CSA May/June 2024

May/June 2024

ICSC Las Vegas: Show Scoop Breakout Retailers SPECS Show Recap

THE SPACE RACE

Experts predict that available retail space will remain at historic lows for at least the next three years

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from the editor’s desk

tech viewpoint: a retail tech column

Contents VOL. 99 MAY/JUNE NO.3

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Breakout Retailer Awards: The 2024 lineup of companies honored for their commitment to physical growth and innovation includes:  American Freight  Chicken N Pickle  Lids; and  Yesway.

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SPECS 2024 Recap: Coverage of Chain Store Age’s 60th annual SPECS Show, the retail industry’s leading event for store design/ development, construction and facilities management includes the following:  SPECS 2024 kicks off on a high-note with dynamic keynote address from rock icon and business entrepreneur Gene Simmons.  Session Spotlight: Advanced tech solutions such as artificial intelligence and virtual reality can ease the jobs of retail facilities managers.  Session Spotlight: A look at how initiatives to recycle and cut back on waste create a positive impact on every area of retail operations.  Session Spotlight: Retailers are moving away from natural gas and going electric.  Session Spotlight: Update on the Americans With Disabilities Act includes compliance tips for retailers.

COVER STORY

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THE SPACE RACE Experts predict that available retail space will remain at historic lows for at least the next three years.

TECH

Illustration generated by AI from Shutterstock

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Inside Amazon’s new robotic fulfillment hub

CSA (USPS 054-410; ISSN 0193-1199), is published bimonthly by EnsembleIQ, 8550 W. Bryn Mawr Ave., Suite 225, Chicago, IL 60631, on a controlled basis to qualified retailer titles and architects. Real estate and shopping center owners and developers $75 per year. All other non-qualified in the United States: $96 one year; $186 two year; $17 single issue copy; Canada and Mexico: $138 one year; $258 two year; $19.20 single issue copy; Foreign: $138 one year; $258 two year; $16 single issue copy. Digital edition subscription: $55 one year digital; $105 two year digital. Periodicals postage paid at Chicago, IL and additional mailing offices. POSTMASTER: Please send address changes to CSA, Circulation Fulfillment Director, 8550 W. Bryn Mawr Ave, Suite 225, Chicago, IL 60631. Subscription changes may also be emailed to contact@chainstoreage.com, or call 1-877-687-7321. Vol. 99, No. 3, May/June 2024. Copyright ©2024 by EnsembleIQ. All rights reserved.

Contents VOL. 99 MAY/JUNE NO.3

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Anthony Cafaro Jr., co-president of Niles, Ohio-based Cafaro

REAL ESTATE

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Las Vegas SHOW SCOOP Real estate thought leaders provide their insights on what all deem as a transformational era in brick-and-mortar retail.  Anthony Cafaro Jr. on the beauty of B-market malls  Paul Weinschenk on keeping centers fresh  Jill Renslow on how retailers can get more active in center activations  Geoff Mason on the mandate for sustainable projects  Kristin Mueller & Naveen Jaggi on the topmost importance of food-and-beverage tenants  Michael Gold on the value of long-term planning 4

 PREIT’s Leadership Team on its new chapter prioritizing strength, innovation and community  Matthew K. Harding on an ‘all-in’ approach to brick-and-mortar success  Steven Levin on the reinvention of retail  Richard Dube on prime opportunities north of the Sun Belt  Bob Myers on urban-to-suburban migration  Carmen Spinoso on the true story about today’s malls  Adam Ifshin on retail real estate’s power surge

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Retail occupancy Levels Hit Five-Year High — So Do Costs

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FROM THE EDITOR’S DESK

Innovation Looks a Bit Different These Days Much has been said — and written — about the disruption the retail industry has undergone in recent years.

That disruption is reflected in an annual listing of the “The Top 10 Most Innovative Retail Companies of 2024” by Fast Company. This year, only one legacy retailer made the list — Walmart. From an online jeweler that lets customers design their own pieces to a livestream shopping app for buying and selling collectibles, the list reflects the changing nature of retail innovation and of retail itself.

Here is a look at Fast Company’s Most Innovative Companies in retail for 2024.

(Comments in italics are from Fast Company.)

Walmart: For meeting customers where they are, even if it’s at home. The retailer was cited for building a frictionless e-commerce experience for its Walmart+ paid loyalty program, including its Return from Home option that sends employees to members’ homes to pick up items, as well as its ultrafast delivery drones.

Archive: For making clothing resale as easy as scan and click. Launched in 2021, the resale system company works with more than 40 global brands, including The North Face.

Erewhon: For turning a grocery store into a designer brand. With 10 locations, the L.A. area health food grocery store chain is a favorite of celebrities and locals alike. Its smoothies, launched in partnership with high-profile celeb influencers, are a huge money maker.

GlossGenius: For giving spa and salon owners the best tools of the trade. The company’s platform handles bookings and payments for more than 60,000 salons and spas, generating revenue from both subscriptions and commission on payments.

Babylist: For being a one-stop shop for new parents. (In 2023, the online baby registry 6

giant opened its physical store, in Beverly Hills, Calif., and also expanded its offerings with the launch of Babylist Health, which helps visitors find health and wellness products and services whose purchases can be covered using their health insurance.

Optero: For bringing the returns process right to customers’ doors. In 2024, the returns company launched an at-home pickup service which is now available in 40 cities.

Optero uses the data it collects on returns to help its retail partners identify which customers are loyal to a store and what their return habits are.

Whatnot: For cornering the market on collectibles and live shopping. A livestream shopping app, Whatnot connects buyers and sellers of all sorts of collectibles, from sports cards to comics to sneakers.

Queen of Raw: For finding life in deadstock fabrics. The company’s marketplace connects sellers of unused fabric with buyers that include factories, retailers and brands.

RetailNext: For giving retailers access to first-party data and preventing theft in real time. Used by more than 450 retailers, RetailNext, among other things, tracks sales and shoppers via in-store cameras and sensors.

Angara: For turning every customer into a jewelry designer. The online jeweler lets customers use an AI-powered tool to design and create unique jewelry pieces within their budget.

Fast Company also publishes a similar list for food service. Interestingly, convenience-store retailer Buc-ee’s, makes the cut, “for powering endless road trips.”

With approximately 50 stores and a smiling beaver mascot, the Texas-based chain is open round-the-clock and is best known for its supersized locations, super clean restrooms and dizzying array of snack and food options, including barbeque (barbecue brisket sandwiches are the chain’s biggest-selling item at all locations) and its trademark Beaver Nugget puffed-corn treats.

In 2023, Buc-ee’s opened its largest store to date, a 74,000-sq.-ft. location with 120 gas pumps in Sevierville, Tenn. Soon to open: a 75,000-sq-ft. Buc-ee’s in Luling, Texas.

Marianne Wilson mwilson@chainstoreage.com

8550 W. Bryn Mawr Ave., Suite 225, Chicago, IL 60631 (773) 992-4450 Fax (773) 992-4455 www.chainstoreage.com

BRAND MANAGEMENT Vice President & Group Publisher, SPECS Chairman Gary Esposito gesposito@ensembleiq.com

EDITORIAL Editor Marianne Wilson mwilson@ensembleiq.com Technology Editor Dan Berthiaume dberthiaume@ensembleiq.com Real Estate Editor Al Urbanski aurbanski@ensembleiq.com Online Editor Zachary Russell zrussell@ensembleiq.com

ADVERTISING SALES & BUSINESS Midwest & South Sales Manager Michael Morrissey mmorrissey@ensembleiq.com East & West Sales Manager Lise Slaviero Groh lgroh@ensembleiq.com Real Estate Sales Manager Al Urbanski aurbanski@ensembleiq.com

EVENTS/MARKETING Program Director Deena AmatoMcCoy damccoy@ensembleiq.com Event Director Melissa Murphy mmurphy@ensembleiq.com Event Coordinator Rita Ruzalski rruzalski@ensembleiq.com Marketing & Event Administration Coordinator Farida Batuta fbatuta@ensembleiq.com

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CORPORATE OFFICERS Chief Executive Officer Jennifer Litterick Chief Financial Officer Jane Volland Chief People Officer Ann Jadown Chief Strategy Officer Joe Territo Chief Operating Officer Derek Estey

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COVER STORY

THE SPACE RACE Space availability is at an historic low. Construction labor is hard to find. HVAC units must be bought a year in advance and the cost of developer capitalization is high. Still, retail brands must expand!

By Al Urbanski

A

aron Harris is in Las Vegas on his phone talking to Chain Store Age and decides to pull over. He finds an easy rest stop in the cavernously empty parking lot of a closed Kmart. Just minutes before, while on the road, Harris had informed us that Kmart’s ample parking lots used to be his prime targets for the planting of Dutch Bros’ 930-sq.-ft., drivethrough-only locations.

“Damn,” he said. “Wish this store was still open.”

Dutch Bros, which was started as a pushcart in Grants Pass, Ore., by brothers Dane and Travis Boersma, today has 875 locations, most of them west of the Mississippi. But Harris, the company’s senior VP of real estate and construction, is working hard to move the chain eastward into Mississippi, Tennessee, Alabama, Florida, Indiana, and Ohio.

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The shop’s flavor-varied menu of energy drinks, fruit drinks, and smoothies — as well as its array of coffee beverages — target a young demographic aged 13to-33. One of Dutch Bros’ key real estate targets are centers in college towns.

Dutch Bros shops require just six to eight parking spaces, and customers pick up their orders at a window. Most of its business, though, is drive-through, and each line must be able to accommodate up to 12 cars. So the chain has been able to expand rapidly by grabbing up small patches of parking lot in well-trafficked centers.

That’s changed since they began moving eastward. Dutch Bros is beginning to confront the same challenges presented to all expanding brands during a time when retail space availability nationwide is at an historic low in the 4% range. So Harris has begun to get creative.

“I bought some old Burger King and Wendy’s buildings,” he said. “They’re much bigger than what we need, but they already have drive-through lanes. What I do with the extra space is install roll-up doors and make it a giant, covered patio.”

In its April industry report, real estate information and analytics provider CoStar pegged post-demolition net deliveries of just 52.9 million sq. ft. in 2023, the lowest level it had recorded since CoStar began tracking that measure some 20 years ago. The current vacancy rate is 5.4%, 140 basis points lower than the post-2010 average.

Fast-expanding brands such as TJX, Five Below and Ulta wait for the next Bed Bath & Beyond or Tuesday Morning to expire and snap up their leases, but that sudden stream of available space appears to have been temporarily plugged. CoStar MAY/JUNE 2024

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hadn’t considered entering previously.

“I was at a meeting with a couple of global REITS last week, and both of their focuses have moved away from what we call the NFL markets on to secondary cities in places like West Virginia and North Carolina where there’s significant Longer Time population growth and demand,” Jaggi JLL’s president of retail advisory services, said. “They figure people there have Naveen Jaggi, said that the cycle time for steady jobs but can’t buy a house because opening a new location — from site allocation to the day a tenant opens the doors of high interest rates, so they’ll go spend — was 300 to 400 days pre-pandemic. their money on something else, like a new Now the global retail services company, TV set or patio furniture.” which has a vast brokerage organizaJaggi’s counterpart at CBRE, Americas tion, estimates that time frame to range retail leader Laura Barr, thinks it’s likely that many retailers will take an interest between 650 to 950 days. in those secondary and even tertiary The lack of available space in Class A markets, which captured 62% of total net malls and centers in major markets, Jaggi migration between 2019 and 2022. said, also has dwindled considerably. That has retailers out scouting markets that they “Austin, Raleigh and Jacksonville—all secondary Sun Belt markets—posted 10%-plus population growth from 2017 to 2022,” Barr said. “Tertiary market growth has been more widespread, with Boise, Lakeland, Florida, and Provo, Utah, notching double-digit population gains from 2017 to 2022.”

While being interviewed in his car by CSA, Aaron Harris snapped this Data-driven sershot of his favorite Dutch Bros location, a Kmart parking lot. “Wish it was still open,” he lamented. vices like Placer.ai CHAINSTOREAGE.COM

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UNDER CONSTRUCTION MILLION SQUARE FEET

RETAIL STARTS AND UNDER CONSTRUCTION SPACE CONSTRUCTION STARTS IN MILLION SQUARE FEET

cataloged a marked decrease in store closures over the past three years that has resulted in a 20% reduction in the amount of vacated space.

“Unless the costs go down, we’re not going to see a lot of new construction,” said Brandon Svec, CoStar’s national director of retail analytics. “We’re looking out to 2026 for an uptick if rates go lower, but it’s more likely that won’t occur until 2028.”

One top executive of a nationwide owner-operator of hundreds of neighborhood centers who asked not to be named told Chain Store Age said that he has based his acquisition strategy on the thinking that the situation could continue for eight to 10 years.

That’s a long wait. In the meantime, chains pressed to meet the new store goals they presented to Wall Street appear able to do so only at a great expense of time and money. And yes, long waits.

UNDER CONSTRUCTION

SOURCE: CoStar

and PopStats now give retail brands deeper intelligence on consumer habits and demographics in distinct markets that they might not have considered before.

‘Our clients are leaning harder into our data and analytics tools to make well-informed decisions when considering where to go,” Barr observed. “Brands may also consider desirable smaller spaces in prime areas, explore novel store configurations, and look to modernize high-volume locations.”

That said, expanding retailers still demand what they’ve always wanted from the markets they enter—a certain minimum traffic count.

“There are a lot of national retailers that are being flexible with prototype store sizes,” said David Gerstenhaber, senior VP and head of national accounts at Brixmor, which owns and operates more than 350 grocery-anchored and open-air centers nationwide. “But once they get into a space, the real data they’re focused on is the sales they’re going to bill. They’re so laser-focused on footsteps they won’t go beneath a certain number.

They’ll tell us, ‘We have to hit 14 million in foot traffic.’”

Bob’s Discount Furniture has increased its expansion goals this year with plans to open between 17 and 19 new stores in a mix of its current markets, as well as other new markets that adjoin them.

“BDF has always been flexible on our store size, market by market,” said the company’s senior VP of real estate 9

COVER STORY

RISING RENTS AND MORE Annie Malo, a commercial real estate attorney with the Holland & Knight firm in Boston, has for years watched real estate investors steer clear of the retail sector. Now that’s changed. She reports witnessing a boom in new landlord and tenant demands.

Chain Store Age spoke with her to get her take on new pressures being faced by retailers in search of space.

What are the easiest and the hardest spaces to get?

Larger spaces such as those vacated by value brands are becoming more available. Many have been vacant for a long time. We are starting to see creative reuse of these sites from non-standard operators like kids’ entertainment or pickleball.

I’m also seeing lower inventory of in-line and out-parcel spaces. These spaces are seeing higher rents and more as-is deliveries.

Landlords are all raising rents. Have retailers been doing their own buildouts to save money in the long run?

With interest rates higher and now expected to stay higher for a longer time, the cost of money is just higher for smaller

Christopher Day. “We have a model that has proven to work well at different square footages, which allows us to compete in various types of markets. The current retail real estate environment has not impacted our ability to achieve our desired unit growth rate. Strong landlord relationships and flexibility on deal structure has been and continues to be a key focus for our team.”

At an early April event in Washington, Federal Reserve chairman Jerome H. Powell said that interest rates were not likely to decline soon.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell stated.

Real estate developers, however, are not yet eager to be building new centers as long as the cost of capital stays high.

“When will we see the addition of new retail space? That’s tied to what’s happening in the capital markets,” said Mark Masinter, chairman of global retail at Newmark, the worldwide real estate services company. “I could think 10

landlords. This reduces the options that smaller landlords have to finance buildouts. So, while all landlords are now less flexible than they were two years ago, I am seeing larger landlords offer more in terms of buildouts versus local or regional players who simply do not have the ability to shoulder those costs anymore.

Annie Malo

In what regions of the country are rents spiking highest?

We are seeing higher costs across the country. I do not see one region posting dramatically more significant increases than the other. What I am seeing that has a larger impact than increased rent prices is landlord inflexibility when it comes to terms that would normally have been negotiable.

Since mid-last year across the nation, we have seen fewer developers provide “warm box” spaces that include HVAC and electrical and plumbing connections. More landlords are providing as-is sites with little to no flexibility in providing certain MEPs.

of a number of well-thought-out projects that were on the boards a year ago. But the spreads increased, and the reality was that they were outpacing trends. Cost of capital went up quickly and you have to match that with the yield.

So many developers that want Ross Stores plans to open 75 new Ross Dress for Less and 15 dd’s to redevelop and Discounts stores in 2024 increase their retail experience are having to delay. You’ve got 4,000 Dutch Bros locations spanning the United States. to spend millions of dollars before you ‘We do have a lot of options, but we put a shovel to the ground.” work really hard to find those options,” CoStar’s Brandon Svec thinks the Harris said. “Every time we’re on the current construction stasis will remain in place for the next three to five years unless road, we drive up and down the streets two things happen: “Costs go down, and and look for centers we’re interested in. interest rates decline,” he said.

We dig in, we send letters, we call on That’s not likely to happen soon, but them. But one of the other things I like to one retail executive unphased by the do is research where Kmart was. Those situation is Aaron Harris, who envisions massive parking lots!”

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BREAKOUT RETAILERS

Breakout Retailers: Class of 2024 CSA’s annual awards program honors growth in brick-and-mortar

By Marianne Wilson Four growing brands were recognized with Chain Store Age’s Breakout Retailer Awards, an annual program honoring retail, restaurant and non-traditional specialty companies that are investing in growth and innovation in brick-and-mortar.

Selected by the editors of CSA and industry consultants, the winning lineup for 2024 included American Freight, Chicken N Pickle, Lids and Yesway. The honored companies seem to have little in common, at least at first glance. But each one brings something unique to their category — something that clearly resonates with consumers and makes for repeat business.

The 2024 Breakout Retailer Awards, sponsored by architecture and design engineering firm Stantec, were presented at CSA’s 60th annual SPECS Show, March 10-12, in Grapevine, Texas.

Here’s a look at this year Breakout Retailer honorees.

AMERICAN FREIGHT American Freight was born of humble beginnings that go back to 1994 when its founder would buy truckloads of Americanmade merchandise and sell the goods straight off the loading dock. It’s come a long way since then.

The company currently operates 372 warehouse-style stores nationwide, with an assortment that includes a wide variety of furniture, mattresses and appliances from national brands.

Targeting value-conscious consumers, the chain is widely known for its selection of open-box appliances, which include imperfect products with cosmetic damages such as scratches and dents as well as items that have gone through mechanical repair.

All product is restored to manufacturer specs and sold at a fraction of its original price — with a one year warranty. In another major point of distinction, all in-stock items at American Freight are available for same-day delivery.

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American Freight is coming off a busy and, in many ways, transformative year as it put an increased emphasis on the instore customer experience. In December, it launched a new store format that offers an updated look and feel, with new signage, a more spacious layout and enhanced product storytelling for open-box appliances, featuring a color-coded system that helps customers understand the exact condition of each open-box item.

The brand refresh also includes augmented reality technology that lets shoppers visualize how furniture will look in their own home before purchasing.

American Freight is piloting the new format in select stores, with plans to start rolling it out nationwide beginning in the third quarter.

With its emphasis on value, American Freight sees a long runway for growth, with the potential to grow to about 1,000 locations eventually.

CHICKEN N PICKLE Chicken N Pickle is a startup that serves the nation’s fastest-growing sport: pickleball. A family-friendly indoor/outdoor destination, Chicken N Pickle combines a casual restaurant and sports bar with pickleball courts and no-fee lawn games.

With backers that include NFL stars Travis Kelce and Patrick Mahomes, Chicken N Pickle is just getting started. It recently opened its 10th location and has six more in the works, including one in Henderson, Nev., outside of Las Vegas.

The newest Chicken N Pickle is a sprawling 70,000-sq.-ft. location in Webster, Texas, that boasts six indoor and two outdoor pickleball courts as well as shuffleboard courts. There’s also a

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BREAKOUT RETAILERS beer garden, dining areas that span two floors, multiple bars and an outdoor game yard featuring everything from corn hole to bocce ball.

Chicken n Pickle has a decidedly no-tech vibe. There are no video games on site. One of its locations boasts a dog park.

With a slogan of “our hearts are local,” the young company prides itself on investing in the communities it serves. It connects with nonprofits in all of the locations it enters through a full-time community impact coordinator who looks for ways to make a positive impact in the community.

Chicken N Pickle is also passionate about making each location as welcoming as possible. It has wheelchairs at all its sites and can make accommodations for those who are neurodivergent and might need a different ball or empty courts next to them in order to play.

LIDS Long-time mall staple Lids is the largest licensed sports retailer in North America, selling fan headwear and related items across 1,000 U.S. stores — along with hundreds of international doors.

As Lids continues to expand its core brick-and-mortar footprint, it also continues to innovate — be it through larger-thanlife flagships such as a 12,000 sq.-ft. store on the Las Vegas Strip, partnerships or new store concepts.

Among its more recent partnerships is an expanded one with Paris Saint Germain — one of the world’s top football clubs — to open and operate club stores in the U.S. and abroad. In December, Lids opened the largest Paris Saint Germain store in the world, on Fifth Avenue in New York City. The club has said it sees massive potential for future development in the U.S. In another partnership, Lids recently opened an NBA store at the Houston Galleria. The NBA has more than 400 branded stores and attractions across the world, including flagships in New York City, London, Paris and Berlin, all of which are operated by Lids.

The retailer’s newest brick-and-mortar concept was actually born on its website. In 2022, the retailer launched Lids Hat Drop.com, a digital site featuring limited edition headgear, with collections “dropped” in limited quantities once a week. Based 12

on its success — drops sell out in minutes — Lids decided to translate the model to physical retail.

The Lids Hat Drop store operates similarly to its e-commerce counterpart, offering exclusive and limited-edition releases, including notable athlete and celebrity collaborations.

Customers have first access to purchase exclusive hat drops beginning at 11 a.m. each Friday, before the collection becomes available on the e-commerce platform at noon the same day.

The store also includes related apparel and other merchandise.

And, as at most Lids stores, the space features a customization area where shoppers can personalize their purchases.

YESWAY Yesway describes itself as one of the fastest-growing convenience store chains in the country — and the numbers back it up.

The company was founded in 2015 by Brookward Financial Partners, a real estate private equity firm. In less than a decade, Yesway has expanded through acquisitions and opening new stores to 435 locations across the Southwest and Midwest.

The retailer operates sites primarily under the Yesway and Allsup’s banners, with Allsup’s legendary burrito as a point of market differentiation. The company has innovated with different footprints including a larger-size one (5,500 to 6,500 sq. ft.) that it is currently bringing to market.

In addition, it has introduced a smaller- size concept — Allsup’s Express — with the first location across from the campus of Texas Tech University. The 3,000-sq.-ft. bodega-style store has a merchandise assortment tailored to meet student needs, ranging from hot to-go meals to wine and beer.

In other moves, Yesway is using technology to deliver personalized, hassle-free experiences to customers. Its updated rewards program lets members simply swipe their card or mobile app at the pump and in-store register to earn points that can be redeemed for store merchandise, gas savings and exclusive deals.

Yesway sees plenty of room for expansion, with the capacity to build more than 40 stores a year. It’s currently on track to open new stores in rural and suburban locations around the Fort Worth and Dallas area.

The company is also targeting Oklahoma, where it expects to have a minimum of 15 stores open by the end of 2024.

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Brick-and-Mortar Shines at CSA’s SPECS Show

Annual event puts spotlight on store development, facilities maintenance

By Marianne Wilson Retail executives and suppliers involved in the planning, design, construction and maintenance of stores, restaurants and non-traditional concepts gathered together at Chain Store Age’s 60th annual SPECS Show.

The event, held March 10-12 at the Gaylord Texan Resort & Convention Center in Grapevine, Texas, attracted leading retail companies that, combined, operate a total of more than 174,000 stores. All sectors of the retail industry were represented, as well as restaurants and non-traditional specialty concepts such as health care and financial.

“Sixty years of serving the retail industry is an amazing accomplishment for our program,” said Gary Esposito, SPECS chairman and VP of Chain Store Age, in opening remarks at the show.

Gary Esposito, SPECS chairman and VP of Chain Store Age, welcomed retailers and other attendees to the 60th annual SPECS Show.

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Retailers and other attendees gathered for the opening keynote presentation.

“Throughout the years, SPECS has remained committed to providing the critical solutions and services that retailers need to compete in the ever-changing retail landscape. Our success is directly related to all of you who have helped make SPECS the premier event for physical retail.”

The show included approximately 30 targeted educational sessions. Created by retailers for retailers, the sessions focused on critical industry topics and the latest trends and technologies transforming the design, construction and maintenance of physical stores and restaurants, with insights from retailers and industry experts alike.

The Solution Center exhibit floor was home to a diverse array of suppliers offering innovative solutions and services to provide a better store experience for their customers as well as more efficient operations.

With everything on site and included in the program, SPECS also provided plenty of business partnering and networking opportunities. Attendees came together to connect and collaborate in sessions, at meal functions and across the show floor. Retailers and industry suppliers also met one-on-one during the Face-2-Face Information Exchange.

This year’s opening keynote was given

by Gene Simmons, co-founder of the iconic rock band KISS. Simmons shared his unique journey as a music legend and innovative entrepreneur and successful businessman. Simmons is also the co-founder of Rock & Brews restaurants, which has more than 15 locations.

Confounding the image that many people have of rock stars, Simmons told attendees that he has always abstained from drugs and alcohol out of respect for his mother, a Holocaust survivor who MAY/JUNE 2024

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Keynote speaker and Kiss-co-founder Gene Simmons detailed his journey to a rock legend and successful business entrepreneur.

raised him on her own after they immigrated to New York City from Israel when he was a young boy.

Simmons, a college graduate, also noted that before his musical career took off, he worked a variety of jobs in the city. A proficient typist, Simmons worked as a court stenographer and also as an elementary school teacher.

“You always need a fallback plan,” Simmons told the audience.

Representing their companies at the Breakout Retailer Awards were (L to R ) Joe Palermo, Chicken N Pickle; Peter Corsa, American Freight; Tom Trkla, Yesway; and Adam Herstig, Lids.

economy, noting that household wealth is at an all-time high.

“There is a cushion supporting consumer spending that the headlines don’t often suggest,” he said. “Quite frankly, we are doing fine.”

BREAKOUT RETAILERS The show also included the presentation of CSA’s 2024 Breakout Retailer Awards, with the winning lineup made up of American Freight, Chicken N Pickle, Lids and Yesway. (For more on the winning companies, see pg. 11). The annual

awards were sponsored by architecture and design engineering firm Stantec.

Accepting the award on behalf of their companies were Peter Corsa, CEO of the home segment of FRG Inc., parent company of American Freight; Joe Palermo, VP of operations, Chicken N Pickle; Adam Herstig, VP marketing, Lids; and Tom Trkla, chairman and CEO, Yesway.

SPECS will return to the Gaylord Texan Resort & Convention Center next year. SPECS 2025 is scheduled for March 9-11.

Noted financial journalist, commentator and author Ron Insana gave an update on the U.S. economy.

The SPECS day-two keynote address was given by financial journalist and commentator Ron Insana. Insana delivered a positive message about the U.S. CHAINSTOREAGE.COM

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Attendees networked and did business in the Solution Center.

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SESSION SPOTLIGHT

Innovation in Retail Facilities Management

By Dan Berthiaume

buy-in from the finance department on the purchase of AI-enabled facilities management solutions, executives need to be sure to fully include the finance team in all aspects of an AI Adam Oryszczak, Ulta Beauty (L) and Joshua Witte, Dollar Tree & technology project.

Family Dollar Stores.

“The finance department will want to see the savings as well the Advanced solutions like artificial intellitechnological capabilities of an AI solution,” gence and virtual reality can ease the jobs of he said. “It all should start with pilot. Make retail facilities managers. sure to check all the boxes. Finance should That was one of the take-aways from the be involved every step of the way.”

SPECS session “Technology Innovations Meanwhile, Witte discussed how AI can for Facilities Managers,” which featured a serve as a valuable tool to enhance energy lively interactive discussion about the latest management efforts. developments in facilities management “AI provides you a single pane of glass technology. into your energy and utility data,” he said.

Joshua Witte, director – energy and sus“You receive intelligent and actionable tainability, real estate – property manageinformation. With AI-based predictive ment, Dollar Tree & Family Dollar Stores, algorithms, you can avoid problems ahead and Adam Oryszczak, director, facilities services, Ulta Beauty, explored how retailers of time.”

He added that AI can also assist retailers are deploying advanced technology soluin rightsizing facilities management headtions to help maintain retail locations. count, including by maximizing employee Here are the highlights of the panelists’ efficiency and automating manual tasks discussion about how they are implementwithout necessarily cutting any jobs. ing three specific next-gen technologies: artificial intelligence (AI), augmented and AR/VR virtual reality (AR/VR), and Internet of AR/VR solutions let retailers overlay Things (IoT) solutions, in their facilities contextual virtual data into the surroundmanagement operations. ing “real world” environment. Oryszczak highlighted the capabilities of Ulta Beauty’s AI GlamBeauty Lab, which allows customers During the discussion on how artificial to virtually test products and shades within intelligence (AI) fits into retail facilities the company’s iPhone and Android app management, Oryszczak said retailers can with AR functionality, as an example of how use AI to streamline space planning efforts.

AR and VR technology can fit into retailers’ “You can create a heat map to track foot facilities management efforts. traffic and also see how associates work, “You take a picture of yourself and then and then tailor the space to meet associate take the picture online to see how different needs. It enables you to maximize your cosmetic products would look on you with space without a total refresh,” he explained.

AR imagery,” he told the audience. “You Oryszczak added that in order to secure 16

can do the same thing in your facilities. You could take a store layout and use AR to see how changes in things such as fixtures and lighting would look.”

In turn, this could greatly reduce the cost of creating store planograms and of store remodeling projects, added Oryszczak. He also explained how AR/VR technology can increase the value of retailers’ facilities data.

“Data doesn’t mean anything unless you can gather insights from it,” he said. “Are you using data as a band aid when you need open heart surgery?”

In another application, Witte noted that retailers can utilize VR to share different options for facility environments with various stakeholders. “They can see what the possibilities could be,” he said.

IOT Witte highlighted the role Internet of Things (IoT) solutions can play in streamlining critical facilities management functions.

“There is a smart device ecosystem that can link to systems such as water, lighting and HVAC,” said Witte. “It enables a layer of control that was not available before. You can open a portal to your facilities via interconnectivity of platforms. If you don’t open the portal, you risk being left behind.”

Witte also mentioned that retailers can manage assets, such as the technology on their rooftops, using RFID- and QR codebased monitoring.

“You can perform rooftop systems triage by scanning QR codes,” he said.

Both Oryszczak and Witte agreed that while innovative technology has a rapidly increasing role to play in facilities management and all retailers need to start investigating it if they haven’t already done so, it is also a mistake to roll out a disruptive solution simply because it’s the latest and greatest application.

“Not all technologies will be right for your situation or organization,” said Oryszczak.

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SESSION SPOTLIGHT

Making Recycling and Waste Reduction an Enterprise Priority

By Dan Berthiaume

Recycling and waste reduction programs create wide-ranging benefits that sustainability managers need to promote.

That was the message delivered at the SPECS session “Solutions in Waste Reduction and Recycling.” Speakers Amy Fredregill, senior director of sustainability, WSB Engineering, and Sara Iverson Smith, senior director of real estate, facilities and construction, Blain’s Farm and Fleet, highlighted how initiatives to recycle and cut back on waste create a positive impact on every area of retail operations.

The speakers also urged attendees to make sure every stakeholder is fully aware of why they should support these efforts. Fredregill advised attendees to promote sustainability initiatives with the messages that will resonate the most within a typical organization — and to first obtain the right support from

18

the right executives.

Iverson Smith took a closer look at the importance of getting top financial executives on board by demonstrating the cost savings of recycling and waste management programs.

“At Blain’s, we had to prove to the CFO what amount of cost would be saved,” she explained. “By recycling pallets, we made $7 back per pallet. The value of the cardboard we recycle went up. By recycling oil, we can buy less to heat our distribution center.”

Iverson Smith added that recycling and waste management initiatives can help retailers recruit desirable younger talent.

“Generation Z and Alpha want to work for a sustainable company,” she said.

Iverson Smith also urged attendees to “get ahead of sustainable technology trends” such as electric vehicles. Along with sustainability

benefits, a pilot of providing free EV chargers at a Blain’s store also had a positive impact on revenues, she said.

“While customers were charging their electric vehicles, they came into the store to shop, eat and drink,” Iverson Smith explained.

Similarly, Blain’s found that when customers come in drop off products for recycling, they tend to make purchases in the store before leaving.

The speakers also discussed the importance of working as a team with other departments, regional management and leadership. “Make sure you are not working in a silo,” said Iverson Smith.

The speakers ended the session by making the following recommendations for starting a recycling/waste reduction program:  Start small;  Define stakeholders;  Test;  Manage risk;  Design matters; and  Learn from others who have done this before you.

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SESSION SPOTLIGHT

Retailers Go Electric: Making

the move away from natural gas

By Dan Berthiaume The times they are a-changing for how retailers heat their facilities.

At the SPECS session, “Making the Shift From Natural Gas to Electric: Engineering for the Future,” speakers reviewed timelines for states making the transition from natural gas to electric, as well as the implications and new infrastructure necessary to support the conversion.

Panelists Paige Janson, COO, sustainable resource management, ENGIE Impact; Matt Smith, energy manager of self-storage company Public Storage; and Daniel Batty, VP of design and construction at coffee retailer Dutch Bros, agreed that despite complexities and variability

in regulations and procedures for converting from natural gas to electric, retailers shouldn’t delay beginning the process.

“Embrace it. You can’t avoid it,” was Batty’s succinct advice to attendees regarding conversion from natural gas to electric in their facilities. He cited some advantages of electric over gas heating, such as eliminating the risk of natural gas leaking from lines, as well as removing the need for carbon monoxide detectors.

However, Smith urged attendees to be thoughtful in their conversion strategies.

“Know what you’re electrifying,” he said.

“If you’re talking about things like cooking, heating or charging electric vehicles, there are different implications for each.”

Expanding upon his advice to “know what you’re electrifying,” Smith discussed how in the case of Public Storage, conversion to electric from gas is simpler than it would be for many other retail business models.

“We have 3,000 locations across the U.S. with a low environmental footprint,” he said. “We don’t heat our storage units to the level of human comfort – basically the standard is ‘don’t let things freeze.’”

The average storage unit is about 1,000 sq. ft. in size, with many located in rows that customers drive up to garage-style, according to Smith. As a result, he said, Public Storage does not use an especially large amount of gas and often relies on heat pumps.

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“Gas is cheaper to use to run our HVAC systems and water heaters,” he said.

Dutch Bros. started converting to electric during the COVID-19 pandemic and is reducing the costs of electric heating and cooking with a 967-sq.-ft. drive-thru-only store model.

REGULATIONS

Left to right: Daniel Batty, Dutch Bros Inc.; Paige Janson, ENGIE Impact; Matt Smith, energy manager, Public Storage

“It’s not a massive rollout,” Smith added.

In contrast, Batty outlined how Dutch Bros has to deal with cost increases as it converts locations from gas to electric.

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MAY/JUNE 2024

Janson focused her remarks on the numerous state and federal regulations governing how businesses convert from gas to electricity.

“Not every state plays the same,” she cautioned attendees. “This being an election year makes things more complicated, as federal regulations could change in 2025 depending on who is the president.

It’s even more important to keep track of everything that’s happening with regulations.”

At the state level, according to Janson, despite individual variations most states and even many localities have enforceable

renewable energy portfolio standards or renewable electricity standards, which are policies that encourage increased transition of power to renewable energy sources. More than half of U.S. states and territories have set a goal of 100% renewable energy generation by 2050.

And when it comes to natural gas, Page said natural gas rules are a patchwork of different, and often contradictory, regulations. California, Vermont and Washington have banned natural gas and bans are in development in Connecticut, Massachusetts, Maryland and New Jersey.

But at least 25 other states have prohibited local governments from enacting any type of natural gas ban.

Building performance standards also vary considerably by state and locality, according to Johnson, although many states are encouraging voluntary switching from carbon-intensive fuels like natural gas to low- or zero-carbon alternatives like electricity.

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SESSION SPOTLIGHT

Update on ADA Compliance

By Marianne Wilson

The importance of compliance with The Americans With Disabilities Act was among the messages conveyed during the SPECS session, “What’s New When it Comes to ADA: Need to know updates for retailers.”

“The ADA is 33 years old,” said speaker Joan W. Stein, president of Stein Consulting. “Existing buildings have had a long time to perform ‘readily-achievable’ barrier removal.”

Stein noted there have been no updates since the 2010 ADA Standards for Accessible Design, which mandated that all electronic and information technology such as websites be accessible to those with disabilities, including vision impairment and hearing loss. Although it’s been more than 10 years, the Department of Justice has only recently begun the process to codify regulations for website compliance.

The absence of regulations for websites, however, does not mean that you won’t get sued, cautioned Stein.

“Although the Justice Department has not formalized the website regulations, most of the lawsuits are now about websites,” she said.

Stein reminded attendees that while clipboards and pull-out shelves were allowed at checkout counters under the original law, they are not allowed under the updated standard. Instead, checkouts must be built with accessible counter heights.

In other cautionary remarks, Stein noted the distinctions between state building codes and and the ADA regulations, advising attendees that a state or local code can supersede the ADA regulations only if it provides for a greater degree of accessibility or is more stringent than the federal standard.

The speaker also summed up the three critical components of ADA compliance: design, construction and maintenance.

22

“First, you have to design it right, and then you have to construct it right,” Stein said, adding that too often, the design professionals don’t put enough information on the plans.

“The biggest challenge is maintenance,” she said. “Everyone needs to be educated about the importance of maintaining the accessible elements that were designed and constructed for your facility. You can design and construct an ADA compliant facility but employees can ruin it in a moment. Educate. Educate. Educate.”

As to where retailers are most vulnerable when it comes to lawsuits, the answer is outside the store.

“You are most vulnerable in the parking lot, before anyone comes into your facility, and also the moment someone visits your website, Stein said. “And I’ll warn you — it’s not inexpensive to make your website accessible.”

“Be sure to pay attention to exterior elements,” she added. This includes curb ramps that connect parking lots to the sidewalks, entrances, accessible routes and designated accessible parking spaces.

In 2023, a total of 8,227 ADA Title III federal lawsuits were filed, down 5% from MAKING THE BUSINESS CASE According to the latest data from the Centers for Disease Control and Prevention, 61 million in the United States live with a disability.

The total disposable adult’s incomes (post-tax) for working-age individuals with disabilities is nearly $500 billion.

All in all, disabled working-age Americans earn an estimated annual income of $490 billion and have an estimated annual discretionary income of more than $20 billion – not to mention the spending power of the friends, family, and professional network of those with disabilities.

the previous year. New York topped the list of states with the most ADA lawsuits, with 2,759 filings. California is a close second, with 2,380 lawsuits. Rounding out the top five are Florida, with 1.415 lawsuits; Texas, with 224; and Illinois, with 202. (Source: Seyfarth Shaw.)

Stein ended the session by advising retailers that an “ounce of prevention” can go a long way to remaining in compliance with the law.

Her recommendations are below.  Check your exterior site on a regular basis. Look for cracks, changes in level — make it part of your regular maintenance schedule  Travel through your facility. Maintain clear aisles (minimum 36-inches wide), and double check the height of merchandise displays (maximum of 48 inches above finished floor.)  Check restrooms. Focus on moveable items that may be blocking maneuvering clearance — such as trash cans at the door — and for items blocking clear floor space under lavatories.

Stein also advised the audience to check with their insurance carrier.

“The costs for remediation of barriers and/or litigation costs can be potentially covered in your insurance package,” she said.

Retailers should also check their lease to see who is responsible for the parking lot, sidewalks, curb ramps and common-use rest rooms. In addition, they should also review their contracts with vendors, design professionals and contractors.

“Each has responsibility for ADA compliance,” Stein said.

Stein noted that defending ADA lawsuits is costly, with DOJ litigation resulting in the following financial penalties: $75,000 for first barrier, $155,000 for each subsequent. Other costs include legal fees, potential punitive and compensatory fines to plaintiff and more.

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TECH VIEWPOINT

Frictionless checkout – what’s next?

A recent decision by Amazon has changed the landscape for cashierless checkout.

In a major readjustment of its strategy for its “Just Walk Out” checkout-free shopping technology, Amazon said it will remove the automated solution from its Amazon Fresh grocery stores. The technology leverages a combination of computer vision, sensor fusion and deep learning that enables shoppers to shop the store, pick out what they want and skip the checkout when they’re done.

So, what’s in store for frictionless checkout? Here are some thoughts on where Just Walk Out, self-checkout terminals, and automated “smart carts” may be heading.

Just Walk Out To be clear, Amazon is not retiring Just Walk Out, which it also uses in its Amazon Go convenience stores and provides to many other retailers on a licensed basis.

(Many other retailers and solution providers have their own “grab and go” store platforms.)

However, the consensus seems to be that the cost and complexity of setting up and operating this type of checkout-free environment in a setting as large and varied as a grocery store is simply too high to make it a workable business model.

The “grab and go” model is unlikely to disappear. But at least for the foreseeable future, expect to see it mainly confined to convenience stores, airport shops, concessions stores at stadiums and arenas and other environments where consumers in typically purchase a few small goods from a limited selection of SKUs in a small space.

being slow and awkward to use and linked to heightened shrink risks by some experts.

Target recently restricted self-checkout to customers buying fewer than 10 items at most stores (with some flexibility given managers) following an express self-checkout pilot with limits of 10 items or less that found it to be twice as fast.

Walmart is also adjusting how it uses self-checkout terminals at some stores, with those locations possibly starting or ending the day offering staffed checkout only. As Target and Walmart frequently set industry trends, expect other retailers to follow suit.

Smart carts Smart shopping carts equipped with technology like camera vision and sensors that let customers simply identify themselves, shop the store, and automatically pay for whatever items are in their cart when they leave, factor heavily into the plans of at least two retail tech giants.

Amazon will deploy its Dash Cart smart shopping cart solution at Amazon Fresh stores. It operates on a technology infrastructure similar to “Just Walk Out.” The Dash Cart provides shoppers the benefit of skipping the checkout line. But it also has an on-cart screen featuring maps and navigation, allowing shoppers to easily find nearby products and deals. They can also view their receipt as they shop to keep track of spending in real time.

In addition, in a recent blog post, Instacart VP and GM of Connected Stores David McIntosh said the company’s Caper Cart smart cart solution is getting enthusiastic customer response and will have thousands of units deployed across the U.S. by year’s end. He cited specific benefits including gamified experiences (such as a gamified coupon wheel), real-time personalized recommendations and offers, and targeted in-store advertising from CPG partners.

The shopping cart has come a long way from squeaky wheels and poor navigational capabilities. Could it be the frictionless checkout form factor retailers and customers have been waiting for?

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Self-checkout terminals At least two major retailers have also recently cut back on how they use self-checkout terminals, which have been getting some general customer negative feedback for

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TECH

Inside Amazon’s New Robotic Fulfillment Hub

By Dan Berthiaume Amazon is now operating a robotic fulcountry to ensure shorter delivery times.” fillment center in Massachusetts, streamOnce an item in a pod is ordered, the pod lining the delivery of sortable items in the is automatically brought to an associate Northeast U.S. station by a Drive robot. The desired prodChain Store Age recently took an exclusive uct is displayed on a screen in front of the tour of Amazon’s new robotics fulfillment associate with a description and photo. As center in North Andover, Mass. Opened in pods travel the floor, they pass light towers March 2024, the more than 3.8-million-sq.- that take a photo of their inventory. With ft., five-story facility processes hundreds AI technology, Amazon recognizes and of thousands of small packages each day verifies the content of each pod. through 12 miles of interconnected conveyors.

All products handled at the center are sortable and have a maximum size of 18.5 inches for any of their three dimensions – or roughly the size of a kitchen microwave or smaller. Larger, non-sortable items are processed at other “Drive” robots help transport products at Amazon’s robotic fulfillment center.

Amazon facilities.

The fulfillment process begins when items The associate retrieves the product and are received at the facility’s inbound dock scans it with an overhead scanner for verion the first floor and placed into totes that fication, with a green blink indicating they are then brought by conveyor belt to associ- have the correct product, and places it in an ate stations on the second floor. empty tote which is automatically provided Workers scan items and are directed to via conveyor. place them in units called “pods” which After the tote is filled with an order, the feature 11 rows of storage space and autoassociate pushes it onto a conveyor belt for matically travel to them, transported by a downstairs packing and a new, empty tote flat, four-wheel robotic dolly called “Drive.” automatically takes its place. When an order As soon as a product is stored in a pod, it is is filled, the system will hold it for a period listed for sale on Amazon.com. of time in case the customer decides to add Sergiy Sushalskyy, GM of the Amazon to it, enabling a full purchase to be shipped North Andover robotics fulfillment cenin one package for more efficiency and ter, explained the AI-based process the sustainability.

Amazon uses to determine how to stock its When totes travel via conveyor belt downregional fulfillment centers. stairs, a sorter automatically routes them “We use an automated system that sees to different packing process paths, based demand for different items in different aron factors such as whether a tote contains a eas,” said Sushalskyy. “It creates a demand single item or multiple items. forecast based on that information and alloThe facility features both traditional and cates items to fulfillment centers across the automated “Smart Pac” packing stations, 24

with delicate products such as liquid and glass routed to traditional stations that still feature high-tech touches such as an automatically assigned box based on order size and a machine-cut length of packing tape that is the perfect length to seal the package.

In addition, some items are routed to a machine which automatically cuts a sheet of corrugated cardboard and forms it into a box which the exact size to fit the product without need for plastic dunnage, making delivery more sustainable and cost-effective.

At all packing stations, after sealing, packages have a label affixed that does not display any customer shipping information (to protect shopper privacy) but transmits that data to a machine called “SLAM” (scan, label, apply manifest) that automatically places a shipping label and then routes the package to a specific trailer for delivery.

Some packages are sorted for delivery by an automated robotic arm called “Robin” which uses computer vision to pick select packages from the conveyor belt for placement on a Drive robot that takes them to the correct loading dock.

Others are automatically routed via conveyor belt to a cart which will notify an associate with a blinking light when it is full and ready to be pushed to the appropriate trailer.

Worker Safety: Amazon relies on robotic automation to handle repetitive movements and the lifting and transport of heavy objects, leaving associates to handle lighter items and participate in workflows that involve more fluid and less stressful movements.

In addition, dedicated employees (“Amazon Floor Managers”) manually respond when a pod or a Drive robot has an issue wear. They wear special vests when they need to enter a space in order to fix a robotic system or retrieve fallen items.

Built-in sensors alert Amazon’s robotics system to a vest wearer’s presence, and the robotic technology slows down to avoid collision. The vest is designed to work in tandem with the robots’ existing obstacle avoidance detection system.

Robots closest to the floor manager will completely stop, while robots further away will move much more slowly, and remain in restricted movement mode until the floor manager has safely exited the area.

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LAS VEGAS

SHOW SCOOP ANTHONY CAFARO JR.

on the beauty of B-market malls

Adam Ifshin

on retail real estate’s power surge

Richard Dube

Carmen Spinoso

on the true story about today’s malls

Bob Myers

on urban-to-suburban migration

Matthew K. Harding

on prime opportunities north of the Sun Belt

Steven Levin

on the reinvention of retail

on an ‘all-in’ approach to brickand-mortar success

PREIT’s Leadership Team

Michael Gold

Kristin Mueller & Naveen Jaggi

Geoff Mason

Jill Renslow

Paul Weinschenk

on its new chapter prioritizing strength, innovation and community

on the mandate for sustainable projects CHAINSTOREAGE.COM

MAY/JUNE 2024

on the value of long-term planning

on how retailers can get more active in center activations

on the topmost importance of food-and-beverage tenants

on keeping centers fresh

25

CONTENTS SHOW SCOOP

28 30 32 34 36 38 40 26

Cafaro co-president Anthony Cafaro, Jr., who literally grew up in the mall business, tells why malls in “B” and “C” markets--when carefully curated to local needs and wants--can serve as the prime shopping, dining, and entertainment destinations in their regions.

Peterson Companies president of retail Paul Weinschenk

describes the arduous, but keenly essential, duty of developers to keep rethinking and refreshing their centers to produce optimum results for all tenants.

Mall of America’s chief business development and marketing officer Jill Renslow details how the nation’s most thoughtful and inventive activations team makes MOA more medium than mall.

42 44 46

URW EVP of development, design, and operating management Geoff Mason defines how his company’s mall-

48

JLL’s Kristin Mueller and Naveen Jaggi describe the

50

to-mixed-use center renovations make them more exciting—and more sustainable —for current and future generations.

growing importance of retail center food-and-beverage curations, which they say are on the way to making up 15% of the tenant list at top projects.

Cullinan Properties president Michael Gold tells why de-

velopers need to put in years of planning and collaboration with government officials and key tenants to build projects that will stand the test of time.

PREIT introduces new chairman Glenn Rufano and CEO Jared Chupaila with a dedication to begin a new

chapter based on strength, innovation, and community.

52 54

LAS VEGAS

Levin Management CEO Matthew Harding tells why the future of physical retail depends on “all-in” cooperation between tenants, property owners, and real estate service providers.

Centennial founder and CEO Steven Levin, himself a former retailer, writes on how the industry got caught at a time when it failed to reinvent itself, and how it is now re-establishing itself in a era of “merchant-led retail.”

Tri-Land president Richard Dube advises retailers to investigate opportunities in cities up north, where new immigrant populations are re-densifying established markets.

Phillips Edison & Company president Bob Myers details how a startling shift in social behavior has had a profound and positive effect on the curation and management of neighborhood centers.

Spinoso Real Estate Group chairman and CEO Carmen Spinoso explains why business analysts got it all wrong

about the demise of the mall--and how municipalities are more eager than ever to keep them thriving in their communities.

DLC Management Corp. founder and CEO Adam Ifshin tells why having stores in brick-and-mortar centers is still the most efficient and productive way to interact with consumers.

Retail Occupancy Levels Hit Five-Year High. Pressure will be felt by brands with higher occupancy costs.

MAY/JUNE 2024

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LEADERS

ANTHONY CAFARO JR. on the beauty of B-market malls

D

id you know that one of the nation’s largest and most successful malls resides not in Miami, not in Chicago, not in Dallas, but in Niles, Ohio?

Cafaro’s Eastwood Mall in Niles, Ohio, outside of Youngstown, has 3.3 million sq. ft. of GLA (2 million of that openair), draws more than 15 million visitors a year, and features a 6,000-seat baseball stadium that’s the home of the Major League Baseball Draft League’s Mahoning Valley Scrappers.

No doubt you’ve read in the business press that malls in socalled “B” and “C” markets are either closing or on the endangered list. That theory misses some key dynamics. Mall operators who operate in the middle markets, such as our company, closely monitor consumer trends and maintain close relationships with local municipal officials. We have the opportunity to not just be the only show in town, but the star shopping, dining, and entertainment destination in the county.

Being a privately owned company, Cafaro has an advantage over REITs and publicly traded mall operators such as CBL and Macerich. It’s easier for us to innovate because we’re able to take the long view with our tenant curations. We don’t need to focus on the next quarter or the current year. We’re able to plan where we are going to be five or 10 years from now.

We’ve never been constrained by what a mall could be, and we don’t believe in cookie-cutter tenant curations.

In 2023, we opened a 160,000-sq.-ft. Meijer and a 63,000-sq.-ft.

Bass Pro Shop at Eastwood Mall. Tenants such as these instantly widen our trade area. We’re not just the mall for Niles, but for a tri-county area in two states. Eastwood now attracts customers living within a 45-minute driving time. My shareholders are my family, and we discuss deals like these sitting around the dinner table.

28

We’ve never been constrained by what a mall could be, and we don’t believe in cookie-cutter tenant curations. We operate 40plus centers and no two are exactly alike. We signed Target as an anchor at some of our malls in the 1980s and ‘90s and people in our industry told us it would downgrade our properties. Now those naysayers would be singing hosannas if they landed a Target in their properties.

In 2003, Cafaro signed Costco as one of the anchors of its Spotsylvania Town Centre in Fredericksburg, Va., and a business associate asked me, “Why would you do that? You should get a Lord & Taylor instead.”

That Costco averages $250 million a year in revenue. And that Lord & Taylor would have closed.

Our first residential development of 271 luxury apartments recently debuted at Spotsylvania, a location that has a very different dynamic than most of our other centers. It is located off an exit from I-95 and draws significant traffic. Tenants have access to plush amenities in that center and it has been received very well.

Yes, we use analytics like Placer.ai data to analyze the traffic in our malls, but we’re more old school because we have the opportunity to be. In B markets, it’s easier to mix with the customer base to keep track of their current needs and wants. We’re not focused on just the 20-to-40-year-old segment of consumers. We consider the desires of their parents and grandparents, too. Our staffs engage with them on an ongoing basis and interact with local Chambers of Commerce and town officials to read the pulse of individual communities.

In major metros, malls are no longer considered the place to be.

Centers in big cities have to compete fiercely for people’s time. It’s not like that, however, in Clarksville, TN, or Erie, Pennsylvania, or Paducah, Kentucky.

This year, Cafaro Company is celebrating its 75th Anniversary.

Certainly the industry has changed since our founding. Nobody’s building a million-square-foot mall anymore, and that’s okay.

We’re continually evolving to make our centers succeed. We love being the unicorn.

Anthony Cafaro Jr. is co-president of Niles, Ohio-based Cafaro.

MAY/JUNE 2024

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LEADERS

PAUL WEINSCHENK

on keeping centers fresh

O

ne of the most difficult challenges faced by developers of successful retail centers is trying to maintain that success by keeping them fresh. Trends change. The demographics and tastes of our shoppers change. How do we continue to keep our projects the leaders in their markets? What must we do to keep them relevant?

Peterson Companies owns a lifestyle center called Fairfax Corner in Fairfax, Va. It houses a wide range of tenants that include REI, Ikea, Chico’s, Bluemercury, and several food-and-beverage options. It’s just 20 years old, but old enough to need some refreshing. Therefore, we are underway on a $110 million expansion that will include 36,000 sq. ft. of new retail space.

Quality tenants are highly focused on co-tenancy. They want the optimum merchandise mix in projects where they think their customers will already be.

Arhaus has been doing well in the center in its 14,500-sq.-ft. space, but we knew it could do even better in a larger space. It took a long time to tell the brand our story, but Arhaus will be moving into a 19,000-sq.-ft. store and be one of two anchors in our new space.

Fairfax County is one of the wealthiest counties in the United States. It is a trend-driven and very competitive retail market, so we at Peterson did not hesitate to push the button on an investment in new construction. We had to do it to protect our market position and drive our rental rates. We surveyed our competitive retail real estate market looking for another anchor and set our eye on a very popular brand situated in an under-performing mall.

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We recently succeeded in signing this esteemed brand to a lease, and it will be joining Arhaus in the under-construction space at Fairfax Corner.

Quality tenants are highly focused on co-tenancy. They want the optimum merchandise mix in projects where they think their customers will already be. Some older brands are still doing okay. Their health ratio is decent. Others are experiencing rapidly declining health ratios. With the first group, we will extend their leases and see how things go. As for the latter group, we’re not going to renew them. We instead will look toward bringing in other, high-engagement brands that will maintain a successful center’s vigor. That’s our job.

We have some food-and-beverage tenants that were new and exciting when they took spaces in our centers years ago. Now many of them have hundreds or even thousands of locations nationwide, and that’s great. But we expect them to refurbish and remodel their locations to jibe with the tenor of our centers.

Our founder, Milt Peterson, began building mixed-use, community-based centers decades before they became the most actively developed sector in retail real estate. Our projects—like National Harbor outside of D.C. and Rio in Gaithersburg, Md.— are planned environments meant to stand the test of time. Milt’s idea was not to build shopping centers, but long-lasting communities filled with high-quality architecture, green spaces, and art.

At Peterson, we are charged with the same mission for our retail curations.

Not all centers are the same. They come in tiers, and tenants need to be able to respond to those tiers independently. We understand that it’s hard for rapidly expanding national chains to deviate from their store prototypes. However, we believe that our centers offer them the opportunity to elevate their identities with unique spaces in upper-income communities.

Paul Weinschenk is the president of retail at the Fairfax, Va.-based Peterson Companies.

MAY/JUNE 2024

CHAINSTOREAGE.COM

LEADERS

JILL RENSLOW

on how retailers can get more active in center activations

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or more than 20 years, Mall of America has been my home.

It was my dream to work in the events and entertainment industry. When I was offered an internship at Mall of America while I was in college, I was ecstatic! The Mall is a fast-paced ever-evolving venue and I learned so much during my internship that I didn’t want it to end. I commonly describe my career at the mall like a jungle gym, taking chances and lateral moves for the potential of growth. Now, more than two decades later, here I am still learning through our incredible experiences surrounded by an exceptional team.

Timeliness and relevancy are of crucial importance to the staging of successful events.

Mall of America is an iconic tourist destination. To remain a leader in the industry, we need keep trying new things. Our events are something that makes our Mall unique. We host more than 300 events each year offering something for everyone. Recently, we had more than 5,000 people come to the Mall to see a pop-up performance from EDM DJ Marshmello. Over the years we’ve had stars such as Taylor Swift, Kate Hudson, Ed Sheeran and Mark Wahlberg. Peloton and Lululemon teamed up to host a class with celebrity instructors in the Rotunda, which was also streamed on the Peloton App. Fan-favorite Twiggy the Waterskiing Squirrel has performed shows at the Mall drawing crowds of adoring fans. We are also known for our cultural events, which bring people together to celebrate traditions.

Timeliness and relevancy are of crucial importance to the staging of successful events. Activations are a nontraditional form of media. Brands take space in Mall of America not only for its high volume of sales-per-square-foot, but to garner visibility for their brand outside of the Mall and to build relationships and connect with customers. Movie studios, book publishers, and music labels are great at doing this to drive awareness.

We are constantly exploring new opportunities to offer one-ofa-kind retail experiences for our guests. In April, we opened a Rent the Runway Sample Sale, a 3,000-sq.-ft., limited-time pop-up 32

shop. It was stocked with thousands of gowns, dresses, and accessories from previous Rent the Runway collections that were once available to rent. Shoppers have loved this addition, especially with all the dresses costing only $85. We have also found unique ways to promote the store. An example of this is when one of our team members found a dress worn by Daisy, a popular contestant on the latest season of “The Bachelor,” during the finale episode.

The social team posted a fun video of the dress, and many women came flocking to the store looking for it.

Something that has differentiated MOA from day one is our relationship with our tenants. We help with marketing, public relations, events, and social coverage that is unmatched at any shopping venue. Our team supports them in their brand awareness efforts and growth at the mall. We encourage our tenants to get involved in our Mall of America community. If they’re successful, we’re successful. We’re truly in this journey together.

What also sets us apart is our unique attractions. Mall of America was ahead of its time by building the largest indoor theme park inside a mall. Not only do we have Nickelodeon Universe, but we have Sea Life giving guests an up-close look at sharks, sting rays, and underwater life some may never otherwise get the opportunity to see. Guests can visit FlyOver America, a virtual flight simulation that takes visitors on a breathtaking journey, along with Crayola Experience, offering creative play for children. We are continually bringing in new attractions and experiences such as Wink World from the brilliant mind of the co-founder of the Blue Man Group, Chris Wink. Additionally, we’re excited for the upcoming opening of Great Big Game Show, allowing visitors to participate in a live-action game show experience.

After more than 30 years, we have learned a lot. It is important to understand your audience and re-evaluate it on a regular basis.

Know where they reside on social media and communicate with them. We can’t do this alone. We are constantly brainstorming and soliciting ideas from everyone. Ultimately, people want to be together and have a sense of belonging and community, and we offer that at Mall of America for everyone. To walk around our mall and hear the laughs and see the smiles is priceless, and it makes all the hard work worth it.

Jill Renslow is the chief business development and marketing officer of Mall of America.

MAY/JUNE 2024

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SHOP UP TO 500 ICONIC STORES

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LEADERS

GEOFF MASON on the mandate for sustainable projects

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all owner-operators nationwide are busy renovating projects to appeal to new generations of American shoppers. They are erecting residential units and office towers on under-utilized parking lots, adding entertainment and food-and-beverage uses, and adding green spaces and activation centers. Often left out of their plans is an essential imperative demanded by most of our nation’s younger consumers—sustainability.

Last year, a poll done by Gallup for Bentley University in Waltham, Mass., found that 77% of Americans between the ages of 18 and 29 found it “extremely important” that businesses operate sustainably for the environment and the planet. Just 12% of them thought that businesses were striving to reduce their carbon footprints.

URW is currently engaged in a wide-scale reformation of the highest-performing assets in our portfolio. Yes, we are adding new retail, residential, office, medical, cultural, and entertainment uses.

We are creating integrated developments tailored to the local needs and preferences of each market. But lying at the foundation of each of these projects is a mandate for increased sustainability.

Mixed-use conversions are inherently sustainable. They limit car travel, reduce the last mile logistics burden, and are developed on already developed land while putting back green space.

Westfield UTC in San Diego has always been an open-air shopping center, but it didn’t quite fit with the evolving La Jolla community.

Over a decade ago, we saw the macroeconomic shifts in the market, and with it, demand for high-end retail and dining. We enhanced the common areas, added curated dining, and introduced the city’s most luxurious apartment tower as well as targeted office users.

In 2024, we will add first-to-market luxury boutiques and chef-led restaurants along with enhanced amenities, community gathering places, and greenspaces. And we’re doing it sustainably, by using innovative, sustainable building strategies that incorporate renewable energy, natural materials, biophilic design, and biodiversity to create a must-visit destination that blurs the lines between indoors and outdoors.

Developing this kind of thriving destination takes careful planning. In fact, URW has master plans for all its flagship shopping centers that consider how new uses are integrated with the existing asset while ensuring it is tailored specifically to the local community. It’s not about creating separate zones for each use, but creating a seamless and cohesive feel for residents, workers,

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and guests so it acts as one self-sustaining ecosystem.

Sustainability is also at the foundation of our plans for Westfield Old Orchard in Skokie, Ill. Working closely with the community, we saw the opportunity to create a mixed-use destination that would appeal to the residents of the North Shore and beyond. We redeveloped a former department store space, bringing new tenants and energy to the center. We also opened a Bloomies, the new concept from Bloomingdale’s, to really target what our customers desire.

Our next phase of development will involve taking down the former Bloomingdale’s store and building a mixed-use community that will include residential, office, medical, and cultural uses. And we will enhance our dining options by adding some of the best restaurants from downtown Chicago.

While we have a clear vision for each of our assets, we are not executing on it alone. In every market, we are selecting the best co-developers to work with—those with local market knowledge, shared goals, and commitment to sustainability.

Mixed-use conversions are inherently sustainable.

They limit car travel and are developed on already developed land while putting back green space.

Westfield UTC and Westfield Old Orchard are just two examples of what we are doing across the U.S. We have plans for each of our flagships that will reposition these traditional retail hubs into highly desirable and sustainable destinations. We are redefining an asset class, just like Westfield did years ago by putting worldclass design and customer amenities at the heart of the traditional regional shopping center. We believe that the future of retail is not about online versus offline – it’s about designing the right environment and creating the right experience for customers.

COVID-19 proved that people still crave physical interaction and socialization, and that they value convenience and quality. Our mixed-use destinations provide all of that and more, by creating places that are integrated, sustainable, and tailored to each market.

We are not just building buildings; we are building communities.

Geoff Mason is the executive VP of development, design, and operating management for Los Angeles-based Unibail-Rodamco-Westfield.

MAY/JUNE 2024

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We

RE-SHAPE vibrant, mixed-use places that enable the environmental transition of cities.

S CA N T O

LE

AR N M ORE

Westfield Old Orchard

LEADERS

KRISTIN MUELLER & NAVEEN JAGGI

on the topmost importance of food-and-beverage tenants

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s the leaders of JLL’s retail services and property management practices, Naveen Jaggi and Kristin Mueller possess wide-scale views of tenant trends in the United States. At last December’s ICSC show in New York, both expressed the opinion that food-and-beverage brands have become an anchor and key traffic driver in nearly every sector of retail real estate—from malls to mixeduse centers to open-air shopping plazas. Chain Store Age sat down with them to learn more about the singular influence of this exploding tenant category.

What classes of restaurant concepts are beginning to trend upward in centers?

JAGGI: You have to pick good partners because you want concepts that are going to evolve with time. You have to be prepared to be a bit flexible in order to try and keep your food-and-beverage components fresh. One thing center operators need to do is to consider a diversity of ethnic offerings—Korean barbecue, Indian, Mexican concepts. The more diverse the community, the more diverse the food-and-beverage complement.

Food-and-beverage’s average percentage of GLA across all classes of retail real estate now JAGGI: Every major development and redevelopment needs Kristin Mueller food-and-beverage components that are unique to their projects. They ranges between 10% and 15%.

New food-and-beverage brands—from QSRs to brew houses to chef-driven concepts—are propagating in every retail real estate sector in every state in the union. How is this happening?

don’t want their brands present at any other centers within 10 miles of them, and they are being patient about the process. They’ll wait up to six months to secure the right restaurant brand.

And they’ll go to extremes to find it. Recently I heard from a senior executive at one big property developer who asked me to connect him with our team in Japan. He was going to be traveling there and he wanted to get a list of the coolest restaurant concepts to visit. Finding the right brand takes patience and research.

MUELLER: That goes for entertainment brands, as well.

Entertainment is a mechanism to offer food-and-beverage. If you look at the theater experience today, the brands that separated themselves from the pack are the ones that offer quality food and beverages.

And the same goes for other entertainment brands. Chicken N Pickle, which is widely expanding, surrounds their pickleball courts with picnic tables and serves up drinks and wood-fired chicken.

How much more space is being devoted to food-and-beverage?

MUELLER: The asset class that’s the most demanding about having a solid food-and-beverage component is mixed-use. The most complicated sector is open-air. But food-and-beverage is the fastest-growing tenant category across the board. When this all started, the food-and-beverage category’s average percentage of gross leasable area across all classes of retail real estate went from 3% to 5%, then it rose from 5% to 7%. It’s now ranging between 10% and 15%. There are many projects around the country that are 15% food and beverage.

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Are your teams and your accounts’ teams using local consumer data to refine the search?

MUELLER: Restaurant lineups are definitely project-specific, and developers are using geo-fencing data to help them determine what will work in which neighborhoods. In Atlanta, Selig Development has repurposed a light industrial area into a project called The Works. They’ve put in a 25,000-sq.-ft. food hall with 30-plus, mostly local, tenants.

There’s banh mi, South African street food, grilled fish, a ramen bar.

They keep changing the mix of offerings to keep the assortment lively.

JAGGI: I was in New York and experienced a similar concept at Chelsea Market. Thirty-plus food options. They have a world map on their restaurant listing that places the restaurant in their countries of origin—currywurst and beer from Germany, ramen from Japan, and a really interesting concept called Eat Offbeat that’s run by a team of refugees and immigrants who migrated to New York City.

MUELLER: Doing your research, being patient, sending your team to travel around the country and the world is the best way to create unique and fresh food-and-beverage offerings. Cutting edge concepts play out on social media and succeed in drawing new customers to centers.

Kristin Mueller is the president of Retail Property Management and Naveen Jaggi is the president of Retail Advisory Services at global real estate services provider JLL. MAY/JUNE 2024

CHAINSTOREAGE.COM

LEADERS

MICHAEL GOLD

on the value of long-term planning

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ver the past five years, more than 160 million sq. ft of vacant retail space has been demolished. Construction of new retail real estate, meanwhile, has come to a near standstill due to increasing construction and financing costs.

The average vacancy rate in the United States has consistently been at the 4% level for the past year. The unemployment rate, meanwhile, is less than 4%, its lowest level in decades. Despite nagging inflation, people are out and spending money. Retailers are overwhelmingly seeking new locations and vying to stay put in the good spaces they currently inhabit. Openings far outpaced closings in 2023, and 2024 appears to be continuing that trend.

What’s an expanding retailer to do?

In March, it was my great honor to be named president of Cullinan Properties. During the course of my career in retail real estate, I had come to appreciate Cullinan as a developer with a distinct, focused, and meticulous game plan and an unparalleled track record spanning nearly four decades. Cullinan has been an outlier in our business, founded nearly 38 years ago by Diane Cullinan Oberhelman, who, with vision, grit, and execution, has thrived through countless obstacles, including multiple economic cycles.

One of the only women in a chief role in development at that time, Diane focused on the office real estate sector at the beginning, then realized the value of adding retail and became a mixed-use pioneer. Cullinan developed mixed-use before anyone even used the term “mixed-use.” She acquired a vacant Caterpillar property in East Peoria and collaborated with city officials to transform an 86-acre site into what is now a populated and thriving, retail-based district called the Levee District.

Cullinan’s operational formula is never derailed by problem periods in the industry, such as the one we are now experiencing. We maintain longstanding relationships with municipal officials in our markets, with whom we set out carefully articulated, long-term plans.

One such project now under development is RockRun Collection in the Chicagoland suburb of Joliet, Ill. More a burgeoning community and entertainment center than a real estate project, Cullinan has collaborated with the city of Joliet on RockRun, which will feature an upscale Hollywood Casino and include 500,000 sq. ft. of retail and restaurants and 200,000 sq. ft. of entertainment along with office/medical, hospitality, and multifamily housing.

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In addition to the local municipality, Cullinan put in a tremendous amount of upfront legwork with state and federal officials to make sure we are creating a project that the community deserves and that also fits the needs of leading retail brands. With careful longterm planning, we have de-risked this project and positioned it to be the most impactful development, located directly in the heart and at the crossroads of America.

People today are looking for more dynamic environments in which to live, work, play, and stay.

Consumer habits and living patterns have changed. People today are looking for more dynamic environments in which to live, work, play, and stay. Because of the scale of the project, we have the luxury to blend all these components together artfully. Its food-and-beverage component will range from fast food to white tablecloth. RockRun Collection will have a menu of entertainment options outside of the casino, and it will feature a plentiful array of unique and traditional retail to serve the immediate community and the 10 million-plus residents we will reach with our super regional draw.

Retailers want and need to expand. Today, there is more demand than supply, and speed to execution is critical. Cullinan’s strategic process, however, is not solely focused on speed. We stay nimble to ensure we’re meeting the needs of the market. We believe that years of planning and preparation must be invested in building top-level projects that top-level brands long to be part of. Ours is a careful, time-consuming, and detailed process.

I could not be more excited to be helping lead the Cullinan team at this time. We have best-in-class people and are looking ahead as we build on our unparalleled track-record to execute the vision of RockRun Collection and our many other innovative projects nationwide. As we have for nearly 40 years, our team will march forward together into this next chapter.

Michael Gold is the president of East Peoria, Ill.-based Cullinan Properties.

MAY/JUNE 2024

CHAINSTOREAGE.COM

LEADERS

PREIT’S LEADERSHIP TEAM

on its new chapter prioritizing strength, innovation and community

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REIT is now a private company with financial stability, increased access to capital, and an enhanced ability to execute on our commitment to creating best-in-class destinations through innovation. With a freshly constituted board anchored by industry veteran Glenn Rufrano, and a refreshed management team led by our new CEO, Jared Chupaila, PREIT is excited to chart its path forward leveraging a robust portfolio of ideally located properties to create unparalleled shopping and entertainment spaces.

Glenn has 35 years of experience specializing in stabilizing and repositioning publicly traded and private real estate companies.

Most recently the chairman of ICSC, he brings in-depth industry knowledge to PREIT in his new role.

Jared most recently served as CEO of Brookfield Properties’ retail real estate unit, where he oversaw the company’s United States portfolio of more than 150 retail centers across 43 states. He brings more than 20 years of experience in commercial real estate executive leadership, corporate strategy, asset management, and leasing and operations to the table.

Our strategy is guided by maximizing the value of our portfolio to benefit our retail partners, shoppers, and communities. We are committed to redevelopment and leasing initiatives that prioritize unique, sought-after retail, dining, entertainment, and wellness experiences. This approach, coupled with our dynamic portfolio, attracts a wide range of notable brands.

Beyond traditional retail, PREIT is exploring transformative additions such as healthcare facilities, apartments, and hotels to turn our properties into vibrant, community-centric hubs that offer enhanced walkability, provide extensive amenities, and serve as a built-in audience for our retail partners.

PREIT’s properties are more than places to shop, dine, play, and stay; they are the centers of their neighborhoods, offering small businesses a home, creating jobs, and supporting infrastructure improvements. They are hubs that generate success for our retail partners and meaningful impact for the communities we serve.

Looking ahead, PREIT is poised for success as a top operator of high-quality, purposeful places that shape the future of retail and experiential real estate.

PREIT’s Springfield Town Center in Springfield, Va.

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MAY/JUNE 2024

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LEADERS

MATTHEW K. HARDING on an ‘all-in’ approach to brick-and-mortar success

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ultivating today’s most successful open-air retail environments – those destinations that generate high traffic, engage consumers, and encourage longer shopping visits – takes an “all in” approach from retail space users, leasing and management specialists, and landlords.

And working together we are making great things happen.

Savvy shopping center tenants, whether traditional retail, entertainment, fitness, dining, healthcare or service concepts, among others, are continually adapting to shifts in consumer behavior and industry dynamics. They know customer service and convenience are key, and social experiences are again a priority. This has contributed to retail’s positive trajectory, with store openings outpacing closures for three consecutive years – and counting.

Strategy is equally important for creating enviable tenant mixes.

Third-party commercial real estate service providers like Levin Management Corporation (LMC) are blending new tools with traditional approaches. Our team is actively leveraging seven decades of experience with real-time data through a partnership with Placer.ai. This enables us to harness the power of AI to gain crucial insights into market trends and consumer patterns, and create laser-focused tenanting tactics. Retailers, too, are using Placer.ai to better understand the market and their performance.

Property owners are capitalizing on leasing velocity to position assets for sustained performance.

Finally, in today’s climate, property owners are capitalizing on leasing velocity—particularly within the open-air sector--to position assets for sustained performance. This translates to a busy time for integrated third-party services providers that are in tune with markets and consumer shifts, have relationships with today’s most desirable retail brands, and approach property operations with a long-term view.

Retenanting success – proof is in the data

Within our leasing and management portfolio, Mayfair Shopping Center in Commack, N.Y., provides a great illustration of a strategic, long-term re-tenanting initiative. A right-sizing requirement by Lidl following its acquisition of the property’s long-time 42

anchor supermarket, and a flurry of store closures resulting from COVID-19 shutdowns, created a prime opportunity for transformation at the 222,000-sq.-ft. Long Island property.

Flash forward 36 months, and 112,000 sq. ft. in new leasing includes Lidl’s in-center relocation to a smaller, free-standing building, and the addition of PGA Tour Superstore, Planet Fitness, Sephora, and a host of dining, fitness, and specialty retailers. Mayfair Shopping Center drew 2.1 million visitors in 2023, according to Placer.ai data – an all-time high and a 19% year-over-year increase.

Reinvestment for a bright future

Strong leasing and decreased vacancies at well-located shopping centers justify property reinvestment. The LMC construction management team’s stepped-up activity shows that landlords are doing just that.

In 2023, we launched a major redevelopment at Blue Star Shopping Center in Watchung, N.J., catalyzed by an in-center relocation and a new 72,000-sq.-ft. LMC-arranged lease with long-time tenant ShopRite. We secured land use approvals for this ambitious project and are spearheading a center-wide modernization. When ShopRite moves to its new space, we will reconfigure the existing store for multiple new tenants.

At West Orange Plaza in West Orange, N.J., a 211,500-sq.-ft.

Target lease also propelled recently launched, center-wide renovations. A physical plant expansion/modernization will accommodate Target’s omnichannel requirements, and approximately 14,000 sq. ft. of ground-up construction is adding two new retail buildings.

Later phases may include a third new building, and others will be modified and expanded.

The all-in advantage

The bottom line is today’s brick-and-mortar success stories involve properties that go beyond serving as places to shop for traditional goods and services to become diversified, one-stop sites where consumers can also pick up their online orders, come together for meals, fitness and fun, and patronize health, wellness and personal care services.

Approaching the future of brick-and-mortar retail will always require agility and foresight. When space users, real estate services providers, and owners are in it together, the future is bright indeed.

Matthew K. Harding is CEO of North Plainfield, N.J.-based Levin Management Corporation.

MAY/JUNE 2024

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LEADERS

STEVEN LEVIN

on the reinvention of retail

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s someone who started his career in his family’s chain of women’s specialty retail stores, I became aware early on that retail is an ever-changing business. That’s because consumer behavior and trends are always changing, and, therefore, leaders of retail brands must always be preempting those changes. I always felt that as a retailer, you needed to reinvent yourself about once every seven years, and that still holds true today.

Over the past few years and post-COVID, a new era has emerged in retail which is being driven by two factors: 1.

2.

The reemergence of merchant-led retail, and Shrinking real estate inventory

Post-COVID brick-and-mortar shopping has returned to dominant retail centers. We are seeing a return to merchant-led retail with relevant and engaging brands now delivering a much more cohesive omnichannel experience. Sephora, Gorjana, Lululemon, and the URBN brands Anthropologie and Free People are all delivering an omnichannel experience that makes shopping more convenient.

At the same time, former online-only retailers are opening brickand-mortar stores to support new market expansion that can only be achieved by opening physical locations—illustrated by the growth of brands like Warby Parker, Madison Reed, and Tommy John. These brands are acutely aware that 80% of consumer purchasing decisions are made in-store, although the majority of customers have been to their websites first. The customer gains the added convenience of a seamless browse to purchase experience.

Savvy retailers are combining the use of both e-commerce and brick-and-mortar stores, resulting in the delivery of a better, more robust experience to consumers.

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The United States has historically been overbuilt with retail due to extended periods of rapid expansion. Over the past few years, however, net shrinkage of less productive GLA has helped balance the national footprint. CoStar recently reported that post-demolition net deliveries dwindled to 52.9 million sq. ft. in 2023, the lowest level recorded since it began tracking that measure some 20 years ago.

Sephora, Gorjana, Lululemon, and the URBN brands Anthropologie and Free People, are all delivering an omnichannel experience that makes shopping more convenient.

In conjunction, the better shopping centers are doing better.

Rents are rising in Class A centers and highly competitive retailers are willing to pay them because they are being deliberate in choosing the ideal location. We’re seeing this play out at centers across the country. The Summit Birmingham, Pacific City in Southern California, and Chicago area projects like Hawthorn are a few examples of these highly sought-after locations. Retailers have a better roadmap for success which is exactly what merchant-led retailing is about.

The real winner in all of this is the consumer, which is exactly how it should be.

Steven Levin is the founder and CEO of Dallas-Based Centennial.

MAY/JUNE 2024

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Innovative Spaces.

Captivating Places.

Transforming today’s retail real estate into tomorrow’s industry-defining destinations.

From East to West, lifestyle centers to multifamily, and all the spaces in between, we’re transforming beautiful spaces and creating community.

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Properties + Growing

19M SF

of Retail and MixedUse Destinations

1800+

Retail Partners

Find us at CentennialREC.com

LEADERS

RICHARD DUBE

on prime opportunities north of the Sun Belt

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hile opportunities for supermarkets in the Sun Belt states are abundant, Tri-Land, during its 45-year history, has been repositioning and redeveloping underperforming supermarket-anchored centers located primarily in seven Midwestern and Mid-Atlantic markets: Chicago; Milwaukee; Minneapolis; Indianapolis; Baltimore; St Louis, and Kansas City.

And let me tell you: There are plenty of great locations to be found north of Florida, Texas, and Arizona.

Tri-Land’s acquisition targets are located in high-traffic, high-population markets with average-to-above-average incomes. To fit changing market or strategic conditions, we will expand or downsize an existing supermarket--or even relocate a store that is either too small, too old, or improperly located. Here are some examples that illustrate this practice:

with the redevelopment. Four new outlots have been created and an existing Burger King location is being demolished and replaced by the chain’s new prototype building. The 33,000 sq. ft. of space Price Chopper returned to Tri-Land being repurposed into a discount fashion store. The exterior of the entire shopping center is being upgraded to reflect a contemporary appearance and the common areas are being upgraded with new sidewalks, parking lot paving, installation of high intensity parking lot lighting, and high-impact landscaping.

FRIDLEY, MINN. Tri-Land purchased a shopping center in this northern suburb of Minneapolis that was formerly occupied by a 140,000 sq. ft. discount store built in the early Seventies. When the store closed in the early Nineties, Cub supermarkets took the lease. The rent was inexpensive and the competitive environment was less intense than what exists in the Minneapolis market today. Tri-Land downsized the 104,000 sq. ft. space to the Cub’s current prototype size 65,000 sq. ft., repurposed the 35,000 sq. ft. of space Cub returned to Tri-Land, and created two new outlot developments that housed a McDonald’s on one outlot and a 9,000 sq. ft. multi-tenant building on the second outlot. Cub supermarkets renovated the inside of the store, installed new fixtures, and created a contemporary exterior façade. The sales performance of the downsized Cub supermarket increased substantially during the 24 months following the downsizing.

EMERGING ETHNIC SUPERMARKETS. During the past 20 years, as supermarket consolidation has accelerated throughout the United States, urban cities and first-ring suburbs have experienced growing demographic concentrations of Hispanic, Indian, Chinese, and Asian Pacific populations. The more established Slavic population has also been on the rise.

The result of this increasing population of immigrants and first-generation citizens has led dozens of ethnic grocers to open up stores in dense urban neighborhoods and high-density suburban markets. Though growing populations in Sun Belt states are particularly enticing to expanding retailers today, dozens of ethnic supermarket chains are themselves moving rapidly into urban and suburban regions farther north.

Whether it be venturing into a redevelopment with a fast-growing ethnic supermarket chain or repositioning supermarket brands that are No. 1 or No. 2 in their markets, we at Tri-Land see an abundance of opportunity in our operating areas that is equal to—or in some cases better than—what’s available in the Sun Belt.

INDEPENDENCE, MO. What Tri-Land is doing in this eastern suburb of Kansas City is almost a duplicate of the Fridley project—30 years later.

We are now implementing a $25 million renovation of the 160,000 sq. ft. Hub Shopping Center in this eastern suburb of Kansas City. It is anchored by Price Chopper in a 103,000 sq. ft. space Walmart left to relocate in a supercenter format three miles away. The competitive environment of the Kansas City market in the early Nineties was less intense than it is today, and Price Chopper sought to downsize its footprint here to be consistent with the chain’s Kansas City store location strategy.

A new 20-year Price Chopper lease was executed in the summer of 2023 that reduced the size of its space to 70,000 sq. ft. Simultaneously, with the execution of a new Price Chopper lease, the City of Independence approved a $12 million economic incentive package to assist 46

There are plenty of great locations to be found north of Florida, Texas, and Arizona.

Richard Dube is the president of Westmont, Ill.-based Tri-Land Properties.

ETHNIC GROCERS GROCER NAME

ETHNICITY

# STORES IN THE U.S.

H Mart

Korean

97

Fiesta Mart

Hispanic

60

Cardenas Markets

Hispanic

54

Patel Brothers

Indian

50

Mitsuwa Marketplace

Japanese

50

MAY/JUNE 2024

CHAINSTOREAGE.COM

LEADERS

BOB MYERS

on urban-to-suburban migration

C

OVID-19 brought forth many changes in American society.

Some were temporary, like wearing face masks, and some look like they will remain embedded in our lives for decades to come.

A LinkedIn study found that, in April of 2022, 20% of job postings offered remote-work opportunities. That was twice the share posted in January 2021. Pre-pandemic, only 3% to 5% of employers offered work-at-home options.

The effect that this incredible social shift has had on neighborhood centers has been profound. Center visitation has been increasingly activated throughout the day, and the shift has caused operators like us at Phillips Edison & Company to remerchandise centers with new uses.

Medical retail—or medtail as we call it at PECO—is a fast-growing use in PECO’s Neighbor mix (our tenants), and we continue to see strong demand from this category. Urgent care, veterinary clinics, physical therapy, and dentists are all vying for spaces in our centers. Also, we are seeing demand from spas, stretch studios, and cryotherapy. What we’re observing now is a suburban population that wants access to these services closer to home as hybrid work continues. PECO’s neighborhood shopping centers are optimally located to serve those needs.

Looking at Placer.ai traffic data, we find that households make 1.6 visits a week to the grocery stores that drive our merchandise mix. Today our food and dining visits are expanded throughout all dayparts at our restaurant Neighbors. National restaurants including Wingstop, Starbucks, Chipotle and Dave’s Hot Chicken are getting ahead of the suburban market trend, taking greater advantage of the growth available in the suburbs and secondary markets.

PECO owns and operates more than 300 centers nationwide and is one of retail real estate’s leaders in occupancy with a portfolio-wide rate of 97.4% as of the end of 2023. For center operators, this has been the best operating environment that we have seen in 20 years.

One big reason for this is the dramatic increase in the dependence that work-at-home suburbanites have on our centers. We’re witnessing a population that wants access to all of their necessities closer to home.

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The other big reason is the historic decline in construction of new retail space in nearly all markets nationwide. We’re asked all the time about when new supply will be coming on stream. We think it could be as long as seven to 10 years before we see retail construction return to the level it was two decades ago.

PECO’s national accounts team has solid relationships with national chains, however, and they do whatever they can to help tenants gain access to new markets. We deal with many retailers that are looking to add 100 or more stores a year, and our national accounts associates work diligently to accommodate them. In turn, many of these retail brands have been willing to modify their standard store footprints in order to secure spots in PECO’s highly trafficked centers.

What we’re observing now is a suburban population that wants access to a wider variety of services closer to home.

PECO is dedicated to helping national retail brands meet their expansion goals, so we are constantly on the lookout for well-located suburban centers to acquire. Last year we invested $279M in new center purchases, and we are looking to acquire approximately $250M in assets in 2024. We are focused on acquiring centers anchored by the No. 1 or No. 2 grocers in the nation’s top 100 markets for centers that fit within our grocery-anchored, neighborhood shopping center strategy.

Migration shifts since the start of the pandemic, along with the shift toward hybrid work, have led to a suburban resurgence, impacting everything from retail to dining and benefiting PECO’s suburban market locations. We are currently seeing strong demand for our spaces and are positioned to grow and excel as we look ahead to the next five to 10 years.

Bob Myers is the president of Cincinnati-based Phillips Edison & Company.

MAY/JUNE 2024

CHAINSTOREAGE.COM

¨

Senior Director of National Accounts, East

LEADERS

CARMEN SPINOSO on the true story about today’s malls

A

s 2023 was ending, we gathered our senior management team to review the past year and look forward to the year ahead. It is a time of analysis, visioning, budgeting, and reflection. We look inward and discuss broader industry issues and trends. Following our discussions, I found it interesting that dire predictions made about the mall’s future prior to the pandemic turned out rather differently than had been supposed. Here are three:

RISING RENTS, OCCUPANCIES, AND SALES IN MALLS. Honestly, ever since I entered the industry in the Eighties, the predominant prediction was “The Death of The Mall.” First, it was big boxes that would hasten its doom, then power centers and lifestyle centers. The pandemic hit, online sales soared, and doomsayers all nodded their heads that it would be the internet that would deal the death blow.

They were wrong. It didn’t happen. People are going to the mall, and new brands and uses are leasing spaces in them. Retailers have become keenly focused on their physical presences for a multitude of reasons. There is little new construction happening. Retail space availability is at 4%, and it’s malls that are often the firstchoice locations for expanding retailers, restaurants, and entertainment venues. Our more than 85 properties are experiencing rising rents, increasing occupancies, and improved traffic and sales.

As a private company, Spinoso Real Estate Group (SREG) does not report operating results, per se, but the public REITs that do underscore the strong performance of malls operated by skilled sponsors. Simon Properties recently reported that occupancy (95.8%) and rents have increased significantly versus prior year and are at all-time highs. Macerich, too, reported climbing occupancies and a return to pre-pandemic levels.

In this year’s first quarter, we at SREG achieved a remarkable 180% increase in new deal square footage compared to last year’s Q1. This growth has translated into a remarkable 155% increase in gross revenue during the same timeframe. Furthermore, our pipeline for new leases and letters of intent under negotiation is at an all-time high.

NEGATIVE CHANGES IN E-COMMERCE. Pre-pandemic, headlines predicted a future in which everything would be purchased online and delivered to doors by drones. Amazon Prime promised next day delivery, for free. But we are seeing an opposite trend and narrative growing. Overnight shipping is often not free. Indeed, 50

it’s very expensive. Many products once available on Amazon are no longer available. Damaged products, stolen deliveries, incorrect order fulfilment, and other issues are motivating shoppers to purchase in person.

The real story that has played out is that of national chains incorporating in-store pick-up of online orders within their stores.

Macy’s, Home Depot, Dick’s Sporting Goods, specialty shop retailers, and even food court tenants such as Chick-fil-A have taken up the practice, and SREG works closely with our tenant partners to accommodate and promote this feature.

MUNICIPALITIES ARE MORE PROACTIVE ABOUT MALL REDEVELOPMENTS. I have had the good fortune to personally lead a

multitude of shopping mall redevelopments. Historically, these types of projects--both large and small-- were met with significant resistance from municipalities, communities, and often anchor tenants with approval rights. This situation has changed dramatically. Municipalities are now quite desirous to see “their mall” prosper and are supportive of plans to improve, evolve, and invest in these important community assets.

Municipalities are now quite desirous to see ‘their mall’ prosper and are supportive of plans to improve, evolve, and invest in these important community assets.

We are now working on a mall property in Wisconsin where, prior to our involvement, an anchor tenant closed and vacated. The building and the parcel were owned by a third-party that leased it to the former department store. When the department store closed, officials used city resources to purchase the box. They recruited a residential developer to redevelop the box and parcel into much needed quality residential product. We worked with the city and other anchors to develop a new reciprocal easement agreement designed to address the needs of an evolving mall.

As so often happens in our media-drenched society, the mall storyline that was set down via hearsay and the media did not come to pass. And well-operated, enclosed centers in viable markets continue to be the main attraction on Main and Main.

Carmen Spinoso is chairman and CEO of Syracuse-based Spinoso Real Estate Group.

MAY/JUNE 2024

CHAINSTOREAGE.COM

LEADERS

ADAM IFSHIN

on retail real estate’s power surge

H

ow many of you reading this article have been to a social event, told somebody what you do for a living, and heard in reply, “You’re building more stores? Doesn’t everybody buy everything online these days?”

You then patiently explain to them that, in fact, about 85% of retail purchases are made in stores and that, in fact, you have been tasked with a goal to open 70 new locations this year and are having a tough time finding available space.

Your questioner’s jaw drops.

Near the end of 2023, DLC secured two institutional joint venture partners to rapidly expand our open-air center portfolio. We acquired four centers within our traditional markets that comprise 765,000 sq. ft. of gross leaseable area, and we obtained a significant growth capital commitment that we intend to use to double the size of our portfolio over the next three years.

Retail real estate is experiencing a power surge.

Both institutional and private equity investors are aggressively snapping up retail real estate to secure better returns. Better returns than from office. Better than from multifamily. Better than from industrial.

Retailers seem to care less than ever before about the source of an order, exemplified by Target and its efficient in-store pickup system for online orders. They’ve got what you ordered in your local store. You pull up your car, pop your trunk open, and they put it in. The probability of returns is reduced by six times. Should you take it home and decide to return it, you just take it back to the store. And while you’re there, you are very likely to make additional purchases.

American consumers are spending, and one thing I hear consistently from tenants is that none of their stores are losers. All are making money in our open-air centers, which provide tenants with a massive merging of convenience, service, food, and value. And that value continues to rise with new classes of retail flowing into our centers.

Wellness, fitness, pet care, dental. The array of uses that are joining the tenant lists at our properties are more varied and more attractive to suburban consumers than they’ve ever been in the 30-plus-year history of DLC. Some of the deals we are doing are

52

ones we’d never have imagined a decade ago.

We just did a retro-fit of what was an A.C. Moore space in Fredrick, Md., at Fredrick Crossing for a 22,000-sq.-ft. veterinary hospital. And, considering today’s suburban lifestyles, we don’t intend it to be a unicorn. At that center a local resident can drop her dog off at the hospital in the morning, go to work, return at the end of her day, and shop at Walmart and Kohl’s and Dollar Tree in the same center before picking up her pet. She can also pick up some dinner from one of our food and beverage tenants before she heads out of the parking lot.

American consumers are spending, and one thing I hear consistently from tenants of our open-air centers is that none of their stores are losers.

DLC has been able to work around construction and materials delays for new builds and retro-fits such as this one with the establishment of Renovo Construction in 2020. We have also expanded our services to include architectural services with the acquisition of NWS architectural firm based out of Chicago. That allows us to be able to sit down with retailers who are adding and redesigning their stores and get them built the way they want them and deliver them on time.

Smart retailers who appreciate the increasing value of retail real estate want more stores. They want more physical presence and connectivity with the consumer. Brick-and-mortar has long proved itself as the most efficient and most productive way to create a loyal customer base. That’s why Target, Walmart, Costco, Home Depot, Best Buy, and Sears find themselves among the top 20 online shopping sites. And why so many top direct-to-consumer brands are building stores.

Adam Ifshin is the founder and CEO of Elmsford, N.Y.-based DLC Management Corp.

MAY/JUNE 2024

CHAINSTOREAGE.COM

REAL ESTATE

Retail Occupancy Levels Hit Five-Year High — So Do Costs Pressure will be felt by brands with higher occupancy costs

By Zachary Russell Rents and occupancy costs are rising, increasing challenges for retailers, restaurants and other businesses.

Retail occupancy levels hit a five-year high in 2023 at 88.4%, according to Datex Property Solutions’ recent 2024 Market Outlook report. When spaces do become vacant, the time to re-lease that space is shrinking, with the average number of days to fill a vacancy last year coming in at 95 days, a decrease of 18% from 2022 and a 24% compared to 2021.

Both new lease and rent renewals are increasing, but at different rates. In 2023, 61.5% of new leases increased compared to the previous tenant, a jump from 55.5% in 2022. While 30.3% of new leases decreased, and 8.1% stayed flat, average rents across all retail categories were 6% higher in 2023.

When it came to renewals, 83.2% of leases increased in price in 2023, a rise from 77.2% in 2022. Only 4.7% decreased and 12% stayed flat. The average rent change for renewals was an 8.8% increase.

In addition to increasing rents, occupancy costs were at a five-year high in 2023 at 7.43%, rising from 6% in 2022.

Datex noted in the report that this could be a greater factor in tenant failures than increased rents. Datex defines occupancy costs as rent plus triple net expense reimbursements divided by sales.

“The one possible fly in the ointment in terms of the overall health of the retail market is that growth in rental rates outpaces growth in retail sales, leaving retailers fewer dollars to actually operate their businesses,” said Mark Sigal, CEO of Datex.

In 2023, the merchant categories that had the highest sales per square foot also had the lowest occupancy cost 54

percentages. The sectors include sporting goods (1.6%), supermarkets (2.1%), beauty supplies (4.7%), fast food (6.2%), restaurants (6.4%) and specialty food retailers (9.7%).

Sectors with the lowest sales per square foot and highest occupancy cost percentages included movie theaters (20.4%), fitness centers (20%), office supplies (17.3%) and crafts (12.7%).

“Given their relationship to merchant health, the overall rise in occupancy costs could be an early sign that portfolio owners may see an increase in tenant failures in 2024, which would change the calculus for unfettered growth,” Sigal said. “The way to think about rising occupancy costs is the bigger the slice of the sales pie that is eaten up by rent, the fewer slices that are available to hire people and to actually market your products and services.”

THE HAVES AND HAVE-NOTS Sigal noted that the strongest performing categories, especially sporting goods, beauty and food, are being driven by consumers more flush with spending money than they were prior to the pandemic.

While thriving categories change, these retailers will be attractive to developers, as they drive traffic to malls, which have rebounded to pre-pandemic levels.

“The data is showing pretty clearly that there is a separation between the haves and have nots in retail,” he said. “Beauty supplies, supermarkets, sporting goods, and especially food, are doing very well.

Certainly from a retailer perspective, we’re seeing stronger demand at open-air than enclosed malls.”

A recent survey from digital marketing firm NP Digital found that these increased rents are top-of-mind for retail professionals.

Of the 1,000 retail professionals across several sectors surveyed, more than 70% of survey respondents said they saw an increase in their brick-and-mortar rent over the last year. Nearly half of respondents said these rent increases are hurting their profits, and two-thirds said they have considered closing due to the costs.

More than half (56%) said they had begun sharing retail spaces to cut down on costs. NP Digital’s VP of marketplaces David Hutchinson said this could be an increasingly popular strategy as rents and occupancy costs climb.

“Shared retail spaces often occur with brands that have complementary audiences to one another,” said Hutchinson. “They are not competing with the other brand, but rather allowing the customer to shop freely between both brands to drive sales and grow brand awareness.”

Hutchinson cited store-in-store partnerships, such as Ulta Beauty and Target, as a way for retailers to not only increase sales through a widened availability, but also cut costs on physical stores.

“Ulta’s increasing presence inside Target is a prime example of how common shared retail spaces are becoming,” he said. “The partnership started with 52 locations and has plans to open 800-plus in the near future.”

Kohl’s does a fantastic job of recognizing higher rents versus foot traffic, Hutchinson added.

“Most Kohl’s stores now have Amazon returns,” he said. “While I’m not familiar with the commercial agreement, it [Amazon returns] drives foot traffic, helps subsidize the rent and customers with returns get a voucher to spend instore to encourage sales.”

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