Focus on: Shopping Center Management
If there is one booming business inside the shopping center industry, it’s that of third-party management.
Shopping center management — whether you’re talking operational control, marketing programs and strategies, or leasing — is growing by leaps and bounds, as owners find alternative ways to fill the coffers when new construction is at a standstill.
To examine where the management sector is heading, what better group to assemble as our panel of experts than our fastest-growing third-party managers of 2012? In the April/May issue of Chain Store Age, we unveiled the top six based on new domestic and international management and leasing contracts obtained during the preceding calendar year.
Of our top six — (in order of rank) CB Richard Ellis, Jones Lang LaSalle Retail, Fameco Real Estate, Bayer Properties, Vestar Development Co. and Mid-America Asset Management — only No. 1 fastest-growing third-party manager CBRE couldn’t participate in our panel. The remaining five had plenty to say. We asked each what three trends (concerning shopping center management) they predict we will see unfold in 2013.
Jones Lang LaSalle Retail, Atlanta
Panelist: Karen Raquet, director of property management
As retailers embrace sustainability, landlords will continue to be focused on implementation of green initiatives, among them:
• Municipalities will continue to develop recycling opportunities enabling landlords to reduce costs and generate revenue;
• Lighting retrofits to more energy-efficient bulbs with payback in less than two years;
• Transition to solar power in states that provide incentives for the changeover; and
• States where utilities are deregulated offer opportunities to bid out electric usage and resulting in significant savings.
As owners/occupiers look for opportunities to reinvent their retail properties, a more localized approach to managing and leasing assets provides the contract manager with the opportunity to provide integrated retail real estate services for all types of retail properties.
DUAL-ROLE POSITIONS/BUNDLED SERVICES
As owners/occupiers look for opportunities to reduce payroll costs, dual-role positions will continue to evolve:
• Reduced marketing budgets create opportunities for specialty leasing/marketing Dual Role Managers;
• Where geographically feasible, having one manager/marketing manager/specialty leasing manager oversee more than one center;
• Strength in operations for a general manager may result in an operations/management DRM where appropriate; and
• Bundled service opportunities from housekeeping/security providers with one overall supervisor improves efficiency of the program and requires one strong supervisor.
Fameco Real Estate, Plymouth Meeting, Pa.
Panelist: Lawrence R. Zipf, president, Fameco Management Services Associates
Economic metrics for well-located projects will improve, including occupancy, rents and value, with demand first for primary markets, and a continued delay for secondary and tertiary market locations. We continue to observe improved demand for those projects supported by the right demographics, access and tenant mix. Rental rates have stabilized and landlord concessions have decreased. For those properties that are in secondary or tertiary markets, tenant demand is still weak, and those tenants who are in the market are still often undercapitalized, lacking the economic depth to provide comfort when a landlord is making its underwriting decision. Owners of weak projects are most compromised as they balance long-term value for short-term cash flow and increased risk versus cash in hand to meet debt service requirements.
Properties that are underwater today will still be underwater in 2013 and will remain there until some form of work-out with the lender is achieved. Value has decreased dramatically, excess cash flow may be trapped by the lender, and the ability to attract qualified tenants is damaged as the owner has minimal or no capital to invest in fit-out.
Financial performance will continue to be under close scrutiny by owners and lenders.
Bayer Properties, Birmingham, Ala.
Panelist: Jeffrey Bayer, president and CEO
The key trends will fall under the different 3P areas of leasing, management and marketing:
1. The leasing focus during the recent economic downturn was to maintain property occupancy levels, which required more attention on local and regional retailers, in addition to non-traditional shopping center users. With the more recent improvement in the economy and retailer sales, occupancy levels have increased and national retailers are expanding again.
The trend is now toward increasing GLA productivity within the occupied space … optimizing the retail mix to generate the highest possible sales per square foot.
2. Retailers have successfully utilized a multichannel approach of brick-and-mortar stores, in addition to e-commerce sites for several years. But when a large online retailer such as Amazon announces a focus on the fashion apparel arena, it becomes even more critical that the brick-and-mortar shopping venues provide a different and improved customer experience.
The trend is toward creating a shopping center experience that cannot be duplicated online.
3. Marketing Spend Increase: Shopping centers, not unlike most businesses, tend to cut the marketing spend during a challenging economy.
The trend is moving toward an increase in marketing spending, not only in event marketing, but also in traditional consumer advertising.
Vestar Development Co., Phoenix
Panelist: R. Patrick McGinley, VP property management
1. Increased use of technology to enhance property management efficiency: We strongly believe that an asset is best served by having the property manager in the field and at the site as often as possible. To enable this, we have invested significantly in systems to allow the manager access to data when outside the office, including enhanced lease administration programs, electronic facility ID plans and access to financial data.
2. Increased emphasis on customer service and enhancing the shopping center experience: This comes into play in two ways — through technology and a renewed community focus that includes an increased emphasis on community outreach programs. On the tech front, as more customers rely on their smartphones for information, we will stay a step ahead of the technology to provide them everything from shopping center and store information to directories and maps, as well as redeemable offers or contests for app users. In addition, we continue to better refine our utilization of social media, including Facebook, Twitter, Instagram and Pinterest.
3. Reintroduce corporate sponsorship and additional revenue income for clients.
Mid-America Asset Management, Oakbrook Terrace, Ill.
Panelist: Michelle Panovich, principal/senior VP
The industry is still in recovery mode, and it has a long way to go. There will continue to be ebbs and flows, but overall the retail market is healthier now, and I see that trend continuing for 2013. A lot of the mid- and large-box space has been filled and new tenants are entering the market, but there is still very little new development and moderate redevelopment. Some rent reductions are still being requested and tenants are still filing for bankruptcy, but that situation has generally leveled off.
Asset managers must continue to find creative ways to help existing clients maximize their assets. Obviously, everyone is watching every dollar and weighing the value of everything from certain tenant improvement costs to the costs for daily services, such as landscaping and snow removal. We put significant effort in negotiating lower rates and leveraging our size to save money for our clients.
Receiverships will continue into 2013. Although the percentage of receiverships has held steady, there is a shift in the type of property that is now going into foreclosure. They may not be as troubled, but may simply be dealing with a mortgage maturity that has a significant drop in value and as a result a new loan is much harder to place.