The crucial importance of store openings and renovations
When a store opens for business, everyone benefits – the retailer, the landlord, and the community. The same can be said for when a store is renovated.
It’s a big reason why our teams at DLC, NWS Architects, and Renovo Construction are specifically focused on getting stores open – or reopened as the case may be – as quickly as possible. We want those registers ringing. When a store is signed and not open, you haven’t accomplished the goal in the eyes of the consumer.
The American consumer remains incredibly resilient despite how hard we’ve been hit by inflation. Wages are rising at nearly two times the rate of inflation. Consumer credit is especially well-behaved.
Retailers with quality balance sheets and top-flight management know this and are anxious to continue to expand. They also are smart enough to renovate their existing locations to keep them relevant and welcoming to their customers. For example, Walmart is a great believer in keeping its stores up-to-date in order to meet the needs of their loyal customers. As a result, in just one quarter this year, their top line growth nearly equaled TJX’s entire annual total revenue.
At a recent event that I attended, a slide about retail bankruptcies over the past five years was shown. It occurred to me that the brands on the list uniformly had compromised balance sheets and top-level management that had been slow to adapt to current consumer needs and wants.
American consumers are highly conscious of what they want to achieve for their families. They have money to spend, and it has become clear to them that e-commerce can satisfy only a modest portion of their needs. They continue to rely on brick-and-mortar stores for value. That is vouched for by the average 94% occupancy rate across the 70 plus open-air centers in DLC’s portfolio. We’ve leased over 125 anchor boxes in the last six years with the overwhelming majority of them being taken by value oriented retailers who are singularly focused on delivering value every single day to their customers.
To stay current and in favor with their customers, retailers should plan to renovate their stores every seven years, because most of them are beaten up from high traffic by then. Consumer expectations have changed – and will continue to do so, driving retailers' consistent need to evolve. We hear so many retailers say they are refreshing the brand, investing in their store experience. These are code words for the need to renovate, and shoppers will surely know when a store is due.
And it’s basic things that make a big difference. For example, if a shopper goes into a store and takes her toddler into a restroom that’s disgusting, if it takes too long for her to check out, she might be making her last visit.
To get the job done, clever retailers use their own capital to finance renovations, and most use pre-approved vendors for renovations. Long lead-times are necessary if the job includes HVAC, refrigeration, or electrical upgrades. National brands try to do all their stores in a single market at roughly same time and are good at planning equipment purchases for these all-at-once renovations at the best prices.
At our properties, we are seeing this play out, and in more and more instances, tenants of all sizes are relying on our in-house team of architects and GC to complete that renovation or roll-out to get open faster.
It’s a sign of the times – stay current or get left behind. We work with many great retailers who know they have to invest in their stores and we are able to partner with them. After all, their store is a shared investment.
Here’s to registers ringing everywhere this holiday shopping season.
