Tools: Re-Tooling Real Estate

Real estate planning tools that have been around for years are being retooled and enhanced to meet the modern challenges of retail real estate and store management.

The overriding theme of the massive retooling effort is to knit the pieces that have been developed over the past 15 years together into an integrated whole. Is it possible to make a master tool that can handle site selection as well as related transactions such as lease renewals, lease administration, project management, and on and on?

So far, there is no master tool. On the other hand, many of the major players in the real estate management universe are beginning to share data more efficiently, and partnerships capable of building ever more robust tools are springing up.

Making the Most out of Markets

Late last year, geographic-information-systems (GIS) giant ESRI of Redlands, Calif., and Woburn, Mass.-based location-optimization expert GeoVue announced an agreement under which the ESRI ArcGIS Server enterprise GIS platform, data and support will combine forces with GeoVue Enterprise, a Web-services platform for retail and franchise site selection, market planning and sales forecasting. The new application integrates advanced and powerful geographic analysis, visualization and data handling with real-time sales and trade information.

“Traditionally, GIS is a desktop application,” said Simon Thompson, director of commercial marketing with ESRI. “The philosophy of our ArcGIS server is to offer data modes, analysis, reports and other information to managers, executives and analysts across the organization through a Web interface.”

Using ESRI’s engine, GeoVue provides its retail customers with a service called location optimization, which GeoVue CEO Rudy Nadilo says can enable retailers to determine the precise number of stores required to extract all the retail dollars available to a chain within a region.

“We have a restaurant chain in Atlanta,” Nadilo said. “Management thought the chain had maxed out with 20 stores. We did an optimization run for them and found that the stores they had were in some cases so old that the trade areas had changed. We found that if the chain jiggled its locations a bit, revenues would grow by 43%. We also found that they were leaving revenue on the table. The market can hold 25 stores. So there were five more locations available to them right under their nose.”

Under another optimization scenario, added Thompson, a retailer can upload a spreadsheet of all store sites, and the system will analyze all the sites and create a report suggesting how to improve the network.

The system will also run in reverse. “Every retailer has an ideal store profile,” Thompson said. “It is so many square feet in size; it does a certain number of annual sales; it works best in shopping centers with, say, major grocers, located on a road with a certain minimum traffic count. A retailer can plug all of this into the ArcGIS system and tell it to go find locations.”

Nadilo added that the optimization concept works well for franchisers, also. “It’s a way to optimize a market before selling the first franchise,” he said. “That way you can sell franchises one at a time and avoid creating unequal markets. You can also sell clusters of franchises.”

Opening Stores Faster

MapInfo has developed new tools that can improve merchandising and speed the process of bringing new stores to market, said Mark Zygmontowicz, managing director of sales with MapInfo Corp. in Troy, N.Y.

The merchandising technique, called clustering, begins with location optimization and then goes on to determine unique merchandising requirements for clusters of stores within individual trade areas. “Suppose you have 30 housewares stores in the Washington, D.C.-Baltimore metro area,” Zygmontowicz said. “Our new tool will cluster the 30 stores into groups with common merchandising themes.”

The system can identify which stores will do better by emphasizing the kitchenware side of housewares. It will also call out the stores that should focus more on bath and accessory items.

To help retailers speed stores to market, MapInfo has become part of a partnership team that includes Accruent, Inc. of Santa Monica, Calif., and the Co-Star Group of Bethesda, Md., to marry MapInfo’s optimized site selection with real estate location data and project-management technologies.

“Suppose this linkage cuts two weeks off of the process of opening a store,” said Zygmontowicz. “If a retailer opens 100 stores per year and manages each opening 14 days faster, it will add 1,400 operating days to the year.”

Combining Forces to Cut CAM

Released in late 2006, the Virtual Premise Advanced Desktop Audit Manager is helping retailers recover excess payments made for common-area maintenance (CAM) and other operating expenses.

Atlanta-based Virtual Premise, Inc. and Asset Strategies Group, LLC of Westerville, Ohio, designed Audit Manager. It automates the process of monitoring for common errors in expense billing.

“If a 1 million sq. ft. shopping center adds 200,000 sq. ft., the pro rata share of square footage leased by each retailer will decline and drive down CAM expenses. Sometimes landlords catch this and sometimes they don’t,” said Andy Thomas, president and COO of Virtual Premise.

The Audit Manager uses an automated interview to find problems. One question is: Has this center added square footage this year? If the answer is yes, the system asks for details and calculates the new pro rata CAM payment. Then the system asks for data from the rent invoice to check for errors.

The system audits CAM as well as other operating expenses often affected by errors.

Lease Administration That Leaves Nothing on the Table

It isn’t necessary for companies to form partnerships to develop innovative solutions to problems faced by retail real estate managers. Asset Management Technologies (AMT), in Cornelius, N.C., developed a Web-based property-management system called AMTdirect all by itself.

“This is an active Web-based system that is always running,” said Daniel Schubert, chief client officer with AMT. “It notifies users of any and all upcoming events related to their real estate portfolios.”

Rack Room Shoes, a 500-store, Charlotte, N.C.-based AMTdirect user, typically adds a clause to its leases giving the retailer the right to terminate the lease in the third year if the store doesn’t perform to certain standards. Add to that all of the other real estate portfolio matters that bear watching: renewal dates, percentage rents, Sarbanes-Oxley Section 404 and so on. AMTdirect monitors these matters and sends out alerts recommending action before problems arise.

“Real estate is a top three expense,” Schubert said. “It becomes even more expensive when you make mistakes managing a portfolio.”