You are currently browsing the category archive for the ‘Tenants’ category.

Very Good Signage

Very Good Signage

Here we go. I am on a rant and I feel that this one is well deserved. Time and time again I watch independent retailers go out of business in decent centers and I see one MAJOR mistake that they make. They do not put a sign above their storefront and when allowed, they do not put a sign panel in the pylon sign. This is really retail 101 and business 101.

Several minutes ago, I was driving around a shopping center that I know very well and drove past a space that has turned over several times since the previous national tenant left a few years ago. Well, for some reason these operators do not put signs on their storefront. Sorry folks, “open and they will come” is not the way of the world. I know the landlord wants the user to put a sign above the space because it adds consistency to the center and vibrancy, but this tenant and many others do not seem to get it.

Here’s the bottom line as far as I am concerned, if you are not seeing the sales you desire and you do not have a sign above your store and any other available signage opportunities…shame on you. It is your fault! Anyone who is reading this blog and does not take advantage of the available signage is making a very costly mistake.

If you want to be the best, you have to play like the best and I assure you, McDonalds would NEVER open a store without some kind of sign, so why would you?

<Sigh> (This is one of those things that pushes my buttons.) I am stepping down from my soapbox now…

Advertisements

I thought it would be beneficial to show how a Red Mango store operates and what the yogurt looks like. In my previous post, I talked about Red Mango’s rapid expansion. For further interest, check out this review of Red Mango.

 mango.jpg

Red Mango, one of the yogurt operators in the Yogurt Wars, plans to open 50 stores in 2008. That is a lot of franchisees! Currently Red Mango has 10 stores in the United States and many more in Korea. It will be interesting to see how they compete with Pink Berry and some of the other concepts already penetrating other markets. Most of the Red Mango stores are located in New York and California, but there others dotted across the United States.

picture-59.png

I just read the report: Apple stores outperform Best Buy, Saks and Tiffany by Philip Elmer-DeWitt

I thought I would share the report because it is amazing how well Apple is doing. It is pasted below.

How productive are Apple’s (AAPL) retail outlets?

“Out of this world” according to a report issued this morning by Toni Sacconaghi of Bernstein Research. In fiscal year 2007, he estimates, Apple stores generated an average of nearly $4,500 in sales per square foot — a figure far higher than any other consumer electronics or luxury retailer. That’s nearly five times the productivity of Best Buy, for example, one of the most efficient consumer retail outlets, and nearly 12 times that of Saks. Only Tiffany & Company comes close, with sales of $2,750 per square foot. (see charts at right)

The findings were part of a follow-up to the in-depth report on Apple’s retail strategy that Bernstein Research issued a year ago. Since then, Apple has opened 20 new stores (total: more than 200) and reportedly has plans to expand to China, France, Germany and elsewhere.picture-60.png

Among the report’s other findings:

  • Mac sales per store grew 26 percent year-to-year in fiscal 2007. Apple’s brick and mortar stores sold an average of 8,000 Macs in 2007, or a “stunning” 21.4 per day.
  • Apple Stores boosted the company’s total revenue by at least $1.35 billion (5.6 percent) during the year, with gross margins of 42 percent (versus 34 percent for Apple overall)
  • Despite the high gross margins, the stores have somewhat lower profitability than the company overall because of high operating expenses. The average Apple Store has 40 full-time-equivalent employees, double the number four years earlier. All told, Sacconaghi estimates that the retail segment’s operating margin was 16.9 percent for the year, compared with 18.4 percent for Apple overall.

starbucks-london-727085.jpg

Yesterday, January 7, 2008, Starbucks sacked their CEO, Jim Donald, and announced that they will close some U.S. based stores in 2008. Starbucks is a great concept, but after thousands and thousands of stores opened in a close proximity to each other, its time to take a breath. The share price has suffered considerably in the last few weeks as a result of declining sales. They likely plan is for Starbucks to close the stores that are not strategically positioned and under performing. To read more about Starbucks closing, click here.

clock.gif

Opening a retail store takes time – in most cases. Occasionally, a retailer will leave and the following retailer to back fill the space will be of the same use type. This happens often with restaurants, but for the most part “the shoe does not fit perfectly”.  As a result, most retailers ask for a FREE RENT period.

Free Rent is a specified time period negotiated between the Landlord and Tenant allowing the Tenant to handle all construction, legal, permitting and operational issues before opening for business.

The amount of free rent achieved through negotiations depends on many factors, but here are the main factors:

  • Market Conditions
  • Duration of Vacancy
  • Type Of Use

Market Conditions influence free rent because in a hot market landlords are less motivated to give extended free rent periods. In a slow market, negotiating a longer free rent period is much more likely.

The Duration of a Vacancy can also determine the amount of free rent provided by a landlord. Challenging centers and spaces are options for obtaining more free rent. Additionally, if a space sits vacant for a long time there is a better possibility of getting free rent.

The Type of Use also determines the amount of free rent. Restaurants require considerably more time, money and inspections to get open when compared with insurance agencies. Restaurants usually have the ability to negotiate a considerably longer free rent period, even in a hot market. This is especially true for white table cloth restaurants.

Free Rent can sometimes be the factor that makes or breaks a deal. It is certainly one of the key negotiating points. There is always remove for negotiation with a free rent period, but it is important to know how it fits into your deal.

418206182_450e303e62.jpg

Banks have been a gloomy topic in the retail/commercial real estate world for the past few months. The summer of 2007 marked the beginning of drastic changes in the banking industry. Banks like Commerce Bank, PNC, Citibank, Bank of America, Wachovia and Chase were opening locations left and right. Banks were in bidding wars to take freestanding buildings at busy intersections and highly visible corner buildings in cities across the United States. Here in the Washington D.C. area, I heard stories about banks paying as much as $500,000 annually for a ground lease. Basically, they had to pay a lot of money for some dirt and then build a building. As always, markets move like pendulums and the bank market started to make its way down around July.

Nobody is certain of the single cause for banks slowing down, but it is fair to say that 1) the credit crunch, 2) slower home growth/undertain housing market and 3) hypergrowth. The first two issues are all over the news, but point 3 is rarely spoken about outside the real estate community. There are just too many banks in one market and they are all over each other. I understand they are fighting for deposits, but there are only so many people and over saturation was inevitabe in many cases.

People are expecting the banks to come back roaring in 2010. It will certainly be interesting to see what happens. I predict that some banks are going to be bought and others are going to get rolling opening more sites.

potbelly.jpg

I just read a great article about Potbelly Sandwich Works a concept that people located in Chicago and Washington D.C. should know well. It has consistently been voted as the best sandwich in D.C. I think the sandwiches are great and the service is quick. Their sandwiches are not too big and they are intended to be shared by a group who goes in for lunch or dinner. They also sell ice cream, ice cream shakes, floats, cookies, salads and a couple of other items.

Potbelly has a very specific sight selection criteria that is definitely worth emulating. The company has been known to be patient to get the desired site. One of the best examples of Potbelly’s site selection in Washington D.C. is the store located at 19th & L. The site is a very visible corner that is located in the business district. The store is one of the few Quick Service Restaurants open in the evening. Hopefully, a Potbelly Sandwich Works will be opening in your area in the coming months. Here are some of the main criteria for Potbelly’s site selection process:

  • Good Visibility
  • Close proximity to an office population (lunch business is important)
  • Strong Daytime Traffic
  • End Caps or Free Standing Buildings (in the suburbs)
  • 1,800 – 3,000 Square Feet

For more information on all of the main site selection criteria, click  to go to Potbelly’s  real estate homepage.

 starbucks-china.jpg

Rumor has it that Starbucks is going to be slowing down in 2008.  I really like Starbucks, but I have always been amazed at their appetite for expansion. The company plans to focus on in store operations, but will continue to expand at a slower rate. The coffee giant says that it will focus on store operations and customer satisfaction.

I think Starbucks will be around a while because people are still crazy about Coffee, but certain elements in the economy are preventing people from spending $5 a day on frappuccinos.

Lately, Wegmans has been the talk of the town. Here in the Mid-Atlantic Region, Wegmans is opening locations in high growth areas and the stores continue to perform. They have really added something to the grocery concept. With over 70 locations between Maryland, Virginia, New Jersey, New York and Pennsylvania this supermarket/restaurant/wine bar is continuing to lead development trends.

To find out more about Wegmans click here.

RSS Word on The Streets

  • An error has occurred; the feed is probably down. Try again later.

My Del.icio.us