Not all retailers love onsite fulfillment

Fifty-seven percent of retailers are opposed to adding fulfillment space to shopping centers, according to Colliers’ Retail Report Spring 2021. “Retailers believe there are more suitable locations in less congested areas that would streamline costs and operationalize fulfillment center logistics,” said Colliers national director of retail services Anjee Solanki.

Issues retailers see with operating fulfillment centers at malls

90 percent of retailers: There are better locations

87%: Traffic and access difficulties

66%: Potential cost of converting space

57%: Lack of suitable space/configuration

52%: Potential cost of leasing space

44%: Could make mall less attractive to shoppers

15%: Would be disliked by shoppers

6%: Harder to recruit staff

Solanki said: “With all these variables unaccounted for, it shines a light on those pushing an idea solely to solve the problem of excess space in malls rather than considering what is most beneficial to retailers.”

More vacancies coming for malls

The vacancy rate at regional malls hit a record 11.4 percent in the first quarter, up from 10.5 percent in the fourth quarter, according to Moody’s Investors Service. The 90 basis-point climb from one quarter to the next is the highest the firm has recorded since 2009, in the height of the last recession. The U.S. has about 1,000 malls, according to Green Street. Moody’s tracks 700 of them.

Store closures will go on for several years

UBS estimates 9 percent of the U.S.’s existing stores, or 80,000, will shut by 2026. That assumes e-commerce sales rise to 27 percent of total retail sales, up from 18 percent today. Clothing and accessories chains are most likely to shutter, according to UBS, which forecasts about 21,000 closures from this sector by 2026, many of them in enclosed malls. UBS makes the case that government intervention has sustained retailers temporarily and the effects will taper off. Office supply and sporting goods stores also are among those that will close because of sales woes, UBS anticipates. Categories in which UBS expects store closures to be the most modest are home improvement, grocery and auto parts.

Three-quarters of U.S. shoppers went to physical stores over the holidays

Seventy-five percent of U.S. shoppers traveled to a physical store to buy a holiday gift in 2020, according to a Silverback Strategies survey of 1,048 consumers conducted between Christmas and New Year’s Day. Of this group, nearly 80 percent made traditional in-store purchases. Others took advantage of curbside pickup and buy-online-pick-up-in-store. And more than half who purchased gifts online visited a retail store’s website. This was particularly true of certain products like jewelry and watches; buyers of those products were nearly 30 percent more likely to consider buying at a retail store than online.

Kids’ cooking school is about to open first U.S. location

Little Kitchen Academy, a Montessori-inspired cooking academy for children age 3 and up, will open its first U.S. location this summer, at Los Angeles’ Westfield Century City. Montessori-trained culinary expert Felicity Curin co-founded the organization with her husband — global brand and franchise expert and entrepreneur Brian Curin — and social impact investor Praveen Varshney. Brian Curin has worked on brands like Cold Stone Creamery, Moe’s Southwest Grill and Flip Flop Shops. The Los Angeles location will serve as the flagship training facility. The 1,505-square-foot Westfield Century City location will feature the same modern, innovative, signature design as the first location, which opened two years ago in Vancouver. In May 2020, Little Kitchen Academy announced it will open more than 400 global locations by 2025 and is seeking like-minded multi-unit franchisees and development partners.

Investor interest keeps grocery property prices high

Grocery-anchored retail centers continue to be investors’ preferred retail property type, according to JLL’s Grocery Tracker 2021 report. The number of single-asset grocery property trades of over $5 million fell 55.1 percent in 2020, which aligns with other retail property types, but pricing remained high, falling only 1.8 percent. The volume of single-asset grocery properties traded totaled $4.4 billion, accounting for 20.4 percent of all single-asset retail transactions.

Due to the desirability of grocery-anchored centers, JLL expects sales volume of such properties to increase this year. Owners of grocery centers on prime corridors in secondary markets like Fayetteville, North Carolina, will look to monetize their portfolios as investor demand increases, particularly given the past year’s 4.4 percent increase in price per square foot in those markets. Single-tenant grocery assets and grocery-anchored retail properties smaller than 100,000 square feet will form one of the most sought-after asset classes during the recovery, and their cap rates will compress over the next 12 to 18 months, according to JLL.

6 retail property transactions of note

Macerich sold Phoenix’s Paradise Valley Mall for $100 million to a joint venture it has formed with an affiliate of Red Development. Macerich will retain a 5 percent interest in the multiyear, multiphase redevelopment. The 1970s-era mall has been rezoned to better reflect demand for wider offerings on the 92-acre site. Uses will include high-end grocery, restaurants, multi-family, office, retail and other elements. The redevelopment will feature 3.25 million square feet of non-residential and 3.25 million square feet of residential totaling about 2,500 multi-family units.

Ground-floor retail totaling 25,349 square feet in Vita, a luxury condominium and retail development in Boston’s Jamaica Plain neighborhood, sold for $15.9 million, or $626.72 per square foot. “This was a rare opportunity to acquire a newly constructed, retail development occupied by a secure list of tenants generating durable income in one of Boston’s most desirable communities,” said Marcus & Millichap Institutional Property Advisors senior managing director of investments James Koury. He represented the seller, J.P. Property One LLC, and procured the buyer. Located 4.5 miles from Boston’s Financial District, Vita is near the Green Street and Forest Hills commuter rail stations. The retail is fully occupied by Beth Israel Hospital, Pure Dental, Third Cliff Bakery, The Cooperative Bank and Planet Fitness.

The owners of Zinfandel Crossings in Rancho Cordova, California, improved the sale price for the property by breaking it into four pieces for individual sale, according to broker Hanley Investment Group. All the retail space has sold for a total of $11.4 million to a private investor. According to Hanley Investment Group executive vice president Kevin Fryman, the combined sales totaled $2.5 million more than if the center, pictured at top, had sold as a single property. The $1.8 million sale of a vacant, 26,520-square-foot box formerly occupied by Fit Republic gym was the final transaction. It marked a premium price for a vacant retail box sale in Greater Sacramento, according to Fryman. The other three transactions were a 54,000-square-foot 99 Cents Only store, a two-tenant building totaling 4,414 square feet and a five-tenant building totaling 6,755 square feet.

Nashville’s oldest shopping center, the historic Arcade, sold for $28 million to New York City-based Linfield Capital and a group of local investors. The 118-year-old property spans a city block, encompassing 10 parcels. The two-story building’s design is based on Milan’s oldest active mall, the Galleria Vittorio Emanuele II. The buyers have yet to announce their plans. The deal was financed in part with a $22.6 million loan from FirstBank.

A 66,500-square-foot shopping center in Spokane, Washington’s Hillyard neighborhood sold to local investment company Sinto Properties LLC for $17.65 million. It’s anchored by Safeway and a gas station, and other tenants include Great Clips, Mod pizza, Panda Express, Subway and Top Nails. Capital Pacific represented the seller, Marketplace at Hillyard LLC. Coldwell Banker Tomlinson agent Denny York represented the buyer.

Mohr Capital sold a Steubenville, Ohio, ground lease occupied by Texas Roadhouse to a private investment company. Mohr Capital granted initial rent relief to the restaurant in exchange for a long-term extension of its lease. “As social restrictions ease and more people receive their vaccinations, dine-in restaurant operators like Texas Roadhouse are beginning to see a rise in sales,” said Mohr Capital director of retail investments and acquisitions Rob Solls. “We’re happy with the way this transaction worked out. As the economy and consumer behavior normalize, we believe the property will continue to provide value to the buyer.” Mohr Capital acquired the ground lease in 2019 upon the launch of its retail acquisition and redevelopment division. The Mansour Group procured the buyer.