Retail Split Widens Between Luxury, Value

CHICAGO-Growth in consumer confidence, though slight, is translating to a boost in the retail market, according to Jones Lang LaSalle in a recent global report. Retailers are continuing to talk about new stores and plan for the holiday season, while investors are seeing better quality properties come on the market, and lenders opening up cash flow.

Many projects put on hold during the global financial crisis are underway again, according to the report. However, the retail landscape for the next few years will be challenging, particularly in mature markets. The growth hasn’t come without change, says Greg Maloney, president and CEO of JLL Retail. Both retailers and owners have had to improve business practices, and lenders are finally pushing properties off balance sheets, in some cases through foreclosure. “This will start the process, get activity going for investors. It’s slow improvement, we’re not on a sharp curve upward,” Maloney says.

Retailers are ready to grow, he says. “They’re talking about opening new stores and longer lease renewals. They got rid of non-performing stores and are in pretty good shape. While they may be only talking about five to 15 new stores, instead of the 40-50 new stores a year we saw earlier in the decade, it’s still expansion,” he tells GlobeSt.com.

The trend of the year continues, he says, as shoppers are frequently choosing either luxury or value stores to shop in, and ignoring the middle-level chains. A good example is Hingam, MA-based Talbots, which recently announced it plans to close up to 100 stores and is launching an outlet. “Talbots has been one of the best of the middle, but like most retailers today, they need to take a position, are they luxury or value?” Maloney says.

Another example would be Taubman Centers’ Great Lakes Crossing in Auburn Hills, MI, a 14-year-old large indoor mall that just announced it will transfer almost completely over to outlet stores. Maloney says he’s not sure a complete overhaul is the way to go, but he agrees a firm stance makes an impression on the consumer. “You have to define yourself as not in the middle today, that section of retail is suffering the most. Even in restaurants, the fast-food companies are announcing expansions, while sit-down restaurants that aren’t at the top of the local market are suffering,” he says.