Making the Most of It
May 1, 2008 12:00 PM, By Jennifer Popovec
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Retailers today are working hard to meet the needs of their customers while refining their concepts and minimizing operating costs. That means retailers, along with retail real estate owners, must be more innovative and creative in dealing with their space.
Across the nation, retailers are evaluating their existing portfolios, closing underperforming stores and investing in their best stores. During tough economic times, retailers often need to downsize their stores or at least shave some expenses. By subleasing space, retailers can relieve some of the pressures from escalating occupancy costs.
Also, many cash-strapped retailers with debt-burdened balance sheets that need money are turning to sale-leasebacks. Only the companies with the highest rated credit have the slim chance of accessing capital from banks and the bond market.
Meanwhile, many mall owners are dealing with duplicate department stores, and in some situations, department stores are operating two full-line stores. Other owners have allowed department stores to split their merchandise between the two stores. A few owners have decided to tear down the second store to build an open-air center.
Beyond department stores, developers and owners are bringing in new, nontraditional retail anchors, including gourmet grocers and organic markets, as well as non-retail anchors such as colleges. When it comes to institutions of higher education, owners have found that these uses not only bring a lot of foot traffic to their centers, but they also create the opportunity to convert students, faculty and staff into shoppers.
The grocers can draw shoppers to their aisles more than twice a week and encourage shoppers to visit the mall more frequently. And, better still, the gourmet grocery shopper usually has a higher average household income.
Even the most successful owners and retailers can end up with empty space, and that vacancy can be expensive to maintain. Today, however, retailers and owners can make money from that vacant space by leasing the storefront's windows for advertising.
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