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ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas [email protected]

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Page 1: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

ICSC CenterBuild

Retail Update

November 2017

Garrick H. Brown

Vice President of Retail Research,

the Americas

[email protected]

Page 2: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Myths and Realities in the Age of newCommerce

• What is really happening, and why?

• How this trend will play out in 2018 and beyond?

• The good, the bad and the really, really ugly… (Who is growing,

who is shrinking and who is dying?)

Notes from the “Retail Apocalypse”

Agenda

Is it

Really?

Page 3: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Major Retailer Bankruptcies

Through November 2017

Source: Cushman & Wakefield Research

Aerosoles

Alfred Angelo

BCBG Max Azria

Bob’s/Eastern Mountain

Central Grocers

Gander Mountain

Gordman’s

Gymboree

HHGregg

Limited

Marbles: The Brain Store

MC Sports

Papaya Clothing

Payless

Perfumania

RadioShack/General Wireless

Romano’s Macaroni Grill

Rue 21

Toys R Us

Traffic Shoes

True Religion

Vanity

Vitamin World

Wet Seal

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Major Retailer Bankruptcies

Major Chain Bankruptcies Forecast Total

Page 4: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Major Chain Store Closures

Have surpassed great recession levels

Source: Cushman & Wakefield Research

What’s Really Happening (it’s not

just about Amazon)?

Convergence of Four Factors:

1. Acceleration of newCommerce

2. Over Retailed Marketplace

3. Race to the Bottom

Discounting (Rise of Off-Price)

4. Shifting Consumer Patterns

(Millennials Spending

Differently than Past

Generations)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Major Chain Store Closures

Major Chain Closures Forecast Major Chain Closures

Page 5: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Abercrombie &

Fitch

Apparel 60

4 – 7K SF

X X

Aeropostale Apparel 154

2 – 4K SF

X X

Aerosoles Shoes 74

2 – 4K SF

X X X X

Alfred Angelo Apparel 64

2 – 4K SF

X X X

American

Apparel

Apparel 110

2 – 4K SF

X X X

Applebee’s Restaurant

Casual

105 - 135

2 – 5K SF

X X X X

Ascena Retail

Group

Apparel 400

4 – 8K SF

X X

Page 6: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

BCBG Max Azria Apparel 120

1 – 4K SF

X X

Bebe Apparel 180

2 – 5K SF

X X

*Bed, Bath &

Beyond

Home 15

20 – 40K SF

X X X X

Benny’s Dollar

Stores

31

2 – 5K SF

X X X

Best Buy Consumer

Electronics

20 – 40

25 – 40K SF

X X

*Bed, Bath & Beyond is reportedly simultaneously opening 30 new stores.

Page 7: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Bloomin Brands Restaurant

Casual

43 – 60

3 – 6K SF

X X X X

Bob’s/Eastern

Mountain

Sporting

Goods

95

6 – 24K SF

X X X

Book World Media

Books

45

2 – 10K SF

X X X

Charlotte Rousse Apparel 5 – 10

2 – 5K SF

X X

Chico’s Apparel 50

3 – 5K SF

X X

Children’s Place Apparel 100

2 – 5K SF

X X

Country Curtains Home 20

3 – 4K SF

X X X X

Crocs Shoes 160

1 – 4K SF

X X X

Page 8: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Cub Foods Grocery 10

25 – 70K SF

X X

Dillard’s Department

Stores

2 – 5

100 – 200K

X

Famous

Footwear

Shoes 30

5 – 8K SF

X X X

Family Christian Books 240

2 – 4K SF

X X X

Finish Line Shoes 150

3 – 5K SF

X X

*Footlocker/Lady

Footlocker

Shoes 100

2 – 4K SF

X X X

Fresh Market Grocery

Organic

13

20 – 35K SF

X X

*Footlocker/Lady Footlocker is reportedly simultaneously opening 90 new stores.

Page 9: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

GameStop Video

Games

190

1 – 3K SF

X X X X

Gander

Mountain

Sporting

Goods

162

40 – 60K SF

X X

*Gap/Banana

Republic

Apparel 200

8 – 12K

X X X

GNC Misc.. 100

1 – 3K SF

X X X X X

Gordman’s Dept. 101 (50 to

Stage Stores)

X X

Guess Apparel 50

3 – 5K SF

X X

*While closing underperforming Gap and Banana Republic stores, the Gap is ramping up

growth of their Old Navy and Athleta concepts.

Page 10: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Gymboree Apparel 350

2 – 5K SF

X X

Hancock Fabrics Misc.. 255

10 – 17K SF

X X

HH Gregg Electronic 220

30 – 50K SF

X X

*Hibbett Sports Sporting

Goods

25 - 35

5 – 6K SF

X X

**IHOP Restaurant

Casual

20 - 25

2 – 5K SF

X X X

J Crew Apparel 50

2 – 5K SF

X X

JC Penney Department

Store

140

100 – 200K

X

* Hibbett Sports is reportedly simultaneously opening 50 – 60 new stores.

* IHOP is reportedly simultaneously opening 80 – 95 new stores.

Page 11: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Jos A Banks Apparel 85

3 – 5K SF

X X X X

Kings Variety Grocery 19

40 – 80K SF

X X

Kohl’s Department

Store

18

70 – 90K SF

X X

The Limited Apparel 250

1 – 5K SF

X X X

Lucy Apparel 44

1 – 3K SF

X X

Macy’s Department

Store

100

180 – 200K

X X

Marsh

Supermarkets

Grocery 18

50 – 125K

SF

X X

Page 12: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

MC Sports Sporting 66

12 – 45K SF

X X X

Michael Kors Apparel 100

2 – 5K

X X X

Naturalizer Shoes 7

1 – 4K SF

X X X

Neiman Marcus

Last Call

Off Price

Apparel

10

15 – 30K SF

X X X

New York & Co Apparel 30

2 – 5K SF

X X

Office Depot Office 100

20 – 40K SF

X X

Page 13: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Papaya Clothing Apparel 10 – 80?

2 – 4K SF

X X

Payless Shoe

Source

Shoe 700

2 – 4K SF

X X X X X

Perfumania Beauty

Fragrances

65

1 – 2K SF

X

Portrait

Innovations

Misc. 63

1 – 2K SF

X X X

RadioShack Electronic 1,000

1 – 4K SF

X X X X

Ralph Lauren Apparel 23

2 – 5K SF

X X

Regis Beauty

Salons

25

1 – 4K SF

X X X X X

Page 14: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Romano’s

Macaroni Grill

Restaurant

Casual

37 -93

2 – 5K SF

X X

Rue21 Apparel 400

2 – 5K SF

X X X

Save A Lot Grocery 13

20 – 65K SF

X X

Sears/Kmart Dept./

Discount

430

80 – 160K

X X X

Stage Dept. 20 (+ adding

50

Gordman’s)

X X

Staples Office 70

25 – 45K SF

X X X

Teavana Misc.. 379

1 – 3K SF

X X X

Page 15: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Closures

Announced retail closures for 2017 & beyond/typical CRE space usage

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Toys R

Us/Babies R Us

Toys 200 – 400?

10 – 40K SF

X X X

Traffic Shoes Shoes 12

2 – 4K SF

X X

True Religion Apparel 27

2 – 6K SF

X X X

Vanity Apparel 140

2 – 4K SF

X X

Vitamin World Health

Vitamin

51

1 – 3K SF

X X

Walgreen’s Drug Store 860

15 – 20K SF

X X X

Wet Seal Apparel 171

2 – 4K SF

X X

Page 16: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Top Retail Chains in Contraction Mode

Announced bricks-and-mortar closure plans

Source: Cushman & Wakefield Research

Top Contraction Categories:

Consumer Electronics

Apparel

Department Stores

Consumer Electronics

Media (Books, Video, Music,

Etc.)

Office Supplies

Sporting Goods

Closures at Record Levels

0 200 400 600 800 1,000 1,200

RadioShack

Walgreens

Payless

Sears/Kmart

rue21

Ascena Retail (various banners)

Gymboree

Hancock Fabrics

The Limited

Family Christian

hhGregg

Gap/Banana Republic

Gamestop

bebe

Wet Seal

Gander Mountain

Crocs

Aeropostale

Finish Line

JC Penney

Top 20 Major Chain Closures 2017

Announced Major Chain Openings 2017

Page 17: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Top Retail Chains in Growth Mode

Announced bricks-and-mortar expansion plans

Source: Cushman & Wakefield Research

Top Expansion Categories:

Dollar Stores

Discount Grocery

Off-Price Apparel

Beauty/Cosmetics

Super Stores (but often in

smaller sizes—Target)

Fitness/Health Clubs

Fast Food

Coffee

Fast Fashion

Clicks to Bricks

Value, Value, Value

0 200 400 600 800 1,000 1,200

Dollar General

Dollar Tree

Aldi

Starbucks

McDonald's

AutoZone

TJX (all banners)

Retro Fitness

Five Below

ULTA

Lidl

Ross

H&M (All Banners)

Sally Beauty

Tractor Supply

Athleta & Old Navy (the Gap)

Walmart

Wendy's

Sephora

Dollarama

Top 20 Major Chain Openings 2017

Announced Major Chain Openings 2017

Page 18: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

99 Ranch Grocery 5

25 – 50K SF

X X

Academy Sports Sporting

Goods

6

85 – 100K

SF

X X

ALDI Grocery 400 (900 by

2022)

15 – 25K SF

X X

Allen Edmonds Shoes 10

2 – 4K SF

X x X

Anthropologie Apparel 10

4 – 9K SF

X X X

Athleta/Old Navy Apparel 240

4 – 17K SF

X X X

AutoZone Automotive 200

3 – 7K SF

X X X

Page 19: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Bargain Hunt Dollar 30

20 – 25K SF

X X X

Blink Fitness Health Club 50

14 – 20k SF

X X X X X X

Bed, Bath &

Beyond

Home 30

20 – 40K SF

X X X X

Burlington Off-Price

Apparel

30

45 – 80K SF

X

Cabela’s Sporting

Goods

50

2 – 4K SF

X

Carter’s Apparel

Children’s

5

50 – 75K SF

X X X

Page 20: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Cheesecake

Factory

Restaurant

Casual

5 – 10

5 – 10K SF

X X

Chuy’s Restaurant

Fast Casual

10 – 15 X X X X X

Citi Trends Apparel 10 – 20

2 – 4K SF

X X X X

Costco Discount 30

125 – 150K

X X

CVS Drug Store 50 – 70

14 – 18K SF

X X X X X

Dick’s Sporting

Goods

Sporting

Goods

43

40 – 80K SF

X X

Dogtopia Pet

Supplies

20

6 – 9K SF

X X X

Dollar General Dollar 1,000

5 – 10K SF

X X X

Page 21: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Dollar Tree Dollar 650

7 – 10K SF

X X X

Dollarama Dollar 60 – 70

5 – 10K SF

X X X

DSW Shoes 20

20 – 30K SF

X X X

Fallas Discount

Stores

Discount 20 – 25

13 – 17K SF

X

Five Below Dollar 100

5 – 10K SF

X X X

Footlocker/Lady

Footlocker

Shoes 90

2 – 4K SF

X X X

Fred’s Drug Store 20 – 40

12 – 18K SF

X X X

Page 22: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Free People Apparel 12

4 – 8K SF

X X X

H&M (All

Banners)

Apparel 100

4 – 15K SF

X X X

Habit Burger Restaurant

Fast Casual

30 – 40

2 – 4K

X X X X X X

Hammer & Nails Beauty 50

1 – 2K SF

X X X X X X

Page 23: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Hibbett Sports Sporting

Goods

50 - 60

5 – 6K SF

X X

Home Depot Home DIY 5 – 10

100 – 150K

X

Hobby Lobby Misc.. 60

40 – 90K SF

X X X

Huddle House Restaurant

Casual

35

2 – 4K SF

X X

IHOP Restaurant

Casual

80 - 95

2 – 5K SF

X X X

J. Jill Apparel 15

2 – 5K SF

X X

Page 24: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Kirkland’s Home

Furnishings

40

6 – 12K SF

X X

Kroger Grocery 35

40 – 80K SF

X X

LA Fitness Health Club 30 – 40

34 – 42K SF

X X

Lidl Grocery 100

15 – 25K SF

X X X

Lululemon Apparel 40 – 50

2 – 4K SF

X X X

Macy’s

Backstage

Off-Price

Apparel

30 – 40

25 – 40K SF

X X

Marshall’s Off-Price

Apparel

35 – 50

25 – 35K SF

X X

Page 25: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

McDonald’s Restaurant

Fast Food

200

2 – 5K SF

X X X X X X

Natural Grocers Misc.. 20

1 – 3K SF

X X

Nordstrom Rack Off-Price

Apparel

25 – 35

25 – 35K SF

X X X

Orchard Supply

Hardware

Home DIY 8 – 16

25 – 28K SF

X X

Off Broadway Shoes 4 – 8

18 – 20K SF

X X

Ollie’s Bargain

Market

Discount 30 – 35

25 – 35K SF

X X

O’Reilly

Automotive

Automotive 210

7 -12K SF

X X X

Page 26: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Party City Misc.. 25 – 30

10 – 15K SF

X X X

PetSense Pets 30

4 – 6K SF

X X X X

Pollo Loco Restaurant

Fast Casual

20 – 30

2 -5k SF

X X X X X X

Publix Grocery 15 -20

40 – 80K

X X

Rack Room Shoes 20 – 30

4 – 6K SF

X X

Retro Fitness Health Club 125

12 – 15K SF

X X X X X

Ross Dress for

Less

Off-Price

Apparel

100

15 – 35K SF

X X X

Page 27: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Sally Beauty

Systems

Beauty

Salons

100

1 – 4K SF

X X X X X

Sephora Beauty

Cosmetics

70

3 – 7K SF

X X X

Shoe Carnival Shoes 20

5 – 10K SF

X X

Soft

Surroundings

Home 17

4 – 6K SF

X X

Sportsman’s

Warehouse

Sporting

Goods

8 -12

15 – 65K SF

X

Sprouts Farmer’s

Markets

Grocery 30

25 – 35K SF

X X

Page 28: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

Sprint Cellular

Store

40

1 – 3K SF

X X X X X X

Starbucks Restaurant

Coffee

400

2 – 4K SF

X X X X X X

Target Super Store 32

30 – 50K SF

X X X X X

Texas

Roadhouse

Restaurant

Casual

25 – 30

3 – 6K SF

X X X X X

Tim Horton’s Restaurant

Coffee

105

1 – 3K SF

X X X X X X

TJ Maxx Off-Price

Apparel

40 – 50

25 – 35K SF

X X X

TJX HomeGoods Home 80

30 – 50K SF

X X X

Page 29: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Announced Major Chain Openings

Not everyone is shrinking…

Retailer Type # Stores

Avg Size

Urban

High

Street

Cool

Streets

Mall &

Lifestyle

Power &

Regional

Neighborhood

& Community

Strip

TJX AS OF YET

UNNAMED NEW

CONCEPT

Home 5

30 – 40K SF

X X X

Tractor Supply Misc.. 100

15 – 20K SF

X X X

ULTA Beauty

Cosmetics

100

10 – 30K SF

X X X X

Urban Outfitters Apparel 4

4 – 10K SF

X X X

Walmart Super Store 89

40 – 125K

X X X

Wendy’s Restaurant

Fast Food

75

2 – 4K SF

X X X X X X

Page 30: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

The News Isn’t All Bleak

Some categories and/or concepts are simply on fire!

0

50

100

150

200

250

300

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Food Halls in the U.S.

Projected

Existing

Page 31: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Cool Streets

Millennial-driven up-and-coming alternative urban neighborhoods still hot

EDGY COOL

UP AND COMING

PRIME HIPNESS

STILL COOL, BUT…

GONE MAINSTREAM

The Evolution of Cool Streets

Edgy Cool Bodegas, Bars &

Funky Local… Cheap

Rents

Up and Coming Boutiques, More

Restaurants Arrive…

Rents Climbing

Prime Hipness Funky Local Priced

Out, Cool National

Concepts Arriving…

Rents Climbing

Still Cool, But Going

Mainstream

Whole Foods Arrives

Rents Climbing

Gone Mainstream Creatives Moving On,

Replaced by More

Affluent Crowd.

Pottery Barn!

Page 32: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Cool Street Contenders

Privately-held hipster brands can take chances the big chains can’t—and they’re connecting with Millennials!

Page 33: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Global Hipster Style

Independents are gaining ground globally

•French

Poys & Pirls

Pigalle

AMI

Club 75

Maison Kitsune

Monsieur Lacenaire

KENZO

Helas

Carven

Etudes Studio

Andrea Crews

Cote & Ciel

Vetements

Magenta

English

Dune London

Palace Skateboards

Lazy Oak

Grind London

a number of names*

Satta

Nasir Mazhar

A Cold Wall

Maharishi

Cassette Playa

Goods by Goodhood

Roundel London

Garbstore

Nigel Cabourn

Cottweiler

Japanese

Sasquatchfabrics

Bed J.W. Ford

Freak’s Store

Magic Stick Entertainment

Wacko Maria

GUILTY PARTIES

Scandinavian

Acne Studios

Eytys

L’Homme Rouge

Wood Wood

Armoire d’Homme

Rascals

Norse Projects

Tretorn

CMMN SWDN

Polar Skate Co

German

ACRONYM

PB 0110

Simon Freund

Boulezar

Hien Le

Mykita

Frisur

A Kind of Guise

Kostas Murkidis

Beastin

Ucon Acrobatics

Wemoto

Page 34: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Rise of the Indies

Many of the hottest new brands are former pure play eCommerce

Page 35: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Clicks to Bricks

Brand embassies, returns savings driving more pure play growth in physical space

0

10

20

30

40

50

Existing Stores YE 2016 Estimated New Stores 2017

Page 36: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Entertain Us!

Millennials spend more on experience than “stuff”

Golf/Sports/Arcade Entertainment Themes

BarCades/Mixed (Dave &

Buster’s, Punch Bowl Social, etc.)

TopGolf

Miniature Golf

Glow Golf

Ping Pong (Susan Sarandon)

Bowling Alleys (Lucky Strike, etc.)

Duck Pin Bowling

Indoor Go Cart Tracks

Indoor Shooting Galleries (Real

Guns Optional)

Nouveau Theaters

IMAX

Restaurant/Theaters

Bar/Theaters

Children Themed Theaters

Hipster/Art House Theaters

Athletics Space

Aquatic Parks

Trampoline Rooms

Indoor Rock Climbing

Indoor Skydiving

Velodromes (Indoor Cycling Tracks)

Culture/Performing Arts Space

Art Galleries

Museum Space

Live Theater Space

Dinner Theaters

Cirque Space

Stand Up Comedy Clubs

Live Music Venues

Float Rooms/Sensory Deprivation

Page 37: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

Craft Brewing Explosion

Trend is still not mature nationally

388

199

227

170

133

84

141

134

133

99

100

117

87

73

54

74

75

204

121

88

91

93

116

51

58

56

74

73

44

51

62

69

35

29

156

67

52

80

26

62

76

105

55

44

47

63

33

27

25

42

39

CALIFORNIA

COLORADO

WASHINGTON

NEW YORK

OREGON

PENNSYLVANIA

FLORIDA

TEXAS

NORTH CAROLINA

ILLINOIS

OHIO

VIRGINIA

MICHIGAN

WISCONSIN

INDIANA

MINNESOTA

MASSACHUSETTS

STATES WITH 100+ BREWERIES

Microbreweries Brewpubs Planned

0

1,000

2,000

3,000

4,000

5,000

6,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Craft Breweries in the United States

Brewpubs Microbreweries Regional Breweries

Page 38: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

What About the “Retail Apocalypse?”

Page 39: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

US eCommerce Total Share of Retail

Stronger growth ahead due to ePharma & eGroceries

Source: Cushman & Wakefield Research and Moody’s Analytics

What’s Really Happening

(it’s not just about

Amazon)?

Convergence of Four

Factors:

1. Acceleration of

newCommerce

2. Over Retailed

Marketplace

3. Race to the Bottom

Discounting (Rise of Off-

Price)

4. Shifting Consumer

Patterns (Millennials

Spending Differently

than Past Generations)

4.2%

12.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

% o

f T

ota

l R

eta

il S

ale

s

9.1%

Q3 17

Page 40: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

From eCommerce to newCommerce

How online keeps evolving…

1995 - 2000 2001 - 2009 2010 - Present 2015 - Present

The Early Days

Desktop

Initial Launch of

eCommerce

Rise (and Fall)

of Early Players

Pure Play

Years

Desktop

Mobile

Post Tech Wreck Ramp

Up of New Pure Play

Internet eCommerce

Distribution Strategy:

Tax Advantages

over Speed

The Age of

Amazon

Desktop

Mobile

Tablets

Amazon Distribution

Strategy: Speed to

Consumer over Tax

Amazon Dominance

Retailers Rush to Build

eCommerce

Infrastructure

2017 - ?

Omnichannel

Age

Desktop

Mobile

Tablets

Amazon Dominance

Continues

Retailers Still Building

eCommerce

Infrastructure

Emergence of Bricks

to Clicks Movement

newCommerce

Age

Desktop

Mobile

Tablets

?

Seamless Integration

of Omnichannel (now

a GIVEN for Retail

Survival)

eGroceries

ePharma

Page 41: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: US Commerce Department, Cushman & Wakefield Research

From eCommerce to newCommerce

eCommerce GAFO numbers demonstrate bricks-and-mortar challenges

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

$260,000

$270,000

$280,000

$290,000

$300,000

$310,000

$320,000

$330,000

20

11

Q2-1

1

Q3-1

1

Q4-1

1

20

12

Q2-1

2

Q3-1

2

Q4-1

2

20

13

Q2-1

3

Q3-1

3

Q4-1

3

20

14

Q2-1

4

Q3-1

4

Q4-1

4

20

15

Q2-1

5

Q3-1

5

Q4-1

5

20

16

Q2-1

6

Q3-1

6

Q4-1

6

20

17

Q2-1

7

Retail Sales: GAFO, ($Mil.) eCommerce Share

Page 42: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Jeff Bezos Vs. the World

Guess who is winning so far?

Source: US Commerce Department, Company Reports/SEC Filings/ Cushman & Wakefield Research

As robust as eCommerce

growth continues to be…

Amazon continues to

outperform even those

numbers…

Amazon accounted for 43%

of all USA eCommerce sales

in 2016…

Amazon sales surged 33.7%

in Q3 2017.

-15%

-5%

5%

15%

25%

35%

45%

55%

Q3 2

009

Q3 2

010

Q3 2

011

Q3 2

012

Q3 2

013

Q3 2

014

Q3 2

015

Q3 2

016

Q3 2

017

Total Retail Sales

eCommerce Sales

Amazon Sales

Page 43: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Amazon/Whole Foods

Amazon didn’t buy a grocery chain; they bought 462 eGrocery fulfillment centers

Source: Kantar Worldpanel, Statista, Cushman & Wakefield Research

eGroceries has only just

begun in the USA

Amazon’s $13.7B purchase

of Whole Foods means

disruption for grocers, not

so much for landlords

Traditional grocers need to

ramp up eGrocery efforts…

Likely scenario for 2018:

Blue Apron, HelloFresh or

other “Meal Kit” operator is

acquired by traditional

grocery chain to accelerate

eGrocery rollouts…

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

South Korea

Japan

United Kingdom

France

Taiwan

China

Czech Republic

Spain

Netherlands

USA

Online Grocery Market Share 2016

Online Grocery Market Share 2016

Page 44: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Look for Strong Growth from Amazon/Whole Foods

But still just in denser urban and suburban locales

Source: IBISWORLD, Cushman & Wakefield Research

2016: 52.1% of all USA

eGrocery sales came from

just eight states…

Or, more specifically, dense

urban markets within those

eight states…

Final Mile still rules

NY

13.8%

CA

12.3%

IL

4.3%

PA

3.9%

TX

5.3%

FL

5.3%

NJ

3.9%

OH

3.3%

Page 45: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Amazon/Whole Foods Has Some Catching Up to Do

Combined grocery market share in 2016 was roughly 3%

Source: Kantar Worldpanel, Statista, Cushman & Wakefield Research

Look for aggressive growth

from Amazon/Whole Foods

likely to begin 2H 2018.

We anticipate that as many

as 500 new stores in

different formats may be

opened in the next five

years…

Page 46: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

What’s Next for Amazon?

Furniture and Pharma both on the horizon…

FURNITURE & PHARMA

Page 47: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Company filings, Retail Info Systems, Chain Store Age

Walmart Innovations…

Looking to catch up; leveraging competitive advantages to compete w/Amazon

• Q2 2017 online revenues reported up 60%

• 67 million SKUs online; up 30% from Q1 2017

• Online grocery in 900 locations

• Easy re-order

• Click and collect discounts

• In-store technology – The 100 Towers

Build the most compelling complement to the physical store network

• Scan and Go

• Curb-side services

• Uber and other pilot partners

• Store associate private delivery

• Jet influences in reshaping

strategy

• Latch-key delivery

Page 48: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

And What’s Going on Here?

Is Walmart going upscale?

+

+

+ ?

+

Page 49: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Source: Cushman & Wakefield Research

2018: the Year of M&A Mania?

Undervalued concepts ripe for acquisition… Will we see the emergence of a retail duopoly?

Page 50: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

The “Apocalypse” Story Isn’t Going Away Any Time Soon

Next year likely to see peak closures

Source: Cushman & Wakefield Research and Moody’s Analytics

Challenges Next Year:

Bankruptcies Likely Not to

Reach 2017 Levels, but Still

Elevated…

Can Sears Survive Another

Year?

Increased Department Store

Closures

Second Wave of Strategic

Closures to Follow

Department Store

Consolidation as Tenants

Exercise Co-Tenancy

Clauses

M&A Consolidations

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Major Chain Store Closures

Major Chain Closures Forecast Major Chain Closures

Page 51: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Danger Zone

Bankruptcies will persist in 2018 and beyond

Source: Cushman & Wakefield Research and Moody’s Analytics

Credit downgraded, late

payments, have sought

restructuring or hired financial

advisers or have issued “going

warning” concerns.

2018 Bankruptcy Watch

Sears

Neiman Marcus

J. Crew

Vince

David’s Bridal

Nine West

Claire’s

Lands’ End

Charming Charlie

Bon-Ton

99 Cents Only

Charlotte Russe

335 364 554

368

4,878

1,667

86

1,020 575 564

262

2,710

1,430

187

650 300

0

1,000

2,000

3,000

4,000

5,000

6,000

Potential Vulnerabilities AheadApparel & Department Stores

Potential Vulnerabilities Ahead

Page 52: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Not A Good Combination…

USA has most retail space per capita and lowest sales PSF

Source: Turner Construction Cost Index, Cushman & Wakefield Research

“I am often called the father of

the shopping mall. I would like

to take this opportunity to

disclaim paternity once and for

all. I refuse to pay alimony to

those bastard developments.

They destroyed our cities…”

Viktor Gruen

The Father of the American Mall

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

0

5

10

15

20

25

30

USA Canada Australia UK France China Germany

Sales per Square Foot per Capita

Square Footage per Capita Sales per Square Foot per Capita

Page 53: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Over-Retailed, But Not All Retail is Suffering

Neighborhood/Community and Strip Centers doing fine…

Source: Costar Group, Cushman & Wakefield Research

Malls and Power Centers

have been most impacted

by current wave of

closures…

But Malls only account for

8.4% of all USA retail and

Power Centers account for

7.1% of all USA retail.

Shopping Centers

(neighborhood, community

and strip centers) have

actually seen vacancy

declines.

We estimate that the

marketplace is over-retailed

by roughly 1.5 Billion

Square Feet.

Shopping Center

Type

Total GLA

(MSF)

Vacancy

Rate

Q3 2016

Vacancy

Rate

Q3 2017

Share of

Retail

Market

Power Centers 754.5 4.8% 5.0% 7.1%

Shopping Centers

(Neighborhood,

Community, Strip)

3,537.2 8.0% 7.8% 33.1%

Malls (Lifestyle,

Regional Mall, Super

Regional Mall)

899.2 5.4% 6.2% 8.4%

Specialty Centers

(Outlet, Airport, etc.)

85.7 5.0% 4.9% >1.0%

Freestanding Retail 5,400.4 3.0% 3.2% 50.5%

TOTAL RETAIL USA 10,676.0 4.8% 5.3% 100.0%

Page 54: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Feeling Good in the Neighborhood

Neighborhood/Community/Strip vacancy continues to slowly fall

Source: Costar Group, Cushman & Wakefield Research

What’s Really Happening

(it’s not just about

Amazon)?

Convergence of Four

Factors:

1. Acceleration of

newCommerce

2. Over Retailed

Marketplace

3. Race to the Bottom

Discounting (Rise of Off-

Price)

4. Shifting Consumer

Patterns (Millennials

Spending Differently

than Past Generations)0%

2%

4%

6%

8%

10%

12%

(20.0)

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17 Q

3

20

17 Q

4 (F

)

20

18 (F

)

20

19 (F

)

20

20 (F

)

Mil

lio

n S

qu

are

Feet

Net Apsorption (MSF) New Construction (MSF) Overall Vacancy

Forecast

Page 55: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Power Centers More of a Question Mark

Will traditional power center tenants re-tenant troubled malls?

Source: Costar Group, Cushman & Wakefield Research

What’s Really Happening

(it’s not just about

Amazon)?

Convergence of Four

Factors:

1. Acceleration of

newCommerce

2. Over Retailed

Marketplace

3. Race to the Bottom

Discounting (Rise of Off-

Price)

4. Shifting Consumer

Patterns (Millennials

Spending Differently

than Past Generations)0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

(10.0)

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17 Q

3

20

17 Q

4 (F

)

20

18 (F

)

20

19 (F

)

20

20 (F

)

Mil

lio

n S

qu

are

Feet

Net Apsorption (MSF) New Construction (MSF) Overall Vacancy

Forecast

Page 56: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Dollar-Dazed

Race to the bottom has some winners

Source: Cushman & Wakefield Research

What’s Really Happening

(it’s not just about

Amazon)?

Convergence of Four

Factors:

1. Acceleration of

newCommerce

2. Over Retailed

Marketplace

3. Race to the Bottom

Discounting (Rise of Off-

Price)

4. Shifting Consumer

Patterns (Millennials

Spending Differently

than Past Generations)

Dollar General will open

1,000 new stores in 2017.

This will be the fifth

consecutive year that Dollar

General has opened at least

750 new stores.

Over the last five years, dollar

store chains have grown by

over 7,000 units in the USA.

That equates to a new dollar

store opening once every four

hours in the USA for five

straight years.

Page 57: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

It’s Never Been Better for Off-Price

Department stores are just as challenged by off-price as online…

Source: Cowen & Company, Cushman & Wakefield Research

TJ MAXX

$23B

MACY’S

Projected Amazon Market Share of Clothing And Accessories

Projected Clothing And Accessory Revenues In 2021

AMAZON

$62B

2016

6.6%

16%

2021

%

BIL

LIO

N$

2017

8.2%

$26B

Page 58: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

But What Does it Mean for Malls?

Bifurcation in performance continues to widen…

Source: Cushman & Wakefield Research,

Closures Impacting the

Weakest Properties, Not All

Properties

If the goal is to reduce your

physical footprint, while

looking to boost your online

sales… This inherently means

that your remaining physical

locations are more important

than ever before…

Page 59: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Not All Malls are in Trouble

It’s all about class…

Source: Cushman & Wakefield Research, Fung Global, Green Street Advisors, Bloomberg

Class A and above malls

accounted for more than

70% of all mall retail sales in

2016.

There are roughly 670 Class

B and C malls in the US, but

they only accounted for 28%

of all mall sales last year.

Class D malls accounted for

less than 0.2% of all mall

sales last year…

0

50

100

150

200

A++ A+ A A- B+ B+ B- C+ C C- D

Approximate Number of Malls by Class

A++ A+ A A- B+ B+ B- C+ C C- D

0.0

5.0

10.0

15.0

20.0

25.0

A++ A+ A A- B+ B+ B- C+ C C- D

Approximate Share of Total Mall Value by Class

A++ A+ A A- B+ B+ B- C+ C C- D

Page 60: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Not All Malls are in Trouble

It’s all about class…

Source: Cushman & Wakefield Research, Fung Global, Green Street Advisors, Bloomberg

Death Spirals Will

Accelerate in 2018 &

Beyond…

Number of US Malls 2007:

1,350

Number of US Malls 2017:

1,150

Number of US Malls 2027:

850

$0

$200

$400

$600

$800

$1,000

$1,200

A+++ A+ A A- B+ B B- C+ C C- D

Sales PSF

Sales PSF

Strengthening

Position

Weakening

Position

Average Sales PSF 2016: $480 PSF

If Below… Watch Out!

Page 61: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Is it Still as Easy as Following the Rooftops?

• Where are the new rooftops? Urban Vs. Suburban?

• Demographic Shifts to Watch…

• The hourglass economy—Don’t get stuck in the middle…

• Upscale, discount or experiential—what it means by shopping

center type?

Do the Old Development Rules Still Apply?

Agenda

Page 62: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

The Urban Growth Trend is Real

Urban share of household growth

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

Urban Areas More Than

Doubled Their Usual Growth

Rates from 2010 – 2015.

Demographic Shifts to Watch

Page 63: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Though Suburban Still Captured Most the Growth

Suburban share of household growth

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

Despite urban surge, we are

still a nation of suburbs…

Rural populations, however,

continue to dwindle.

Population Distribution 2015

Urban 15%

Suburban 64%

Rural 21%

2010 – 2015 Growth Capture

Urban 21%

Suburban 71%

Rural 8%

Demographic Shifts to Watch

Page 64: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Millennials and Empty Nesters Fueled Urban Growth

Urban population growth by age

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

Young and Old Fueled Urban

Growth

It wasn’t just Millennials!

Demographic Shifts to Watch

Page 65: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Millennials and Empty Nesters Fueled Urban Growth

Urban population growth by age

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

But Urban Growth Rate of

21% Expected to Fall to 15%

Over Next Decade

Reasons:

Costs

Millennials Raising Families

Boomer Population Declines

Generation Z Likely to be

Urban Aspirational but Pricing

Likely to be Issue

Demographic Shifts to Watch

Page 66: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

So Where Are the Rooftops Now?

Here is where the old development rules still apply, with caveats..

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

Florida and Texas continue to

lead the nation in population

growth…

Ground-up development,

particularly of

neighborhood/community

centers, following patterns of

growth…

Southeast Leads the Way

Page 67: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Population Continues to Grow…

Household formation and home ownership growth

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

Between 2015 and 2025…

13.3 million losses from older

generations offset by 25.8

million gains in households

(Millennials, Generation Z,

etc.)

This should translate into 5.3

million more homeowners by

2025…

12.5 Million More Households

0 5 10 15 20 25

1930s1940s1950s1960s1970s1980s1990s2000s

Household Formation by Year Born

2025 Households (Millions)

2015 Households (Millions) -5 0 5 10

1930s

1940s

1950s

1960s

1970s

1980s

1990s

2000s

Home Ownership Growth by Year Born

Page 68: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Where are the Rooftops Going to Be?

Projected household growth by region (millions) 2016 - 2025

Source: John Burns Real Estate Consulting, Cushman & Wakefield Research

Most of the growth will be in

the South

5.3 million more homeowners

7.2 million more renters

Wildcard:

Impact of driverless cars…

Demographic Shifts to Watch

Page 69: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

In a High-Risk Environment, What Still Pencils?

• What’s happening with costs?

• The construction labor crisis…

• The coming wave of defaults… Crisis = opportunity, or does it?

But Can You Build It?

Page 70: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Costs Going Up, Up, Up!

Can it even pencil?

Source: Turner Construction Cost Index, Cushman & Wakefield Research

Turner Construction

Cost IndexIndex %

Q3 17 1044 1.26

Q2 17 1031 1.18

Q1 17 1019 1.29

Q4 16 1006 1.11

Turner Construction

Cost IndexIndex %

Q3 17 1044 5.6

2016 989 4.7

2015 943 4.5

2014 902 4.4

2013 864 4.1

2012 830 2.1

2011 812 1.6

2010 799 -4.0

2009 832 -8.4

2008 908 6.3

Page 71: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Construction Labor Market Status

Labor shortage a major problem…

Source: Bureau of Labor Statistics (updated Sept 2017), Cushman & Wakefield Research

Note: Jobs figures are in thousands

Male participation in workforce

(2005): 73.3%

Male participation in workforce

(2017): 69.2%

Mitigating factors:

Immigration policy

Opioid crisis

Jobs Back, but Not HereConstruction Share of

Nonfarm EmploymentRecovery Status

10-Year Average 2017Q2

Net Construction

Job Losses

(GFC Peak to

Trough)

Net Construction

Job Gains

(GFC Trough to

17Q2)

%

Midwest 4.2% 4.0% -392.9 228.4 -11.4%

Northeast 3.9% 4.0% -209.1 194.3 -1.4%

South 5.5% 5.2% -756.6 466.0 -10.8%

West 5.5% 5.3% -837.4 506.8 -16.2%

U.S. 4.9% 4.7% -2,265.0 1,429.0 -10.8%

Page 72: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Worsened by Hurricanes…

The perfect labor storm…

Source: National Oceanic and Atmospheric Administration, Chicago Tribune, Cushman & Wakefield Research

Harvey destroyed 30,000

homes in Houston—roughly

same as existing residential

pipeline…doubling demand.

10,000 to 20,000 workers

could be needed in Houston

alone…

After Katrina, construction

worker wages increased 12%

in Mississippi… that was

before labor shortage…

This time around?

Worsened by Hurricanes

0 20 40 60 80 100 120 140 160 180 200

Harvey (Sept 2017)

Katrina (Aug 2005)

Sandy (Oct 2012)

Andrew (Aug 1992

Ike (Sept 2008)

Ivan (Sept 2004)

Estimated Cost ($ Billions) adjusted for inflation

Estimated Cost ($ Billions) adjusted for inflation

Page 73: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Worsened by Hurricanes…

The perfect labor storm…

Source: Bureau of Labor Statistics, Cushman & Wakefield Research

Last Year Hourly Mean Wage;

Texas: $14.62/hr.

Florida: $14.00/hr.

Recent employment ads for

construction help in;

Houston: $21/hr. /($14.62)

Florida Keys: $20/hr./$14.00)

Local Wages Already Up 40%+

Page 74: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

USA New Construction by Product Type

Historical and Forecast

Source: Turner Construction Cost Index, Cushman & Wakefield Research

While retail development is

down, office construction

remains robust and industrial

is setting records…

Development Outlook

0

50

100

150

200

250

300

2010 2011 2012 2013 2014 2015 2016 2017 2018 (F) 2019 (F) 2020 (F) 2021 (F)

Commercial Development in Major Markets

Office (MSF) Industrial (MSF) Retail (MSF)

Page 75: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Land & Development Costs are Up, But…

Dead/dying malls will be had for pennies on the dollar

Source: Trepp, Cushman & Wakefield Research

According to Trepp

Retail Delinquency Rate as of

September 2017: 5.7%

We think that number will hit

10% over the next few years.

Retail Delinquencies to Soar

Page 76: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

Can Dead Malls be Repositioned for eCommerce?

The exception, not the rule

Source: Cushman & Wakefield Research

Mesquite Mall was one of the

Dallas area’s first enclosed

malls, built in 1959.

The mall lost ground to

competitors through the 1980s

and 1990s and was closed in

2001.

It was demolished in 2006.

FedEx just built a 334,000

square foot distribution center

on the site.

FedEx/Mesquite Mall

Page 77: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

So Where Does This Leave Us?

The story of retail development over the next decade will largely be a tale of mixed-use redevelopment

Source: Cushman & Wakefield Research

Challenges Opportunities Solutions

Dead/Dying Malls—Mostly

Suburban

Suburban Population Growth to

Increase

Redevelop Dead Suburban Malls

as Mixed-Use Lifestyle Centers

w/Substantial Housing, Office,

Medical and/or Hospitality

Department Store/Apparel

Consolidation

Explosion of Food Retail,

Entertainment Retail, Experiential

Concepts, Off-Price Apparel &

Discounter Demand

Shift Centers Towards

Entertainment Focus or Discount

Focus

Rising Power Center Vacancies Mixed-Use Works Here Too Mixed-Use Works Here Too

Page 78: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

The New Lifestyle Mixed-Use

Food/Drink Heavy, Entertainment/Experientially Focused Open Air Centers

The Wharf Avalon Legacy West The Bloc

Washington, DC

Hoffman/Madison Marquette

Alpharetta, GA

PGIM

Waco, TX

KDC/Columbia

Los Angeles (Downtown), CA

Ratkovich

Brickell City Centre City Point FIGat7th Phipps Plaza

Miami (Downtown), FL

Swire Properties

Brooklyn, NY

Extell, et al

Los Angeles (Downtown), CA

Brookfield

Atlanta (Buckhead), GA

Simon

Page 79: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

There is No Room for Mediocrity in Retail Anymore

Follow Viktor Gruen’s Original Vision

“As art patrons, merchants

can be to our time what the

church and nobility were to the

Middle Ages.”

Viktor Gruen

The Father of the American Mall

• You must give people a reason to come to your store or your

shopping center in the age of newCommerce.

• If your shopping center is the center of your community, it will thrive.

• If it isn’t, then build a community around it.

Page 80: ICSC CenterBuild · 2017-12-04 · ICSC CenterBuild Retail Update November 2017 Garrick H. Brown Vice President of Retail Research, the Americas Garrick.brown@cushwake.com

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