RCA Capital Trends / The Business of Shopping Centers / Tips from Liz and Steve / What do you remember from growing up?
RCA Capital Trends Report 1Q17
This week Real Capital Analytics (RCA) published their Capital Trends Report for their subscribers. With their kind permission here are some highlights:
Global commercial real estate investment volume dropped 2% YOY to $271.4b in Q1’17. A 36% YOY increase in development site sales offset a significant decline in income-producing assets, which dropped 19% YOY to total $156.8b.
European investment volume dropped 16% YOY to €53.5b in Q1’17. The decline masks the underlying strength in some of Europe’s biggest real estate markets, however, and Germany continues to be the destination of choice for many
Investments in Asia Pacific income-producing properties fell 21% YOY in Q1’17 and the quarterly total of $22.6b is the lowest recorded since 2010. Development site sales, by contrast, grew 41% YOY.
Hotel deal volume fell 6% YOY in Q1’17 on sales of $5.8b.
A decline is not normally a good signal in the marketplace
but in this case the decline is far shallower than a year earlier
when volume fell 60% YOY.
Apartment deal volume fell 35% YOY in Q1’17 on sales of $26.0b. This level puts the apartment sector in the #2 slot for investment behind the office sector in Q1’17. The apartment sector posted the sharpest YOY decline in the quarter across all property sectors.
Deal activity in the retail market fell 10% YOY in Q1’17 on sales of $17.6b. Given that deal volume fell at a 23% YOY pace last quarter one might think that this shallower decline is a sign of improvement. There are, however, mixed signals in the marketplace.
Industrial deal volume grew 3% YOY in Q1’17 on sales of $13.9b. Across sectors, industrial was the only one to see growing sales volume. Single asset deal volume grew 15% YOY in Q1’17 on sales of $9.6b and for any first quarter this stands as the record high for single asset industrial deal volume.
Office deal volume fell 12% YOY in Q1’17 on sales of $27.7b.
The drop follows two consecutive quarters in which deal
volume was unchanged from a year earlier. New weakness
in both single asset sales as well as with portfolio and entity
level transactions was the culprit.
The Business of Shopping Centers
For many years I attended the annual ICSC (International Council of Shopping Centers) convention (now called ReCon). Before that show got so big (like 30,000+), it used to be held in different cities. I remember one of the last, or maybe the last of those in New Orleans.
People spent lots of time waiting for elevators in hotels to go up to a company’s suite where they had a meeting planned. Those days are long gone as well as some of the intimacy of those times. I haven’t attended the May event in Las Vegas in a number of years. Each year I’m tempted to go...maybe one of these years.
I have been able to catch up with New York Metro Area shopping center industry friends at the wonderful holiday party thrown by Jerry Welkis, David Sternchuss and Alan Cooperman of Welco Realty. I always saw the retail industry as part real estate and part theatre and the Las Vegas show has certainly become a huge stage.
Many of you probably know the publication Shopping Center Business. To me, it has been THE definitive magazine for the retail real estate industry since it’s launch. When CRE Tech was just beginning to play a role, my friends publishers Jerry and Scott France and editor Randy Shearin encouraged me to write a periodic column called “Tech Window.” We had fun with it – Scott tried to convince me that I should create a costume of some sort and walk around the ICSC convention as “Tech something-or-other.”
The biggest Shopping Center Business issue of the year is the May issue coinciding with ICSC (I bet most people still ask each other, “Are you going to ICSC?” – meaning ReCon). I read through the May issue this week and saw a few things. One, a lot of the firms that I’ve known, or worked for or with, over the years are still around and going strong. And then there are the advertisements. Ads have always intrigued me
and this week I went through all 330 (yes, 330) pages of the May issue and looked at the ‘headlines’ or ‘catch phrases’ in all the ads.
Here are some interesting, engaging and amusing tag lines (or other lines) that I noticed in ads (mostly the full-page ones) in this issue of Shopping Center Business. In some ways, don’t you think it sort of conveys what’s going on in the shopping center industry?
“Where Fashion Meets Technology”
“Retail Equity Unscrambled”
“Premier locations in growth markets”
“Preferred locations. Compelling opportunities.”
“We are the center of retail”
“10 years of innovation”
“Re-imagine your big box”
“Stop by with a deal. Stay for table tennis”
“The best retail – from every angle”
“We’re not one to name drop but…”
“Redevelopment stories with happy endings”
“We go the distance”
“Maximizing performance for the world’s top retail brands”
“We INNOVATE because everything is possible”
“We CREATE inspiring spaces and places”
“We DEFINE open air excellence”
“We OBSESS about every detail”
“We PERFORM because we think like owners”
“Turning real estate ideas into reality”
“Developer funding with forward commitment”
“100% Ground Lease Financing”
“Always the right move”
“Great ideas. Solutions that work.”
‘”Better relationships. Better results.”
“Integrity. It’s the cornerstone of everything we do.”
“Make every day and event.”
“Market knowledge, experience and financial strength.”
“Grow with us”
“More than bricks. We build cornerstones.”
“Prime space for retail.”
“A history of success. A future of opportunity.”
“Prime retail space is still available.”
“size doesn’t matter. EXPERIENCE DOES”
“The right city at the right time.”
“We are buying”
“How is OUR team different? We are YOUR TEAM”
“Commitment to Environmental Responsibility”
“Centers of Attention”
“Grand Opening May 11-14”
Congratulations to France Media who covers the commercial real estate industry with their publications and conferences. Their InterFace Conference Group is headed by another long-time industry friend – and conference guru – Rich Kelley. Check out all they do here.
A Couple of
Presentation Conversation Tips from Liz and Steve.
My partner Liz Weiner and I have just entered our 5th year in business together. The theme of everything we do: “It’s not just WHAT you say, but HOW you say it that makes the difference!”
Our clients are almost exclusively companies and individuals in the global commercial / institutional real estate industry (although we have coached one TV personality who is a rising star – and at some point we predict will be a news anchor on a major network – which network, unfortunately will not allow her to give us a testimonial [even though she would be thrilled to]).
The scope of our work is fairly simple:
- We deliver customized, interactive, multi-dimensional presentation coaching to real estate investment management teams who are preparing to go on the road to raise institutional real estate capital.
- We coach those same type firms and help them prepare for their annual investor conferences.
- We have run 25 Women’s Leadership Workshops – across the U.S. and in London – women from more than 100 commercial real estate industry firms have attended our workshops.
I would like to take a moment to thank the following firms who have sponsored one or more of our Women’s Leadership Workshops – in support of women in the industry – by donating some amazing conference rooms:
Benson Elliot Capital Management
goulston & storrs
Greenhill & Company
Hunton & Williams
Kirkland & Ellis
National Real Estate Advisors
Newmark Grubb Knight Frank (NGKF)
Paladin Realty Partners
Patterson Belknap Webb & Tyler
PM Realty Group (PMRG)
Real Capital Analytics (RCA)
Square Mile Capital
Zeller Realty Group
I would like to share you a few (we’re really big on the #3 as we firmly believe people can only remember 3 things from any presentation) things on which we coach our clients:
1. Think about any presentation as a conversation. It will reduce some of your stress
2. Debrief regularly. Take 5 minutes after any presentation, meeting, phone call and write down three things: What went well? What didn’t go well? What would you do differently next time? Encourage team members to honestly debrief with each other and keep a record of these notes – it’s very powerful.
3. Remember: you only get one chance to make a positive first impression.
We’re wrapping up our workshop ‘season’ in a couple of weeks in London and will be announcing our fall workshop schedule shortly.
Thank you to everyone for your enthusiastic support. Liz and I greatly appreciate it!
What do you remember from growing up?
If you haven’t done so already, you might want to think about jotting down some of your childhood memories…just for posterity. I’m not talking about writing a ‘book.’ Rather, brief anecdotes that (a) you’d like to remember forever and (b) that you might want to share with others close to you.
What I do when I remember something that I want to document is just write the ‘headline’ in an email to myself: Ernie Banks sitting next to me on the flight; Question I asked Henry Kissinger at an industry event (and his great answer), interaction with Donald Trump and his then girlfriend, now wife, at a famous Japanese restaurant in NYC.
We all have gems of things that have happened to us…both good and not so good; but I choose to document the good stuff – unless some of the not so good things are helpful for me to remember NOT to do again as I grow up. Just a thought….
On The Road…
May 17-18: Charlotte, NC to conduct an internal Behavioral Presentation Coaching Workshop for a real estate investment management client.
May 22: London (UK) to conduct an internal Behavioral Presentation Coaching Workshop for a real estate investment management client.
May 25 – 26: New York City
June 5-7: (Tentative) Chicago
June 20 – 22: Asheville, NC to conduct two special sessions for one of our global real estate investment management clients.
August 20 – 31: Australia. A birthday present to myself. My first trip down under prompted by meeting a great band, The Heart Collectors, in Tennessee last year. I’ll be going to Tyalgum (pop. 300), New South Wales, to attend the O’Heart Festival. On the trip back I’ve arranged to have an overnight in Sydney and have lined up at least one business meeting there. I am so looking forward to this trip – no matter how long the flight(s) are!!
Congratulations to my friends…
Joe Azelby who joined Apollo Global Management as Head of Global Real Assets.
Christopher Turner Director who joined Denham Wolf Real Estate Services as Director, Transaction Services
Karen Kasteel, now Vice President of Marketing with Waypoint Residential
Finding Clarity in London / Life used to be easier / Manney Felix
Finding Clarity in London
I got back from London last night. We were there to work with a client, preparing them for their annual co-investor meeting. I've been to dozens of these type meetings over the years and this was the first one that used 'co-investor' in the title of the event - or at least on some of the slides in the presentation. I like it. After all, while there is a style of investing called 'co-investment', aren't your investors, who invest alongside you in a deal, JV or fund your 'co-investor?' It's like having an investor as a collaborator with you which suggests trust.
While in London, I was in an office building and saw the sign below and had to show it to you. CLARITY, with an arrow pointing you in the direction of finding Clarity. Amazing! Someone finally has found it and I want some of it for myself. Of course, Clarity is the name of a company housed in that building and it got me thinking about clear thinking, clarity in messaging, clarity in our lives. It ain't easy, or hasn't been for me for much of my life. The good thing is that over the past few years, I have discovered that, for me anyway, clarity becomes more visible with simplicity in my life. Of course, it's somewhat easier for me to say this as, at this stage in my life, I have only myself to be responsible for and that, my friends, is a wonderfully special place to be.
I've been cleaning up digital files (and also printing out things I find that it's better to have hard copies of - in binders - for easier reference (and so I don't forget that I have them!).
Life Used To Be Easier
The following is something I sent to you some years back and thought you might enjoy seeing it again. Funny how sometimes it's all about the timing in life - when we meet someone, when we see something, when we read something. This message may be even more poignant today:
Life used to be easier
Commutes were shorter
Work and home were separate
Life seemed slower
We had more time
Our technology consisted of alarm clocks, pagers and land-line phones
WELCOME TO THE 24/7 CULTURE! 24/7 Culture = Imbalance
Did you ever imagine that life could get this crazy?
· Can we go back?
Let go of perfection! Done is good enough
· Practice imperfection
· Be late for a meeting
· Don’t capitalize the first word of a sentence
· Invite someone over when the house isn’t picked-up
· Go out without make-up
· Don’t make the bed
Stop SAYING YES
· Review your current commitments
· The world will not end because you roll off a committee
· Limit your extra activities the way you want your kids to
· KEEP CALM AND JUST SAY NO!
· Start saying NO
· No is a complete sentence
· Make ‘ME’ a priority
· Start out with just 10-15 minutes
· Just you
· No TV, phones, computers, email
· Breathe deeply/slowly
· Be still
· Be comfortable with silence
· Pray / meditate
· Watch a sunrise / sunset
· Ponder what you’re grateful for
· It’s okay just to stare out the window
· Be in the moment
· Places to bring balance
· Plan to make healthy choices
· Plan your meals
· Shop you plan
· Choose healthy snacks
· Aim for 7-8 hours
· Be consistent in going to bed and getting up
· Avoid ‘screen time’ one hour before bedtime
· Avoid eating 2 hours before bedtime
· Don’t make it a big deal
· Move for 10-minutes, 3 times per day
· Find a work-out buddy
· Use a pedometer
· Enter a competition
· Mix it up
· Strength training
· Exercise bands
· Weight lifting
· Exercise at work
· Take a 10-minute walk around the block or through your building
· Try a 3-4 minute chair Pilates routine at your desk
· Take the stairs instead of the elevator
Unplug as a ‘family’ (or for yourself)
Manney Felix - May 1, 1917
I've written before about my dad and Monday is the 100th anniversary of his birth. He made it to 92 - a great accomplishment and, until about the last year of his life - no one ever guessed his age (always thinking much younger). I'm lucky to have inherited his genes.
For almost all his working career, Manney 'The' Felix (he had no middle name so we started calling him that) was in the real estate business. He was a professional property manager. His first job was with Punia & Marx where he managed apartment buildings in Manhattan and Queens. From time to time I would accompany him to work and see how he interacted so easily and fairly with all the employees he came in contact with. I saw that they both liked and respected him.
In 1963, he took a job with George Levin whose real estate company was based in Irvington, NJ. This prompted our move from Forest Hills, Queens, New York to Livingston, NJ. It was my parents' first house. Until my dad joined him, Mr. Levin's business was managed by some family members who did a good job. Mr. Levin wanted to take his company to the next level and my dad was the logical choice to become his 'General Manager', reporting directly to George Levin. Manney stepped up to the position and because a trusted employee / advisor to Mr. Levin.
My dad became and advisor to Mrs. Levin after her husbands' death and then moved on to his next position, of a similar nature, with a different entrepreneurial owner of income-producing real estate. Some years down the road, after enduring the stress of a nasty divorce with my mother, Lorna, Manney took a job with Fred Trump, Donald's father. As many of you know, Fred owned tens of thousands of apartments, mostly in Brooklyn and Queens. The position my father was hired for was a new one - putting himself between the property managers and Mr. Trump. The job, or should I say, my dad didn't last long in this position. The property managers did end-arounds, by-passing him and going directly to Fred Trump, as they had done for years. Mr. Trump did nothing about it and that was that.
I owe my career in real estate to my dad. In the early 70's, when I was playing full-time rock and roll with a great band called Everyone, he suggested I get my real estate license, "It can't hurt to have it", he said. So, I did and then finally in 1973, after several failed attempts to leave the band, started the long and winding road of my journey in this great industry.
The final job my dad held was as the General Manager of a very large apartment condo project in Hallendale, FL. He reported directly to the Board of Directors, which, as many of those groups tend to have, is too much time on their hands (they're retired) and thus tend to all feel that they know what's best for everyone living in the complex.
With the politics of reporting to the Board involved, the average lifespan of a General Manager was 3 years; my dad lasted 11 years - only to be done in by a Board member who was taking bribes from contractors and didn't like that my dad was totally on the 'up-and-up.' Life is certainly full of some unexpected experiences, eh?
And so, on Monday, I will toast to my father, Manney Felix.
As my Mom died at 68 from brain cancer, my brothers Jay, Gregg and I were fortunate to have a father who was an upstanding, generous and professional man - and lived to see experience becoming a Great-Granddad!
On The Road...(and some shameless self-promotional stuff)
Read about Liz and I in THE NEW YORK POST!
Check out the great article.by Lois Weiss.
Felix / Weiner Professional Development Workshops:
Behavioral Presentation Coaching - It’s not just WHAT you say, but HOW you say it that makes the difference!
- Capital Raising Roadshow Prep
- Women’s Leadership Workshops
- Moderator & Panelist coaching
- Annual investor conference enhancement
- Interview Skills, Drills & Thrills / Career Coaching
OTR Reader Comments: Manhattan’s Retail Landscape / Dr. Brian Felix / Going to Australia!/ Inspirational Quotes
OTR Reader Comments: Manhattan’s Retail Landscape
Following are a few of the comments I received from OTR readers about my piece on the significant retail space vacancy in Manhattan:
Lots of wisdom here but the issue isn't confined to Manhattan. Stores on 7th Avenue, where I live in Park Slope, are vacant in great profusion, some for more than a year or two. Only new tenants are two nail salons directly across the street from each other, and a Chipotle! Highest and best use in the neighborhood: real estate offices.
Thanks for this. The future of the whole of commercial real estate, not just retail in Manhattan, is very concerning to me because of Internet induced disintermediation, with regard to both space and services/products. It’s almost that nobody has to be anywhere, at least as much of the time as before, so any particular place is important less frequently. It also costs a landlord, or a space user, some money to be innovative, and maybe more valuable, versus the competition, but this innovation costs money/rent, which must come out of the real estate/business. Now, interest rates are going up too, which reduces available cash for innovative competition. And we better keep the immigrants coming because the natives are not growing larger households for the most part. I see, generally, long-term commercial real estate trouble.
And now Payless 400 stores = which will affect more urban streetscapes.
On a kindred subject, this past week in the New York Times there was a story about “Zombie Malls.” In one of my seemingly 19 lives in the commercial real estate industry, I worked on turning around (i.e. saving) shopping centers and malls. Some projects were successful. Others not.
The mall industry has always been dramatically segmented and it’s more now than ever. It may end up that there are only 6 super-regional enclosed malls left in the country (perhaps a slight exaggeration); then, for lack of a better word, second-tier malls, which are able to maintain enough tenancy (baring more and more department store closures) to still be relevant. And then there are the others, which, in many cases, should never have been built. What happens to those properties – and I’m not talking about the structure but rather the land – will be in the hands of today’s generation of turnaround specialists – that is, after the lender forecloses and doesn’t know what the heck to do with the property.
We are in some very interesting times, people. Not just in retail but also in how we live our lives and how technology is impacting society. Change is exciting and sometimes frightening. I’m certain that’s one of the things that have kept me youthful – not being afraid to embrace chance. Well, that and the good genes that I inherited from my dad, Manney ‘the’ Felix.
Dr. Brian Felix
This past week my son, Dr. Brian Felix was awarded tenure in his position as Assistant Professor of Music at The University of North Carolina – Asheville. Brian and all those who love him were looking forward to this moment, as it appeared that tenure would be coming. Like a lot of things we look forward to, the thrill of it actually happening tops all the anticipation. There was no formal ceremony, however the party was fab!
Going to Australia - finally!
Yesterday, I finalized my plan to go to Australia in August! I’ve wanted to visit that country for a long time and what stimulated this trip is a music festival in which my friends The Heart Collectors, play a significant role. “O Heart Fest” is billed as ‘Conscious Awakening Indie Folk Festival.’ It’ll take place on August 25, 26 & 27 in Tyalgum Village, New South Wales (Population: 300).
The United Airlines rep did an incredible job of helping me make the reservation, which includes getting me an overnight stay in Sydney on the return trip. Interested in joining me?
I’ve always loved inspiration quotes. Serendipitously, I discovered (and bought) a book called, “It always seems impossible until it’s done.”
Here are some of the entries that resonated with me; I hope you find something here for yourself or someone you know or love…
“Your life is precious. You’ve only got one. Don’t waste it on bad relationships, on bad marriages, on bad jobs, on bad people. Waste it wisely on what you want to do.”
Eric Idle, actor.
“I couldn’t wait for success so I went on without it.”
Jonathan Winters, comedian
“Whatever you do, don’t stop. Just keep on going. Because one way or the other, if you want to find reasons why you shouldn’t keep on, you’ll find ‘em. The obstacles are all there; there are a million of ‘em. But if you do want to do something, you do it anyway, and handle the obstacles as they come.”
Benny Goodman, musician
“Be true do yourself and keep things simple. People complicate things.”
Jay Z, musician and businessman
“Go for the moon. If you don’t get it, you’ll still be heading for a star. Happiness lies not in the mere possession of money, it leads in the joy of achievement, in the thrill of the creative effort.”
Franklin D. Roosevelt, U.S. President
“When you learn to harness the power of your fears, it can take you places beyond your wildest dreams.”
Jimmy Iovine, music producer
“It’s hard to beat a person who never gives up.”
Babe Ruth, baseball player
“Nothing is particularly hard if you divide it into small jobs.”
Henry Ford, industrialist
“Don’t give up. There are too many nay-sayers out there who will try to discourage you. Don’t listen to them. The only one who can make you give up is yourself.”
Sidney Sheldon, writer
“When you believe you can – you can!”
Maxwell Malta, doctor and writer
“Anyone who has never made a mistake has never tried anything new.” Albert Einstein, physicist
“I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can’t see from the center.”
Kurt Vonnegut Jr., author
“Don’t become something just because someone else wants you to, or because it’s easy; you won’t be happy. You have to do what you really, really, really, really want to do, even if it scares the shit out of you.”
Kristen Wiig, actress and comedian
“I don’t know where I’m going from here but I promise it won’t be boring.” David Bowie, musician
On the Road
April 23 – 27: London, UK
June 5-7: Chicago
June 25 – 27: IMN’s U.S. Real Estate Opportunityand Private Funds Investing Forum, Newport, Rhode Island. There’s a great lineup of speakers already announced and I’ll be moderating my signature panel which, thanks to the creativity of Steve Glener of IMN, is being billed as, “Woke up, got out of bed, dragged a comb across my head – A Day in the Life of an LP.”
Music note: Great progress is being made on my 3rd album (I mean CD) of original songs. This will be a fund-raising project for a non-profit. Some musicians from the commercial real estate industry will be featured on the album – recently in Boston a couple of those folks added vocals and guitar to two of the tracks, “When I Wasn’t Looking” and “Shoot for the Moon.” As the production of the album continues, others will add their magic to the project. My plan is to release the CD for Christmas, 2017. The album title of is “Light of Day.”
|A bold seagull in Boston who turned to me when I talked to him|
Manhattan's Retail Space Problem
I have never, ever seen so much street level retail space vacant in Manhattan. It’s been growing by leaps and bounds. And, these spaces are not in off the beaten- track locations – they’re in prime, 100% locations. Why?
First, there’s the increasing stress on ‘bricks and mortar’ retail stores as Internet impact increases. Second, historically many office building owners don’t really understand retail leasing. They figure that if their rent for office space is going ‘sky high’, so should the retail space. Not true.
Having been in the shopping center / mall industry for a number of years, and learning from my mentor Dick Steinberg, different types of retailers can afford to pay a certain percentage of their gross sales and still be profitable.
In some cases, retailers, seeking branding high-visibility (vs. the Mel Brooks classic, High Anxiety) in a Manhattan location have rented space. Some took space too large for them – adding to an already heavy fixed overhead. Some rented stores in Manhattan believing that they could generate astronomical sales – only to be sadly disappointed.
So, what happens now? Many years ago, a consulting partner and I began using the term ‘Opportunity Income Lost.” It relates to that rental income when a commercial space sits vacant for a month. Actually, it’s the same with a hotel room that doesn’t put a ‘head in a bed’ tonight – they’ve lost that revenue…forever.
When I worked in commercial real estate leasing, our goal was to get a store open for business as soon as possible after they signed the lease. If there was some period of ‘free rent’, then it was all the more important to get them open so that the rent checks started coming in to us sooner rather than later.
While I'm not in retail leasing, I asked Victor Menkin, a long-time friend and one of the most successful (and classy) retail leasing agents in NYC, what’s going on. Here are Victor’s thoughts:
Well Steve, after an intro like that I’m tempted to just say hello to your readers and leave it at that before I say something to put a blemish on how you’ve profiled me, however I’ll give it a shot and thank you for the kind words.
In brief, there are a number of factors I can point to in order to understand what you’ve just described:
The Internet: No need to elaborate. It’s here to stay and the monster only keeps growing. Amazon’s piece of consumer’s spending is only getting bigger and won’t recede in the near future. Yes we can talk about retailers who are incorporating the Internet into their sales strategy but that is only stemming the tide on the slow down in the demand for bricks and mortar.
Synergy disintegration: When we New York retail real estate practitioners read about J.C. Penney and Sears closing many of their shopping center stores we get concerned but somehow seem to manage to pull out the “Yeah but that’s not NYC” card. But guess what, the same phenomena that infects a shopping center when an anchor leaves or shuts down occurs here in the Big Apple when a major store or a quality national tenant shuts down. It’s one thing for a Manhattan retailer to feed off the traffic generated by a major transportation hub or densely tenanted office area but when a “satellite” use takes a position near a major national retailer who goes out, that area loses significant traffic and value. Bebe is about to close all of their stores. Ralph Lauren just announced that they’re closing their flagship Fifth Avenue store as well as 50 of their stores around the country. Not good.
Escalating Manhattan housing costs: Apartment rental costs have continually risen through many areas of Manhattan, Brooklyn, Queens and now the Bronx. We are seeing redevelopment and new construction of residential real estate. The Millennials are flocking to these new areas for affordable housing. This in turn creates new opportunities for retailers and restaurants to feed off that new and growing residential population and secure spaces at lower costs than the historic tried and true Manhattan shopping districts command.
Operating expenses: Let’s remember that in addition to rent, NYC retailers have to absorb a portion of the real estate taxes on the property. Keeping the Big Apple running requires a lot of revenue, which is substantially generated by commercial property taxes so we continue to see retailers absorbing an increasing real estate tax obligation. Add to that the cost of labor to enable Manhattan retailer’s employees to live in one of the most expensive cities on earth and the retailer’s margins are further squeezed.
Over supply: There’s no denying that this country is over built with retail space and NYC is probably leading that statistic in per capita square footage. As the Internet pinches the demand for bricks and mortar in the face of an overbuilt supply…….BANG! I just read this morning that retail bankruptcies are occurring at a higher rate than in the depression!!!
Sovereign Wealth Funds: Manhattan has reached a unique point in desirability for commercial property investments and has seen a rash of foreign capital flock to Manhattan commercial properties, which are seen as a safe haven for these funds. This money is apparently primarily concerned with long term safety and are willing to live with a compromised cash flow from the retail component of a mixed use building or a prime retail specific property and wait for the market to come back.
I could probably go on further describing the problems but don’t want to get your readers any more depressed and even though John Lennon wasn’t a retail real estate broker, I think his words are appropriate: -“There are no problems only solutions”.
There is some good news. There’s too much money at stake in the Manhattan commercial real estate market to allow the retail component’s revenue stream to be log jammed as it is and property owners are already making meaningful changes to adapt to the current conditions. Quality, creditworthy retailers who have adapted to omni-channel retailing and have successfully addressed the Millennial consumer lifestyles are now in stronger positions to leverage asking rents and landlord concessions and contributions beyond what we have seen in a while. Landlords are also looking for operators who offer an experience in their stores as much if not more than their merchandise. These types of retailers can repair what I’ve referred to as the “synergy disintegration” (copyright pending) by generating their own traffic as destinations.
We have seen downturns in the retail real estate cycle here many times over and we continue to not only survive but to come through it stronger. NYC is still THE place to be to make your bricks and mortar mark in retailing.
However, the really good news is that my first grandchild Joshua Reiss Menkin just turned 7 months! Thanks for the opportunity Steve.
Am very glad I didn’t publish this column yesterday as this morning I found an interesting post on LinkedIn by Eli Braha about the state of retailing:
2017 – The year that retail died: In memorium…
- J.C. Penney: closing 138 stores
- Sears Holding: closing 108 Kmart and 42 Sears stores
- Macy’s: closing 68 stores
- Radio Shack: closing 187 stores
- Abercrombie & Fitch: closing 60 stores
- Guess: closing 60 stores
- The Gap: closing 175 stores
- Wet Seal: closing 171 stores
- Crocs: closing 160 stores
- The Limited: closing 250 stores
- American Apparel: closing 110 stores
And here are some of the comments posted on LinkedIn about Eli’s article:
It is the natural evolution of retail. Many of those names are either out of date, expanded far too much
Thanks for the summary. The reality is Amazon has changed the way people shop, however retail malls need to become more of a destination and become more focused service and entertainment. Store design like office, housing, and other sectors, need to utilize space more efficiently.
I think the one thing about every store on the list is that they didn't create a unique buying experience--no compelling reason to walk in the store and rub shoulders with people you'll be fighting with for bargains. Brick and mortar is viable to the extent the 'buying experience' exists. Just an opinion from a guy who might walk in a store once per year.
The sector is going through a massive shift, but to say that retail is dead is slanted media and misleading. Let’s not ignore food concepts, athleisure and other service-oriented retail. 1 example. just in the last few yrs, Soulcycle has expanded to 70+ locations.
It says a lot about what retail can be sustainable in certain markets. Soulcycle at 35 bucks a ride can't work everywhere as an example.
Another retailer bites the dust! hhgregg said on Friday afternoon that the company was closing all 220 of its stores and going out of business entirely, the liquidation ends a 62-year run for the Indiana-based chain. There is really nothing unusual about this. Brands come and brands go.
A couple of more thoughts from me on this:
Observing retailing, from when the early chains went public, Wall Street has put pressure on retailers to open a certain number of stores a year (witness the proliferation – is there a stronger word? – of Starbucks). Succumbing to that pressure, to keep their stock price (and stock options) viable, many chains simply over-expanded – big time. This is not to suggest that we are not in the midst of a sea change in retailing only to suggest that what’s happening now has not totally been caused by Amazon, etc. and other online shopping ‘stores.’
As with many things that have been changing since Al Gore invented the Internet, it’ll be interesting to see if today’s trends and behavioral changes (dare I use the word Millennials?) will stick or possibly revert back to another more ‘human touch’ type of shopping.
On The Road…
April 10: Asheville, NC to conduct a networking / personal brand / career coaching workshop for students in A-B Tech’s STEM (Science, Technology, Engineering, Math) Program.
April 24-27: London, UK to coach one of our clients preparing for their annual investor conference, attend the conference and provide feedback – What went well? What didn’t go well? What to consider doing differently next time?
May 17 – 18: Charlotte, NC to coach a client about to begin their first road show with institutional clients to raise capital
May 22: London, UK to conduct a Behavioral Presentation Coaching Workshop to a real estate private equity firm
June 22-23: Asheville, NC to conduct a session at a client’s global real estate event.
|Last Sunday at the North Carolina Arboretum - 5 minutes drive from my apartment!|
Lorna Renee Silverman Felix - March 24, 1924
Today is the 93rd anniversary of my mother’s birthday. Sadly, she died in June 1992 at the young age of 68.
Lorna Felix was way ahead of her time. She was an independent thinker and focused on breaking out of the stereotypes of women of her time.
She smoked cigarettes from a young age – something I learned a lot of younger women did back then to show they could – rebels they were? (As Yoda might say!)
She was in the audience for at least one Frank Sinatra concert where the screaming and pandemonium resembled what to a later generation became de rigueur at any show of The Beatles.
I am the guardian of two of my mother’s diaries that she kept when she was in junior high school in Rego Park (Queens), New York (then, it was grades 7-9). I’ve learned a lot about her, who she was, and what she was thinking from reading those diaries. I haven’t thought for a minute that she would be embarrassed to know that I’ve read it – in a way, I think she’s glad that I got to know her from her writings as she and I have many similarities - we are not great at following the rules!
Maybe that’s why our relationship was strained. We were too much alike.
Lorna grew up in a, for that time, middle-class family that wasn’t upper middle but definitely had some disposable income. Her father, Herman Silverman, was a furrier and while they clearly were not wealthy, they did spend summers at hotel in New Jersey – away from ‘the city.’
My mother was determined. She was going to make something of herself and not be relegated to remain a secretary, which is how she started her work career in an office in the Empire State Building.
When we moved to New Jersey, the day John Kennedy was assassinated, the world opened up for her. She got a job working for a travel agent and, after a number of years she opened Felix Travel in Roseland, NJ. My dad, Manney, and she were partners although my dad was a behind-the-scenes guy who worked there part-time (as you may know from this column, he was a professional property manager).
In looking back at family photos and movies (which I’m grateful my dad took) we appear to be have been a happy family. Those are my recollections as well. And, like I’ve learned, many men have difficulty with the relationship with their mothers - I am a case study in that. It’s something I’ve worked at figuring out since first starting to see a ‘counselor’ in 1991 and I continue that journey.
The first obstacle I worked at getting over is that my mother was not who I wanted her to be. That disappointed me and made me angry – especially after my sons were born and she wasn’t the ‘grandma’ that I would have liked her to be.
After a number of years of estrangement, even though we lived near each other in New Jersey, I had a break-through: I realized that she is who she is, not who I want her to be and that I had a choice: accept that or not.
When the brain cancer that did her in first reared its ugly head on Thanksgiving weekend 1991, I’m so glad that I did the right thing and was there for her. During that short time, between then and June 1992 when she died, I finally started accepting who she was. The sad part is that we never had time to become friends – something I truly regret.
Lorna Felix was a character; a large personality; a loyal friend to her friends and an adventurer. She travelled the world. I’m sure that that’s where my passion for travel and seeing the world and meeting new people comes from. When I got my drivers’ license at 17, I was allowed to borrow one of the family cars on the weekends. Through summer camp, I had friends (some of them my first girlfriends) in Syracuse, NY and Montreal and on many weekends, I’d jump in the car on Friday after school and come home on Sunday evening. My mother dubbed me ‘The Wandering Jew’ – which is a free-flowing plant.
My mother was the one that introduced the piano into my life. She played a little and as soon as they could afford one, bought a console piano for our apartment. That introduction to piano - even thought I wasn’t disciplined at all and never practiced and stopped lessons early – it couldn’t have become a more huge part of who I am. For that introduction to piano I have always been and will always be eternally grateful - I can't imagine what my life would have been like without music. I know she was proud of me.
I’m sure my mother is looking down on society today and smiling at how women have become more prominent in the business world. It’s been a long, slow journey and Lorna Felix, in her own not so quiet way, was there, at the forefront. She never backed down. She held her ground. She was an entrepreneur. She was an explorer. She was a good mother.
After she was diagnosed with brain cancer, my brother Jay and I asked my mothers’ doctor what would he do if it were his mother. The options were: try chemotherapy or let nature take its course. The Dr. said that given what he’d seen of the good-intentioned families of cancer victims, who encouraged the patient to try to extend their lives and didn’t realize the agony that comes along with that, he’d let nature take it’s course. And we did.
My mom died in June 1992. As you can imagine, it was not easy to watch her deteriorate – valiantly fighting the cancer’s effect on her brain. And, after she died, one of her closest friends, the mother of my best boyhood friend, told me, “Your mother knew you were there for her.” Tears come to my eyes right now thinking about Judy saying that to me. Of course, any good son would be there for his mom. In our case, due to the strained relationship we had, I guess it wasn’t a given that I would handle myself like a ‘mensch.’ Had I not, I would never have forgiven myself.
Tonight, I’ll raise a glass to toast to the life of my mother and feel grateful that I inherited some of her genes. Thanks Mom!
|Lorna Silverman - Atlantic Beach, NY 1946 (Age 22)|