The Tenant is King
In a time of evolution and change, when buzz terms like right-sizing and asset management dominate retail real estate conversations, an unwavering focus on the tenant is more important than ever before. Chain Store Age talked with Jeff Kuchman, Principal/Director Tenant Brokerage, Mid-America Real Estate Corp., based in Oakbrook Terrace, Illinois, about the company’s tenant representation business and how it has continued to take center stage.
How much of a focus is tenant representation for Mid-America Group, and how has that part of the business changed over the last few years?
With the exception of lending/financing, Mid-America is involved in virtually every aspect of the retail real estate business. However, tenant representation is as much a part of our core mission as it was 30 years ago. Our five offices operating in the upper Midwest represent some 250 national, regional, and local chain stores in nearly every retail category. Evolution and change are critical to our retailer clients, and it’s critical that we evolve alongside them, being ever mindful that we remain, at the most basic level, information providers. Providing our clients with timely and accurate information that allows them to evaluate and respond to real estate opportunities remains the most important aspect of what we do … and we do that through media and ways that we’d never have dreamed possible before. Whereas 30 years ago that information was almost expressly used for purposes of securing new store locations, today we’re involved in all phases of our retailer clients’ real estate needs.
What kinds of services/advantages do you provide to tenants that fosters their loyalty to your firm?
As I mentioned, strategy creation, new store deployment, acquisition evaluation, lease renewals, dispositions, down/rightsizing, asset and facilities management, vendor agreements — we become so deeply woven into our clients’ real estate departments that we’re viewed as an integral part of the team from day one. That depth of coverage only happens when we take the time to truly understand what makes each client successful, and how real estate serves the greater purpose of allowing each to better service their customers. We view relationships over a long period, and always attempt to counsel with that in mind.
What are the biggest challenges facing retailers today with regard to their real estate activities?
Securing the best possible locations at affordable costs of occupancy remains our clients’ biggest challenge, especially in light of the lack of new development activity over the past seven plus years. In Chicago alone, we averaged 5.5 million sq. ft. of new shopping center development over a 25-year period ending in 2007. We’ve averaged less than one million sq. ft. per year in the period since. The absorption of vacant space and the dearth of new developments have driven rents and acquisition costs steadily higher, so identifying and securing the right piece of real estate that fulfills our clients’ mission is even more critical than ever before. Construction costs are another factor adversely affecting our clients’ occupancy costs. Acquiring greater market share is expensive, and doing so while balancing investor and shareholder interests is an art.
What about their greatest opportunities?
The greatest successes are derived from overcoming the greatest challenges. By establishing a clear vision for growth/market share, and working with the right team of seasoned real estate professionals, our clients are apprised of opportunities in advance of their competitors and secure the most profitable locations from which to service their customers. Our goal is to make every invested real estate dollar count for our clients.
Overall, how would you describe the state of the industry right now, and what are Mid-America’s strategies for tenant success?
Retailing is a tough, competitive business – one that constantly evolves. The internal real estate departments today are accomplishing more with less in terms of internal personnel and support than ever before. So much of what we do consists of activities that one or several internal real estate professionals did years ago. When our clients are spread thin, it’s our job to make their time with us as efficient as possible.
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