Control Your Real Estate

It’s at times like these that retailers need to be most in control—of labor and expense, of sales trends, of inventory, of real estate.

For this annual Real Estate Technology & Solutions section in Chain Store Age, we talked with four top real estate solution providers about specific ways that retailers can stay in control of their real estate.

Information driver’s seat: To maintain control of a real estate portfolio, it is imperative to be armed with as much information as possible, according to Andy Thomas, president and COO of Atlanta-based Virtual Premise.

“Retailers must get their arms around the terms of their leases,” Thomas said. “During the good times, retailers tend to focus on a more limited array of lease terms and information, such as per-sq.-ft. rates, renewal options and CAM costs.” But, he explained, when times are tough it’s most important to drill down to more lease detail.

“Hidden inside those leases is a lot of information relating to kick-out clauses, co-tenancy clauses and other terms that, when the lease was negotiated, were intended to manage risk,” Thomas said.

“Now is a good opportunity to know what those terms are, so that the portfolio can be managed more aggressively.”

Real estate technology provides the tools that retailers need to most effectively manage lease information. A reliable database of information that provides strong reporting and filtering capabilities can allow a retailer to thoroughly examine alternatives.

“The Virtual Premise Retail Edition has a fully integrated lease and portfolio management capability, along with deal-management capability,” Thomas said. With that, a retailer can determine viable actions and options, then move to aggressively manage deals and monitor store performance.

“Understanding store performance will help a retailer understand how stores are performing from a profitability standpoint, not just revealing what sales are,” said Thomas. “Retailers can then aggressively move to dispose of stores that need to be shed—and that may be readily doable through the lease clauses.”

With big-box stores departing shopping centers in growing numbers, kick-out clauses may well be triggered, allowing retailers to terminate leases without penalty.

“By integrating lease information with store-performance information, a retailer is then able to make decisions about what actions need to be taken, and then aggressively manage the projects that come out of those analyses.”

Customer intelligence: Another piece of the information puzzle that can potentially ensure proper real estate control is customer knowledge.

According to Charles Wetzel, president and COO of Fort Worth, Texas-based Buxton, “Those retailers who win at the end of the day will win because they know who their customers are, they know where those customers are located, and they’ll know the value of those customers with regard to their specific stores.”

That kind of detailed customer information arms retailers with the data they need, continued Wetzel, to make strategic real estate decisions, strategic marketing decisions and the right merchandising decisions.

At a macro level, the customer information starts with a basic ability to map customers and see customer profiles with regard to geography and demographics. “Buxton offers two platforms designed to do just that—a mapping-based platform that allows retailers to see where their stores are, as well as customer location, cannibalization rates and competitive impacts,” he said.

Buxton’s SCOUT application is a comprehensive online site and customer management system that provides instant access to data anywhere in the world. It allows retailers to view geographic representations of their current sites, actual customers and potential customers with one-click access to sales forecasts, site photos, signage images, aerial views, lease documents, site plans and other analysis reports.

“Real estate technology [such as SCOUT and another Buxton platform Micromarketer] is so important to the real estate process today for two reasons,” Wetzel said. “First, companies are requiring that you do more with less—and that, by and large, mandates the use of technology.” As well, he added, retailers are going to need to examine more closely and test more because “we are not in an era in which you can afford to make mistakes. That’s where real estate technology can be a real boon.”

Right-sizing real estate: If you want to maximize your real estate investment, “change the retail environment,” said Rick Davis, CEO and founder of Dallas-based Davaco. “Utilizing demographics and psychographics to right-size the space keeps the brand relevant and productive in an ever-evolving marketplace,” he added.

What Davis means by “right-sizing” is this: Right-sizing is a strategy that takes into account a number of consumer and economic factors to create an optimized store environment with the goal of maximizing profitability of a store fleet.

“Retailers and restaurateurs implementing right-sizing programs look at their consumers’ demographics and respond to what influences their shopping behavior,” said Davis. As they develop right-sizing programs, Davaco executes the changes in a rollout program providing quality, speed-to-market and minimal disruption to a store or its customers.

Specifically, right-sizing includes a variety of techniques to maximize store space, typically focused on creating the ideal product mix and placement, store design/layout and overall atmosphere for each store location. It may include approaches such as store closings, ADA upgrades, altering department sizes and inventory offerings or integrating facility improvements.

Davaco recommends a survey of existing conditions as the launchpad for right-sizing programs. Store information can be collected by Davaco field personnel via pocket PCs, then uploaded to client portals. Actual store data allow for value-engineering of programs so they can be the most cost-effective and efficient.

Creative tenanting: An over-supply of available real estate can offer a ready solution for retailers looking toward cost-effective expansion or a concept launchpad. But filling dark spaces must be approached strategically.

According to Andy Graiser, co-president of Melville, N.Y.-based DJM Realty, a Gordon Bros. company, some retailers and alternative concepts are getting their fair shake at vacant mall space. “Local retailers are being allowed access where they never have before,” said Graiser. In some cases, retailers are test-driving centers on a month-to-month basis, or on a low occupancy as a percent of sales, then will strike a deal following a successful trial. These kinds of deals make sense as part of a tenanting solution, but only if the big picture is considered.

“As store closings multiply and we see dark spaces put to non-traditional uses, landlords will have to figure out how to merchandise their malls differently,” Graiser said. But landlords are generally approaching solutions with care. “Even when faced with high vacancies, most landlords aren’t going to do something to make things worse for the center,” said Graiser. “That’s a fine line and a challenge the landlords have to struggle with.”