Shopping Centers Today

OCT 2018

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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O C T O B E R 2 0 1 8 / S C T 45 Kimberly Mosley, says that as manyas half of all regular Toys 'R' Us customers are likely to visit a local toy retailer this season. One such local shop, the independent Catch a Falling Star toy store, in Winchester, Mass., nearBoston, is boosting its toy inventory in response to the Toys 'R' Us departure, as owner Deran Muckjian told the local press. Meanwhile, the New York City–based Toy Associa- tionsays the loss of the world's largest toy chain will have less of an impact on the industry than observersfirst thought, because the category has been growing at about 4.5 percent annually. The relaunched FAO Schwarz, which Toys 'R' Us owned before ThreeSixty Brands bought it in 2016, is opening shop-within-a-shop units inside Bloomingdale's and Macy's department stores in addition to its Kohl's entryand is introducing a 19,000-square-foot flagship at Tishman Speyer's 30 Rockefeller Plaza, in New York City, this fall. That footprint is less than a third the size of the iconic Fifth Avenue space the companyclosed in 2015. ThreeSixty CEO David Conn told Yahoo Finance that "FAO was expe- riential before it was cool to be experiential" and fits well in today's entertainment-themed retail business model. Simon Chairman and CEO David Simon told analysts during asecond-quarterearnings call that he willbe "shocked" if one main toy retailer does not emerge or re-emerge from the Toys 'R' Us debacle. "There is a rea- son to buy toys in the physical environment," he told the analysts. In thatsame call, President and COO Richard S.Sokolov disclosed that the firm is working with several potential retailers "looking to replace the specialty-store component that Toys 'R' Us had in our portfolio." During the final months of Toys 'R' Us, the second- and third-most-popular toy destinations for shoppers wereWalmart and Target, just behind Amazon, according to a consumer poll from global research advisory firmCoresight. Because Target has an inordinately high number of stores in close proximity to Toys 'R' Us and Babies 'R'Us locations, "these will potentially provide it with a dispro- portionately large boost in sales," said real estate attorney Todd Schafer of Dawda, Mann, Mulcahy & Sadler in Bloomfield Hills, Michigan, who represents retail develop- ers, owners and tenants. "Specialty retailers, too, will likely benefit from the Toys 'R' Us exodus, especially since it occurred before this year's holiday sales season." A good economy aided by job growth and tax reform will probably spur spending growth in toys and other categories this holiday season, observes Timothy Savage, a senior man- aging economist and principal data scientist at CBRE. All the signs indicate that the U.S. consumer is looking for more experiential retail, and this year'stoy shakeup "gives retailers lots of opportunities to provide that," according to Savage. CBRE is estimating thatU.S. economic growth for the year will be slightly less than 3 percent. Some landlords are taking advantage of the recapture of Toys 'R' Us space to command higher rents than the toy chain paid as a traffic-generating anchor, Schafer says. "Landlords are both finding nontraditional users and aggressively dividing up these spaces to reflect a more contemporary tenant mix," he said. Kimco CEO Conor Flynn has said that his firm's vacant Toys 'R' Us spaces are getting gobbled up by the likes of Burlington,Hobby Lobby and TJX. Others, including Aldi,Ashley Furniture andBig Lots, have been successful bidders on Toys 'R' Us locations, bankruptcy court documents indicate. Learning Express Toys, the largest specialty-toy-store franchiser in the U.S.(111 units), appears poised to increase its store and sales numbers post–Toys 'R' Us. The companysaw franchise inquiries rise by 78 percent in the past quarter from the 2017 comparable quarter, according to Mike Derse, the company's business development direc- tor. Though it may be too early yet to tell what impact this will have on store count, Derse says he is optimisticthat the absence of Toys 'R' Us will bringopportunitiesto grab newmarket share. Q

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