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Real Estate Buzz for 2010


With expansion slowing, the buzz word for 2010 is “optimization.”

In the February issue (“Focus on Site Selection Trends,”), I talked with a panel of retail real-estate experts to explore just what to expect in a year that has all the markings of a transition period of economic ups and downs.

My panel of experts all predicted that site optimization -- making the most of existing real estate -- rather than new store growth would be the retail game plan for 2010.

Recently, I also talked with a trio of executives from Troy, N.Y.-based Pitney Bowes Business Insight about the state of retail real estate in 2010. This is what they had to say:

“With respect to a picture of the retail landscape in 2010, you won’t see anything on the order of growth,” said Gary Faitler, senior manager, client services for PBBI, “but more on the order of a shifting of players within existing space.” What we’ll see unfold this year is a shifting of healthier entities that will take advantage of desirable properties that are currently dark, said Faitler.

“To his point,” added Deb Purcell, director, client services of strategy & analytics, “when you look at the numbers that came out after Christmas, you saw minimal growth in the retail sector overall, but there were certain entities reporting significant growth.” Some of those that experience growth in 2010, said Purcell, will be “the survivors of category contraction, where the primary competitor has left the market.”

Examples include Best Buy, which has grown out of rival Circuit City’s bankruptcy, and Kohl’s, which has taken over a multitude of Mervyn’s vacancies.

Best Buy isn’t the only winner from attrition. Other retailers are leveraging the elimination of competition as well. “The electronics space has remained pretty healthy,” said Al Beery, director, client services of U.S. strategy & analytics, “and regional players such as Hhgregg are starting to ramp up growth.” Both Hhgregg and its big-boy competitor Best Buy have unveiled growth plans that are comparable in terms of total number of stores to open in 2010 -- about 25 units each -- but “that’s a huge percentage of growth for Hhgregg, given its total chain size,” said Beery.

In the food sector, value will be a driver in 2010. “Aldi has two things going for it,” said Purcell. “It’s hitting the market sweet spot and it’s also early enough in its concept lifecycle that it’s not facing anything close to market saturation.”

Panera Bread is another concept that has great presence but still with room to grow, said Purcell.

“Also retailers to watch are those that are in an ‘innovative discovery mode,’” said Faitler, who described grocers such as Trader Joe’s and Whole Foods as destinations that are “still unique and that consumers are still discovering.”

All three agreed on the trends to watch unfold in 2010: retrofit of existing space rather than newly built shopping centers; growth of retail that caters to macro-demographic trends such as sustainability, the aging of the population and a growing ethnic diversity; smaller store prototypes geared toward urban settings; and a surge in online retail, which “fuels the ability for retailers to consider their real estate location as just one channel,” said Purcell.

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