Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/863214
S E P T E M B E R 2 0 1 7 / S C T 7 that caused a loss of $10 million. Sales per square foot increased by 1.7 per- cent, to $705, and total sales excluding apparel increased by 3.1 percent. Lease spreads were at 13.4 percent in the second quarter, and traffic at the com- pany's top centers is up by 1.4 percent year-to-date, compared with the com- parable 2016 period, Mathrani says. Opportunities to add value abound, he says. In July GGP acquired full owner- ship of eight Sears boxes, totaling 5 mil- lion square feet, located in its malls. "We now own and control 100 percent of the real estate, including the surrounding land, which may offer future densifica- tion opportunities," Mathrani said. GGP is also entertaining bids on some of its lower-tier properties. "We will continue to prune the lower-qual- ity assets," said Mathrani. "We have sold over 60 lower-quality assets over the last two years. Our trend has been to continue to sell three to five a year. We've already sold, I think, three this year. We're in the market with one this year more." Grocery-anchored shopping center REITs, meanwhile, are confident that their portfolios can withstand any dis- ruption arising from Amazon.com's pending acquisition of Whole Foods. "Amazon's announced purchase of Whole Foods reinforces our convic- tion that a well-located bricks-and- mortar presence that is convenient to the customer is a critical component to the success of any omni-channel platform," said Hap Stein, chairman and CEO of Regency Centers, on an earnings call. "It's going to allow Whole Foods to reduce their cost and be more price-competitive." Stein says he does not think Amazon will convert Whole Occupancy, income up at U.S. centers in 2016: Report Foods stores into delivery hubs for online sales. "They are paying over $40 million a store, so we don't expect them to convert them to 40,000-square-foot warehouses." Instead, Amazon is likely to add pickup and delivery points to existing stores, he says. Regency Centers posted 3.5 percent growth in same-center net operating income for the second quarter. The firm's power centers continue to attract a diverse pool of tenants, according to Jim Thompson, Regency Centers' executive vice president of operations. "We continued to experience steady demand for space from a wide vari- ety of tenants across many categories, which include value retailers, fast-ca- sual restaurants, fitness operators, pet stores and service users, among oth- ers," he said. Leasing spreads on new deals were up by 14 percent during the quarter, highlighted by anchor spreads of 26 percent and shop rent spreads in excess of 12 percent, according to Thompson. "It reinforces our conviction about the importance of retailers being able to conveniently service their customers through bricks-and-mortar," Stein said. "It is and it remains the most efficient way to deliver the last mile." Kimco Realty, which has 15 Whole Foods–anchored properties in its portfolio, sees the Amazon–Whole Foods deal as an opportunity to grow business through omni-channel sales. Kimco CEO Conor Flynn says he ex- pects that the new Amazon–Whole Foods will perform like China's Alib- aba, which integrates online and in- store sales. He is also anticipating that there will be physical changes to some of the existing stores and their parking lots. "They will have to come back to us to get our approvals, and we may have to restructure leases and gains, some NOI, that way, but it'll depend on what their strategy is," he said. Kimco's portfolio occupancy rate increased by 20 basis points in the second quarter. n Income grew in 2016 as shopping center owners cut costs, according to a report from the Institute of Real Estate Management. Based on average actual occupancy, median income for U.S. open-air shopping centers increased last year, to $17.26 per square foot, from $16.58 per square foot the previous year. Operating costs, meanwhile, decreased to $5.08 per square foot, from $5.10 per square foot in 2015, the trade group reports. By region, median income for open-air centers in 2016 ranged from $13.20 per square foot to $23.48 per square foot, versus a range of $13.03 to $26.25 in 2015. The Northeast and mid-Atlantic regions reported the highest income, at $23.48 per square foot. Nationally, insurance and taxes accounted for 44.7 percent of the typical open- air center's total operating costs. Contracted services such as landscaping, security and trash removal accounted for 14.2 percent, while maintenance/repair and utilities accounted for 7.7 percent and 8.3 percent, respectively. n