Shopping Centers Today

NOV 2014

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

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or try on the merchandise before buying; nearly 60 percent said it was easier to find items inside a physical store, and an equal percentage said they like being able to combine shopping with other errands. About 40 percent described shopping with friends and family as a fun activity. The report cites other stud- ies emphasizing the symbiotic benefits of those omni-channel strategies that retailers and developers alike are pursuing now. Of course, none of this is to suggest that all shopping cen- ters are bound to succeed moving forward. "The world is lit- tered with dying or dead retail centers — enclosed regional malls, strip centers and others that the world has passed by," Toro said. But even these have been replaced by better shop- ping centers, not by the Internet. Smart strategies continue to enable the owners of well-located properties to ramp up their productivity. Retail REITs in particular have maintained strong property performance amid the challenges of the Internet age, thanks largely to savvy management, according to Brad Case, senior vice president of research and industry information at NAREIT. "The REIT industry as a whole has produced returns averaging nearly 11 percent per year for more than 20 years," said Case, "and yet retail REITs have produced returns averag- ing 11.82 percent per year — even better than an industry that has done very well overall." This compares to average annual returns of just 8.65 percent for institutionally owned (i.e., non-REIT) retail properties on an unlevered basis, Case says. "Some of that difference can be attributed to the fact that RE- ITs use leverage, but not all of it," he said. "It's not enough to sit back and wait for rents to come in. If you do, the Internet may just eat your lunch. What retail REITs have done is use the Internet, and everything else available, to optimize the experi- ence and entice consumers to spend in their tenants' stores." And at properties of all types and sizes, reinvestment con- tinues to reap dividends as well, whether that involves a new facade for a neighborhood center, or a grand expansion at a re- gional mall. Mall of America, already the biggest retail and en- tertainment destination in the country, announced in March a $325 million expansion, the most significant construction project at that property since 1992. This expansion, slated to open next August, will include high-end retailers, a 342-room hotel, an office tower, new dining options, a tourist welcome center and an event space. Meanwhile Simon announced in January that 25 redevelop- ment and expansion projects were under way at its properties in the U.S., Asia and Mexico, at a cost of about $1.1 billion. One such project is the redevelopment of the firm's Roosevelt Field, in Garden City, N.Y., which is to include the addition of a Neiman Marcus. Other reinvestment projects are all about experimentation. As Kercheval observes in the ICSC report, the demand for a "third place" alternative to the home or the office is strong among U.S. consumers. Toward that end Westfield in October announced plans to create just such a third place: the 35,000-square-foot Be- spoke, at Westfield San Francisco Centre. Its shared work spaces for entrepreneurs will include dedicated and shared desks as well as private offices, plus 14 conference rooms and more. The so- called demo area will be for playing about with the latest gizmos in a space rich with touch surfaces, digital walls and the like. The 18,000-square-foot event space will offer digital screens and other high-tech infrastructure. Bespoke opens in the spring. But anyone thus wishing to raise the bar and redesign N o v e m b e r 2 0 1 4 / S C T 45 In 2013, online retail sales hit $263 billion , which accounts for 6% of total retail sales . Le Mall In-store sales were at $4.3 trillion, which accounts for 94% of total retail sales. s o u r c e : I c s c r e s e a r c h

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