will quickly start to look at secondary markets much more seriously. �ey already know this, but are often prevented by their own internal investment criteria and risk control policies, which usually tend to lag behind the realities of the foreign investment markets. For other foreign investors who may be more familiar with the U.S. market, we are already seeing increased investment activities in what would gener-ally be considered as secondary markets like Austin, Raleigh-Durham, and Denver, but they still look for high-quality assets or well-located assets with an upside with some repositioning or lease-up work. As technology hubs increase in their size and number in various sub-markets around the country (think Apple, Facebook, Google, et al), more job opportu-nities are created, more millennials are attracted to those cities, and naturally demand for o�ces, retail, and other real estate will go up, creating new oppor-tunities for investors. �e popularity of secondary cities have a lot to do with the shift and trends in the labor force. Millenni-als and young professionals in cities like Tampa and Denver tend to stay and work in these cities, instead of relocating. �e amount of salary they make, paired with low cost of living, quality of living and access to a broad array of amenities all contribute to their decision to make these cities their home. Tech �rms in these secondary city markets especially, have bene�ted from their ability to recruit and conserve an important employee base and, as a result, more and more tech �rms are setting up headquarters in these cities, taking advantage not only of this key

Peter Jun Chief Operating O�cer of Madison Marquette

Banknote Building | Bronx, NY

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43PLACES MAGAZINE

Q&A with Peter Jun

labor force but also of still relatively low o�ce rents. Investors are also increasingly considering the appeal of cities like Nashville, Charlotte, Indianapolis, Lou-isville, Portland, Austin and Raleigh-Durham. �ese cities are showing strong population gains – and are popular with the all-important millennial demo-graphic. �ese urban centers provide manageable environments with a better value proposition. How-ever, people are not turning to these housing markets solely because they are attractive. Some of the largest markets in the country have become so highly valued that the average domestic investor is better o� look-ing elsewhere – and that elsewhere is these cities that were previously undervalued and overlooked.

Q: With employment on the rise, has the o ce sector shown healthy signs of growth AND how has “creative o ce” impacted o ce sector robustness? PJ: �ere certainly is impact on the traditional o�ce sector from these creative o�ce trends. However, the impact has not been very signi�cant. �ere’s still a very decent amount of demand for

traditional o�ce spaces especially from the �nancial and professional services sectors – including from banks, accounting and law - and from the government. �at being said, many interesting new o�ce designs are emerging with a focus on attracting �rms with a younger labor force. O�ces like Google, Facebook and many other tech companies have pushed the creative o�ce concept to the front page, and the kind of relaxed and user-friendly collaborative design approach favored by these companies is a magnet for millennials and other younger workers. Demand for creative o�ce space by tech companies

is strong on both coasts as well as in secondary cities across the country. As the tech industry labor force grows - �lled with millennials who will soon represent almost 40% of the total workforce in the U.S, - the appetite for creative workspace will grow with it. Tech �rms seek spaces that foster more open communication and a relaxed feel-at-home environment combined with the unique design elements that speak to the �rms’ culture. Ultimately, this means more and more companies will start to look for �exible space that can accommodate the speci�c needs and aspirations of a young workforce – a trend that will impact the leasing market and potentially, o�ce building valuation.

Demand for creative office space by tech companies is strong on

both coasts as well as in secondary cities across the country. As

the tech industry labor force grows - filled with millennials who will

soon represent almost 40% of the total workforce in the U.S, - the

appetite for creative workspace will grow with it.

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Q: Has the recent volatility in the Chinese economy led to increased Chinese investment in U.S. real estate as wealthy Chinese (and other Asians) seek to move their funds overseas? PJ: Yes it has. And volatility or uncertainty isn’t the only reason that these investors have increased their investment activity in U.S. real estate. Here are some additional key factors: • �ere has been some positive policy shifts from

Beijing. �e government has increased the limit of investment in overseas real estate. In 2015, the Chinese government took steps to streamline the complex set of approvals necessary for all outbound investment. For a country that usually has the most complex procedures, the change is hugely welcomed. Some recent transactions have showed that the transaction and approval time has been decreased by as much as 5 months.

• �e overall economy slowdown has pushed every-one to think of other ways to invest.

• �e low interest rate environment especially has en-couraged �rms and wealthy individuals to �nd new opportunities to increase their wealth and returns.

• Pension funds and mutual funds have to look for new ways to meet their return obligation for their investors. Real estate has always been a type of investment that Chinese people feel more familiar and comfortable with, compared to other �nancial instruments or other high risk investments.

• �e increasing popularity of EB 5 among Chinese people — particularly young parents who are looking for ways to advance their chil-dren’s future by enabling a U.S.-based education and the opportunity for their children to live in the U.S.

According to RCA, as of May 2016, Chinese companies have purchased or are buying 47 U.S. properties worth $9.3 billion. �at makes the Chinese the most active foreign buyer in the U.S., with more than double Canada’s $4.2 billion worth of deals. By contrast, for all of last year Chinese investors did 71 U.S. deals worth $6 billion. We can now clearly see the upward trend of in�ow capital to U.S. Real Estate market from China.

Chinese investment abroad has soared as the Chinese economy has slumped over

the past year. Investors are looking at foreign markets to protect their wealth against the volatility at home.�e recent low interest environment in East Asia has also contributed to the increase in volume and size of capital out�ow to foreign real estate investments. And, as previously noted, the Chinese government has loosened the restriction of foreign investment limit for many Chinese institutional and individual investors, which helped ease the way for increased investment in the U.S. Even as the U.S. market slows down, buyers from Asia, the Middle East and other parts of the world often are more motivated than domestic U.S. inves-tors. Many are eager to diversify. Others are con-cerned about risk in their own countries.

Q: Where are private equity investors - including global ones — looking to invest? PJ: �e answer to this depends on what type of Private Equity �rms are being looked at and what their investment goal is. • �ere’s a group of new PE funds that has just

started to invest in real estate since these assets that previously were not a focus – are now being seen as a secure return option.

• Diversi�cation needs also to play a role – especially for foreign funds such as is the case with Asian PE �rms. �ese funds are looking to hedge the risk from other investments in the fund, allocating cer-tain percentages of their capital in Real Estate. Also keep in mind that until recently, Chinese Private

Equity was prohibited from making investments in foreign real estate markets, so again the positive policy change is pushing even more capital out of China.

• Large Real Estate PE �rms like Blackstone have always been active, in any kind of market environ-ment. For example, Blackstone is about to close another multi-family deal in NYC, for $620m, an 894-unit complex less than a mile from Stuyvesant Town (its landmark 2015 purchase).

• And, many domestic PE funds are also investing overseas, CalPERS has just invested over $250m to JP Morgan’s Asian Fund, which started fundraising earlier this year focusing on real estate investment across Asia. From this we can see that cross border activities are in play in both directions.

Private real estate funds have more money to spend than ever before, but that’s not necessarily good news for the real estate market.

As of March, private real estate investment funds worldwide had $231 billion in aggregate dry powder – or capital commitments from fund investors ready to be spent. In one sense this is great news for the global real estate market universe. Most private real estate funds have �xed investment periods, mean-ing they are contractually required to spend their investors’ money by a �xed date (typically within �ve years). However the reason the dry powder is at a very high level is also because fund managers are hav-ing an increasingly di�cult time �nding pro�table investments.

Many shopping malls will need to reinvent

themselves – substituting entertainment,

healthcare, education and adventure for

what were once traditional anchor tenants.

Q&A with Peter Jun

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In 2015, there was notable activity that occurred in buying existing limited partner positions in private equity funds. Some very sizable funds have been raised, which coupled with some investors’ desire to consolidate or streamline the number of manag-ers they have, has led to more buying and selling of existing interests in limited partner positions. �ose types of transactions are expected to continue in 2016. �at activity is a positive for the broader private equity market as it brings more liquidity to a segment of the market that has typically been consid-ered a niche business.

Q: How will the retail sector continue to transform itself in urban infill locations? PJ: �e future of retail is obviously a big topic. Retail transformation is inevitable right now, and we’ve seen continuous transformation already in this sector year over year, it’s just going to change even more over time.

�ere are a few obvious drivers of the transformation: • Online retail giants like Amazon obviously have

changed the way people shop. However what’s in-teresting is the fact that Amazon is opening its own brick and mortar stores, not only for books but also for merchandise typically carried by Walmart and Target. It will be interesting to see how this move plays out for them.

• Millennials occupy leadership buying positions. Millennials have now become the main workforce and therefore also represent �rst-rank consumer power. �eir purchase and shopping behavior di�er largely from their parent’s generation. Online shop-ping is obviously their preferred shopping method-ology, however the physical store is not completely losing its appeal either. Younger generations look for the “experiential” side of in-store shopping. And this is not only true for what is available to them in stores like Samsung, Apple or Microsoft for tech-nology gadgets, but also what they can �nd in more traditional retail settings such as apparel stores. Retailers of all dimensions are actively seeking new ways to attract shoppers by creating a di�erent and immersive experience for them.

• Shopping centers (not malls) must focus on what provides the greatest return on investment and these days those returns are increasingly being derived from restaurants and other entertainment components, like platinum-level dine-in theatres.

• Many popular Instagram users have become the target for clothing brands where they are paid to wear the clothes and post on the account. Ins-tagram users can directly �nd the piece online by clicking on sponsored links, etc. All of these modalities are aimed at encouraging even more impulse buys.

�ese are some of the trends that are transforming the way people shop, but that also have signi�cant impact on real estate. Many shopping malls will need to reinvent themselves – substituting entertainment, healthcare, education and adventure for what were once traditional anchor tenants. So when looking at retail, we have to be on top of the most recent trends in shopping and recreation – something that demands that we add experiential, boutique and lifestyle stores to our retail spaces if we are to achieve success.

Q&A with Peter Jun

Seattle, WA

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Q&AAQ&AQ&Q&A with Lori Coleman

Avoiding Budgeting Pitfalls

Property Management

�e PLACES team sat down with Madison Marquette’s Vice President of Management, Lori Coleman, to discuss strategies for avoiding classic budgeting blunders.

Q: How do property managers stay on track and avoid unforeseen expenses while trouble spotting vendor contracts and tenant changes?

LC: Aside from reconciliation work, preparing a project budget is often seen as one of the most challenging assignments for a property manager - going above and beyond his/her daily responsibilities. Despite the lengthy budget creation process, which can take 30-60 days, e�ectively and comprehensively managing line items is the best way to get to know a property and what is most likely to impact value. A primary pitfall to avoid is simply applying a percent increase to prior year expenses. It’s important to independently assess all pos-sible cost changes with respect to vendors, tenants, mechanical and maintenance issues, architectural and landscaping needs that are called for in a new yearly budget and adjust accordingly. �e budgeting process is also the perfect time to explore any cause to re-negotiate contracts and/or to identify poorly performing tenants.

Q: What are some strategic tips for re-positioning a project?

LC: When re-positioning a major development, it’s important to meet with vendors pro-actively to discuss targeted goals, ensuring that the proposals they provide are in keeping with all parties’ expectations. Staying within budget and on design message is critical to a successful implementation. �e general manager, project manager and owner must convene to understand the timeframe for repositioning all aspects of design and archi-tecture from landscape to exterior repairs, agreeing on vendors and schedules. Another important consideration for re-positioning is conserving project elements that carry war-ranties.

Q: What should professionals avoid when attempting to stay within budget?

LC: Some property managers avoid making safety repairs in order to cut costs without recogniz-ing the risk factors at play. Sometimes it’s necessary to go over and above budget fore-casts to correct lighting, security, and/or me-chanical issues at a property, and ownership ultimately has the �nal say in those decisions. A manager’s overarching responsibility is to create a safe environment – even if it means adjusting spending in other investment areas.

Lori Coleman Vice President, Management Services of Madison Marquette Real Estate Services

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Q&A with Lori Coleman

Q: What are some common problems that can send a project over budget?

LC: One of the biggest components of the budget to look out for is utility costs, which get billed in arrears. If there is a water leak, you won’t know until after the fact, therefore managers should always keep a close eye on utility consumption, including gas, electricity and water. Another common problem that can be avoided is ensuring that vendors don’t exceed a proposal basis. When negotiating a time and materials contract, property managers should include a “not to exceed” allowance. �is prevents surprises when scope creep impacts budget by requiring the vendor to e�ectively manage their time against contract requirements. Architectural and legal fees are two areas where a “not to exceed” contract is essential, because if you’re not checking in with your vendor on a monthly basis, you can go overboard very quickly. When hiring someone on an hourly basis it may seem inex-pensive, but having an hourly “not to exceed” contract maintains the scope, timeline and the expectations, so that everyone under-stands the budget and the agreed -upon fees.

Q: What are five things to consider when budgeting?

LC: 1. Coding Invoices – When coding an invoice, think about what has been spent and where the project lies in the timeline. Every

time an invoice is coded, its a great opportu-nity to assess the cost and e�ectiveness of a service. 2. Consider your Variances –When con-sidering an optional expenditure, a general manager can look to the YTD Variance report to see if there are bottom line savings that can be used. �is is only e�ective if they understand the extent to which the positive variance is a timing issue (a budgeted project was pushed to a later date) or a permanent issue (a project was cancelled). 3. Safety and Maintenance is Paramount – All properties must maximize quality within a budget with regard to lighting, safe parking and common areas. Work with vendors to discuss value-engineering options customized to your property.

4. Be Aware of Market Conditions – Be attuned to marketing and economic changes that could impact leasing, retention and pro�tability. Allocating resources for the un-expected is a realistic step toward preparing for inevitable costs like an elevator repair. 5. Educate your Team – �e facilities manager should have a particularly strong understanding of the property’s budget because they are often the ones who are in control of expenditure. Always prepare con-cise objectives on growth and expense control for your team.

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Q&AQ&AQ&Leasing Trends

Successful Strategies for Urban Leasing

�e PLACES team sat down with Madison Mar-quette’s Leasing Director for D.C.’s forthcoming Wharf project, Marisa Michnick, to discuss the right tenant mix, and what to consider when negotiating a lease.

When leasing a new property, direc-tors and teams have to be mindful to educate tenants on all components of

the lease, including taxes, utilities, and common area maintenance. Will there be an escalation clause, and how is it structured? What is the length of the lease? Does a tenant have the sales volume to succeed in the space, and does their brand or service �t in with the overall tenant mix and merchandising plan? �ere are a lot of variables that factor in to determining and securing the right selection of goods and services at a property.

Q: What makes a good tenant mix? How do you go about selecting the right composition of tenants?

MM: For an up and coming urban development, you want to �nd tenants who are new to market and experiential. �ere needs to be a discovery component to what they’re o�ering shoppers. Tenants that are providing fresh, innovative experiences in their store in terms of how they attract customers, is what keeps the customer coming back. We always look for brands that appeal to a wide range of de-mographics and psychographics, so that word of mouth can travel across generations and age ranges. Price point is an important factor, as we always look to �nd a middle ground between luxe and value.

We also want to make sure the tenants complement one another and have a similar ethos in their o�er-ings, building on one another’s brand strength and core target audiences. It’s also vital to ensure that the retail mix is laid out in a way that brands and services are situated next to mutually bene�cial and comple-mentary retailers.

Q: What are some challenges to look out for when leasing a property?

MM: A major consideration when leasing a property is time and scheduling; especially since most leasing negotiations can result in a lengthy process. Often, soft goods retail-ers are the last to sign on to a project, so we always need to be mindful of how much time these deals take so that the lease gets com-pleted and the tenant is successfully moved into the new space for the grand opening. Other challenges often involve collective buy-in. When you have a lot of stakeholders at the leasing table, there are a lot of opinions and avenues to consider. One of the most important things a leasing manager can pre-pare is due diligence on the retailer’s recent sales volumes and projections. Sometimes a retailer is resistant to divulging an accurate sense of their sales numbers, but it is impera-tive for leasing teams to be armed with this information in advance, so they can deter-mine how the tenant could �t into the larger merchandising plan. A team may think one particular retailer is amazing, but if they don’t have enough volume to pay rent, neither the tenant, nor the landlord bene�ts.

Marisa Michnick Director, Leasing of Madison Marquette Real Estate Services

Q&A with Marisa Michnick

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Q&A with Marisa Michnick

From a scheduling perspective, all deals take time, but often, smaller retailers take longer than others because typically the same person who owns and runs the business is the same person leading the lease negotiation. �e leasing team always needs to consider how to weave that into the design and construction schedule in order to meet the deadline for opening. If a tenant is late to come on board, you have to work harder and more e�ciently to get the lease executed, and get the tenant into the space on time.

Q: What are the components of a good tenant?

MM: A good tenant wants to be at the project, they know the market and have a solid handle on their consumer. �ey’re telling their story e�ectively on social media and connecting e�ciently with their customer. �ey also know how to tailor their merchan-dising and marketing programs toward the particular market they’re in.

Q: What are some things to bear in mind when negotiating a new lease?

MM: �e �rst thing is to craft an LOI that is mu-tually agreeable and bene�cial to both parties from a sales and merchandising standpoint. An owner is better equipped to collect rent by having a thorough understanding of a tenant’s �nancials—their existing sales volumes and projections for a store in that market. �e tenant also needs to be educated about exactly what type of lease they’re signing up for, the economic package they’re agreeing to, whether it’s a single, double or triple net lease, are options included, and what type of concessions, including tenant improvement, are available. If they know a tenant can’t make set numbers, it’s not good

for the center or the tenant, so the economic package has to be one that makes sense for all sides. A discussion around the percentage rent should occur early on in the LOI pro-cess, as well as developing a �rm understand-ing on the types of space a tenant desires and the level of build-out required. Some questions to ask are what kind of �nishes do they need, what is the improvement allow-ance, and what are their projections for the market.

Another factor of sensitivity is the radius clause. If you bring a new to market tenant to a site, you want to discuss and establish radius restrictions, and whether or not they have plans to open in other areas of the city. Ultimately, the ideal negotiation is one of two-way open communications, where both parties are up front about all the information and require-ments in advance of signing.



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Q&AQ&AQ&Parking Trends

Q&A with Mark Fancher

Interview with Mark Fancher, CEO, Parking Advisors

Malls are becoming increasingly high-tech with touch screen directories and virtual reality goggles. Now the technology trend has shifted to parking, as customers

increasingly value convenience and ease of service. Mall owners are investing in mapping functions and sensor technologies to allow customers to �nd parking quickly, and to get in and out of lots and garages as e�ciently as possible.

Kirkland, Washington based INRIX is one such technology designed to help shoppers spend less time circling for parking, and more time in stores. �e application will employ GPS enabled heat mapping to detect open parking spaces in close proximity to a customer’s destination within the mall.

PLACES sat down with Mark Fancher, CEO of Parking Advi-sors, the leading U.S. Parking Investment Asset Management and Advisory Firm to discuss some of the new technologies hitting the parking industry.

Q: What are some of the biggest trends you’re seeing in the parking business right now?

AB: We work with several large US retail owners. Primary ownership concerns include the quality of the parking experience, the ability for shoppers to quickly know how many spaces are available upon entering, and the ability to quickly navigate to those spaces. Mall parking lots are large and it’s often hard to �gure out how far you have to go at the outset to �nd an available space. Outside the U.S., mall owners have been ahead of the curve for a while now, both in Western Europe and Australia. �ey’ve provided a solid and successful model at

airports and shopping malls for U.S mall owners to parallel.

One technology being adopted by centers today is technology-enabled way �nding.

When a car enters a section of the parking facility it trips a sensor, which adjusts the count accordingly. A digital sign tells the driver the current space availability in that section of the facility. �ese systems have been on the market for a number of years, and legacy systems have been prone to inaccuracies, which can be frustrating for drivers when they think a space is available but the count is inaccurate. Newer technologies provide more accurate space counts. For example, several companies in the U.S. o�er solutions with individual sensors in every space in the pavement or overhead, which can sense the presence of the vehicle. A red or green light display guides drivers down the parking lane and toward a readily available spot. �ese provide more accurate counts in each section of the garage because there’s a sensor in every space – so it becomes a much more reliable solution and the process has become more streamlined. As accuracy has improved, the per-space costs have come down. As a result, you’re seeing more and more of these individual current generation systems in large shopping malls.

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Q&A with Mark Fancher

Another technology that has become available is a License Plate Recognition (LPR) camera in every space that takes a picture of a license plate. As you park your car the LPR camera reads and recognizes the license plate number. Using a phone app or pay station, you can type in your license plate number and it will tell you exactly where you parked. �ere’s also a big emphasis on making sure parking spaces are clean and well-lit, therefore owners are improving signage and focusing on a lot of these basic elements that have been overlooked in the past.

Q: Are shopping centers using this technology to mine data?

AB: In many locales there are privacy laws limit-ing what you can do with customer data, including license plate numbers – so right now the technology is all about customer convenience. Another program becoming more widely used is the ability to recognize frequent customers. For example, large malls utilize LPR cameras that recognize frequent visitors and allow them the advantage of

entering and exiting the parking garage more quickly based on the facility tracking their license plate.

Q: What’s happening with parking apps?

AB: One of the big trends in the industry is the ability to go onto a website or app, identify parking and pre-purchase a spot, or use personal credentials to enter a parking facil-ity. �ere are several companies that o�er this service across the country – aggregators similar to Hotels.com in the hotel indus-try. While they are convenient to parkers, there is a concern about the misalignment between customer and property owner bene�ts. Parking owners and operators are highly frustrated with the high commis-sions and transaction fees charged by these online resellers. We see a coming trend toward lower fee or no fee solutions that will provide a higher level of customer service. A lot of the larger parking facilities have parking operators who can answer questions and provide hands-on troubleshooting, but the companies that will succeed are ones that are not just there to provide a �nancial

service but to o�er inbox technology for ease of use and e�ciency.

Q: What does all this mean for valet parking? Do you think some of these new digital trends will fade out valet?

AB: Valet in retail centers is still a necessary fac-tor in the equation. For example, we have a client who owns a suburban mall outside a major city. �e restaurants are all clustered into one area with a high volume of car traf-�c on �ursday, Friday and Saturday. Not everyone can park close to the restaurant’s front door, so valet parking is essential for this purpose, although it is true that a lot of people don’t like to valet their cars. What we have seen work is the technol-ogy involved in checking in the vehicle, calculating the fee, retrieving the vehicle and the ability for a customer to text ahead when the car is ready. �ere are some really great solutions out there for that. We’re really excited about all the new applications streamlining our industry.

La Brea | Los Angeles, CA

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Contributors

John DeePresident & CEO, Placewise Media

Marissa MitrovichFounder and Editor of Politiquette, LLCand Politiquette.com

David LobaughPresident, August Partners

Nick EgelanianPresident & Founder, SiteWorks

Karla GallardoCEO and CoFounder of Cuyana

Marissa MichnickDirector of Leasing Madison Marquette Real Estate Services [email protected]

Whitney LivingstonSenior Vice President of Management and Marketing Services Madison Marquette Real Estate Services [email protected]

Tom McGeePresident & CEO, ICSC

Robyn MaranoVice President of MarketingMadison Marquette Real Estate [email protected]

Mark EinChairman, Kastle Systems International

Marina EinCEO, Ein Communications

Carla SnyderDirector of MarketingMadison Marquette Real Estate [email protected]

Ksenia SazanovaTax DirectorMadison [email protected]

Natasha StancillVP of Corporate MarketingMadison Marquette [email protected]

Lori ColemanVice President of Management ServicesMadison Marquette Real Estate [email protected]

Katherine McMillianDirector of MerchandisingMadison Marquette Real Estate [email protected]

Peter JunChief Operating O�cerMadison [email protected]

Heidi PiperSenior Associate of Capital MarketsMadison [email protected]

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53PLACES MAGAZINE

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management and marketing.

Dane TekinDirector of MerchandisingMadison Marquette Real Estate [email protected]

Shanna WilsonEin Communications

Chuck TaylorSenior Vice President, LeasingMadison Marquette Real Estate [email protected]

Jordana WellCreative Director, Experience Designat IMG

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RETAIL TRAILBLAZERS

2016’s Hottest Industry Trends

I have been fascinated observing Gen Z and understanding more and more about their retail habits. �ey have no idea what life was like before

the Internet and mobile devices; and they want to see that a brand is in line with their personal philoso-phies. Brands have nowhere to hide now in the digital age - they need to live their marketing campaigns in real time, embodying how they portray themselves online. Warby Parker, Everlane and Casper, are three such brands that have completely disrupted the way consumers buy prescription eyeglasses, luxury basics and mattresses, furthering a shift to eliminating middlemen, (in-store sales representation, inventory, merchandising) lowering prices, and ensuring quality products.

Here are some of 2016’s most interesting trendset-ters, characterizing the fusion of innovation, design, creativity and convenience.

Samsung 837Samsung’s new shop doesn’t actually carry any stock. It’s a perfect example of the new experiential. I was blown away by the detailed interactive experience and watching it consistently pop up in my Instagram feed tells me that people want more tech everywhere. �is really speaks to the brand itself over picking out a product in a store. Samsung is a brand that’s building consumer respect and loyalty simply by being at the nucleus of innovation. �e store features a Playroom with Galaxy View and other new gadgets, as well as custom-etched phone cases. �e Gen Z consumer is all about loyalty to a brand that does not try to fool them with advertising, thereby creating the need for brands to develop innovation departments. Consum-ers want to show o� the entire experience to their social media networks - which is as good as organic marketing gets.

Wallplay �is NYC-based company is creating cutting-edge content marketing programs by providing targeted exposure through edgy arts programming with top brands.

Partnering with the Cole Haan, Laudree, Saturdays Surf NYC, Nike, and Mint & Serf, Wallplay trans-form physical and virtual spaces into storytelling chan-nels. Wallplay was recently accepted into New Inc. the �rst museum-led tech incubator in the Bowery next to the New Museum.

Samsung Store | New York City

By Katherine McMillian

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RETAIL TRAILBLAZERS

Tiger Trading Co.�e Tiger Trading Co. pop-up shop in NYC’s Chi-natown represents the newest in a�liate marketing. Presented by Tiger Beer, the shop is more focused on showcasing the latest Asian design and creativity vs. selling products. Housed in a converted Canal Street dollar store, Tiger Trading Co. features over 500 curated items that are the best of contemporary Asian fashion, art, design and technology.

Flowerboy Project�e Los Angeles design scene has recently been garnering worldwide attention. Design-savvy Ja-maica born designer, Sean Knibb, is the man behind industrial-chic Line Hotel in Koreatown. His latest endeavor, a retail space named Flowerboy Project, opened in July and was inspired by his grandmother’s �ower shop in Jamaica. Knibb has extended the idea of a traditional grab-and-go �ower shop to a grab-and-go concept store o�ering a curated selection of co�ee, gifts, and design trinkets. “In Paris and New York,”says Knibb, “random bodegas have killer �owers—you just take one and go. I wanted to have that same feeling, whether it’s co�ee or pastry or an object.”

Innovation Lab Industry City in Sunset Park built the 7,700-square-foot Innovation Lab to support the local community

with tech training and education needed in the surrounding areas. �is is genius, because it allows Industry City to harness and elevate local artisans and businesses as an incubator that supports and grows these businesses. �is will result in generating future loyalty when these businesses start to consider where to host their shops and brands.

Sonos Flagship�e new Sonos Flagship in Manhattan is yet another example of innovation. One tech reporter claimed it made the Apple Store look like Radio Shack. Featur-

ing seven custom-built listening rooms designed to simulate any permutation of home listening from study, to entertaining to conferencing, Sonos has capi-talized on the marketability of hands-on, in person demos to showcase its audio technology.

H&M and KenzoKenzo unveiled its Fall 2016 capsule collection for H&M in November. Featuring tiger prints and pink faux shearling, its bold and youthful with a dash of street style. At Kenzo’s helm are Opening Ceremony veterans Carol Lim and Humberto Leon, two energet-ic designers who think big. �e ad campaign features international models, musicians, artists and students, and the collection will be available in over 250 H&M stores worldwide.

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RETAIL TRAILBLAZERS

SneakerheadAside from tech purchases, the most consistent trend I see today is “sneaker-heads.” Casual and athletic gear is still popular, but when Supreme does collaborations with Kanye or Ronnie Fieg and KITH collaborate with PUMA, John Elliot + Co, and Focused Space, their products are coveted and sell out almost immediately. �ey are consistently fun designs and consid-ered high art among the greater community of sneaker lovers everywhere.

Scribe Winery �ese guys are an example of living your brand. Adam and Andrew are changing the wine scene and creating a local and curated experience in northern California. Hoards of travel-ers are trekking to their vineyard to hang out on a Sunday to experience wine pairings with community dinners featuring a variety of local chefs, farms and produce. It’s become a mecca nestled in the countryside of Sonoma for frenzied techies to wine and unwind.

Nitro Co ee It looks like an ice cold Guinness and tastes like really good co�ee. Cold brew is popping up everywhere and it’s delicious. Starbucks has recently introduced it, and it’s debuting in inde-pendent co�ee roasters across the country.

Katherine McMillian is Director of Merchandis-ing for Madison Marquette and is located in New York, NY.

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2016 PLACES Magazine

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