OAKBROOK, IL—Shopping-center owners and management companies are expanding their marketing efforts beyond direct mail to expand their websites, social media and other VIP programs in order to connect with and form relationships with their customers, Mid-America Asset Management, Inc. principal Marget Graham tells GlobeSt.com. We spoke with Graham and Mid-America Real Estate Corporation principal Ben Wineman about what shopping-center buyers are looking for in the properties they seek and how owners are working with property managers to please customers.

GlobeSt.com: What are shopping-center buyers looking for in the properties they seek?

Wineman: The market is bifurcated right now between the types of retail product that are out there and the pricing and buyer types that go along with it. There is a widening disparity in the type of buyers and pricing they're willing to pay, depending on whether we're talking about urban-infill retail, grocery anchored centers, power centers, single-tenant net lease and enclosed malls. The latter are controlled by the major mall REITs, but as a general statement, we see buyers active in each of those asset classes within retail. That has not changed.

What's changed since the beginning of the year is the announcements of department store closures and bankruptcies of outdated or overleveraged retailers and a generally negative tenor toward retail coming out of the national press, including business publications and newspapers. Despite this portrayal, retail transactions are still very active and sophisticated buyers continue to be cautious in their approach.

Some buyers are very focused on flight to quality, getting the top-tier grocer within the market and having the right balance of shop space and a defendable long-term retail location serving a community. Those assets still garner top pricing from a low-cap-rate perspective, and urban-infill retail continues to get a lot of attention and focus. Within the big-box and power centers, in core markets there is more positivity because there will always will be additional retailers active in that market. In the secondary and tertiary markets, we continue to see buyers who are active, but they're more cautious about product due to more limited backfill opportunities and longer potential vacancy periods.

Wineman: “What's changed since the beginning of the year is […] a generally negative tenor toward retail coming out of the national press, including business publications and newspapers. Despite this portrayal, retail transactions are still very active and sophisticated buyers continue to be cautious in their approach.”

GlobeSt.com: Are investors seeking long-term hold or are they looking to renovate and sell these centers for profit?

Wineman: We have a lot of both. Some investors will absolutely look at long-term hold, and there again is a flight to quality. The active part of the market has core-plus investors looking specifically for opportunities with vacant big-box space with below-market rents. From a capital-stack perspective there continues to be a lot of equity looking for core-plus opportunistic returns, of which there are limited investments available which leads to strong competition in the asset class.

GlobeSt.com: What are property owners doing at the sites to entice customers to spend more time there?

Graham: With the pressure of Internet sales on brick-and-mortar retail, there is more focus than ever on maximizing the shopping center merchandising mix to drive customer traffic. From grocery to health clubs and boutique fitness concepts, shopping center owners are focused on strategic leasing to drive daily traffic to their property. While restaurant and entertainment concepts have always been part of the shopping center experience, the allocation of the merchandising mix dedicated to these concepts and other experiential retail is increasing, which extends the drawing power of a property as well as the stay time.

Experiential retail today goes beyond the restaurant, theater and upscale bowling alley to include unique concepts like food halls, iFly and Top Golf. The off-price category, including retailers Nordstrom Rack, TJ Maxx, Ross and DSW, among others, also contributes to the shopping-center experience to draw the customer into the center for the treasure hunt to find the luxury brand at a discount price.

GlobeSt.com: How are owners working with property managers to increase sales at these centers and please customers?

Graham: Shopping center owners and management companies are expanding their marketing efforts beyond direct mail to add and expand to their website, social media and other VIP programs in order to connect and establish relationships with customers. There is also a push to reinvent and activate common-area spaces to extend the shopping-center experience. This may include gathering areas and additional seating, use of common areas for regular concert and/or movie series, special events and farmers' markets. Ultimately, the goal is to increase the frequency of the customer visit, extend the stay time at the property and consumer expenditure to drive tenant sales.

GlobeSt.com: What are shopping-center buyers looking for in the properties they seek?

GlobeSt.com: Are investors seeking long-term hold or are they looking to renovate and sell these centers for profit?

GlobeSt.com: What are property owners doing at the sites to entice customers to spend more time there?

GlobeSt.com: How are owners working with property managers to increase sales at these centers and please customers?

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Enticing Retail Customers to Stay

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