Staying Viable: Developers

The first question around the room addressed the issue of survival, specifically, “What have successful retail developers and brokers done to stay viable over the last couple of years?”

“On the developer end,” said Jeff Berg, senior vice president at LANE4 Property Group, “I think you’ve seen people have to change their product type to meet the market.” As Berg explained, the days of the greenfield, edge-of-town power center development have been yielding to those of infill, mixed-use development closer to the regional core.

“We’re just back to basics,” said David Block, president of Block and Co., Inc., Realtors. His company continues to look for good property and to nurture relationships with its clientele.

Jerry White, senior retail adviser with Grubb & Ellis/The Winbury Group, observed that retail developers follow retailers, and that retailers are downsizing and shifting modes, specifically looking more in the older areas of the metro.

“It does seem that retailers and developers are focusing on locations that are not dependent upon new housing and subdivisions being developed right over the hill,” agreed Owen Buckley. “They’re coming back into areas that were passed over during the heyday, so to speak.”

As an owner/ operator of retail properties, John Rubenstein, of Rubenstein Real Estate has been challenged to keep the small retailers in business. In many underperforming developments, this has meant a decline in rental rates.

“From a financing prospective,” offered Joe Platt, vice president of Grandbridge Real Estate Capital, “it’s never been more important to understand who you have in there, to follow their balance sheets and to understand what direction they’re going.”

Chase Simmons observed that his retail developer clients were much less likely to accept risk on a project than was the case a few years ago. They can no longer assume that growth will cover the shortcomings of a given deal. Added Bob Johnson, president of the R.H. Johnson Co., “Everyone is back to basics and trying to keep their spaces filled.”

Back to the basics, however, does not mean that developers shed their ambitions. “People are getting very creative in terms of how they go after tenants, how they structure deals,” said David Hickman, senior vice president of CB Richard Ellis.

Jeff Haney, RED’s senior leasing associate, noted that RED Development had been searching the country to find new tenants to look at its projects. “A lot of them are interesting,” he added, “They’ve found the value.” As an example he cited Charming Charlie’s, a fashion accessory store that RED has helped establish in KC.

Staying Viable: Retailers

“The successful retailers,” said Bob Johnson, “offer superior value right now.” They are the ones that kept their inventories down and continued to “refresh their concept” when times were good.

“We’ve heard a few times, as far as what retailers are doing to survive, is really understanding what the consumer views as the value proposition, and then delivering on that value proposition,” affirmed RED’s Dan Lowe.

Beauty Brands has been one of those retailers to deliver value in a challenging time. Founded in 1995 by Bob Bernstein, the company now has more than 50 locations in 10 states.

“What’s helped make us successful the last couple of years,” said vice president of real estate Mitch Truster, “has been controlling our costs—expenses, occupancy costs, inventory costs, utilities, labor—that’s been key, controlling costs.” Beauty Brands, he said, has also been selective in where it opens stores, focusing on demographic trends and co-tenancy.

Gail Lozoff, who also co-founded Bagel & Bagel, is hard at work on her newest co-creation, Spin! Neapolitan Pizza. “Being sensitive to what the consumer needs has really been what we’ve had to focus on,” said Lozoff, “particularly in relation to value perception.” Spin! now has four locations in greater Kansas City. Lozoff’s partner, Ed Brownell, reiterated the importance of “staying fresh.”