homeWelcome, sign in or click here to subscribe.login
     


 

 

Real Estate


print  email to a friend  reprints add to mydjc  

December 12, 2013

State of the Market: Retailers cash in on strong local market

  • Puget Sound regional malls have consistently reported sales increases above the national average and for many tenants, some of their best performing locations are in the Pacific Northwest.
    • By SUSIE DETMER
    Cushman & Wakefield

    mug
    Detmer

    Writing about the state of the retail market in early December is like writing about a great wedding reception while the marriage ceremony is still in progress. Though hopeful the food will be fabulous, the band danceable and the liquor flowing freely (meaning free and a lot), there is risk the reception might have mediocre food, an abysmal band and a no-host bar. No one knows until it is over, or at least well underway.

    The holiday season will make or break many a retailer’s year. The last opportunity for a retailer to report a stellar 2013 performance can hinge on the few weeks before Christmas where some retailers experience 20 percent to 40 percent of their total annual sales. Going into November, retail sales increased 3.87 percent over last year. Analysts predict a conservative 2 percent to 4 percent increase for the holiday season.

    Unfortunately, Black Friday weekend (should we rename it Black Thursday weekend with so many retailers open on Thanksgiving Day this year?) produced less than anticipated results. According to the National Retail Federation, the weekend actually resulted in a decline in total per capita spending of nearly 4 percent. Shoppertrak estimated weekend sales at brick-and-mortar stores increased 1 percent.

    IBM Benchmark last week forecast Cyber Monday sales at a 17.5 percent increase. Consumer comfort with buying online is a concern for retailers without a strong online presence that rely exclusively on brick-and-mortar stores.

    Many retailers are shaking in their boots. The length of time between Thanksgiving and Christmas is about as short as it can possibly be, with six fewer shopping days than last year. Many fear they won’t have time to realize the sales increases projected. There is also a threat online retailing could make an even more significant dent in brick-and-mortar store sales over the next few weeks. Add to that, consumer confidence has not increased as hoped.

    It will be interesting to see if consumers will deliver the conservative 2 percent to 4 percent sales increase this holiday, as analysts forecast.

    But enough about the retail world as a whole. Our interest is in the greater Puget Sound and what is happening in our own backyard. The good news is our yard looks great. Puget Sound was one of the last markets into the recession and the first out. Puget Sound regional malls have consistently reported sales increases above the national average and for many tenants, some of their best performing locations are in the Pacific Northwest.

    Retail vacancy in the institutional quality retail centers in the Interstate 5/405 corridor is less than 5 percent. Even secondary markets average less than 10 percent vacancy, statistics much of the rest of the country envy. Because of this, Puget Sound remains a desirable area for investment and continues to be a target market for new tenants and expansion.

    Unlike much of the rest of the U.S. where new development has been minimal, Puget Sound welcomed several significant new developments in 2013 representing more than 600,000 square feet of additional retail space:


    Grand Ridge Plaza

    Issaquah

    Heading over Snoqualmie Pass? Look up the hill to the left as you pass the south end of Lake Sammamish and see the Grand Ridge Plaza development. Once nearly exclusively residential, the addition of Swedish Hospital’s daytime population helped spur this long-awaited development. With nearly 300,000 square feet of new retail, the center opened in October with anchors such as HomeGoods, Marshall’s, Safeway, Dick’s Sporting Goods, Regal Cinema, and several restaurants and shop spaces.

    University Village

    Seattle

    The expansion of the south side parking garage with new retail stores such as Scotch & Soda Amsterdam Couture, American Eagle Outfitters, Liam, Joey Kitchen and Calypso St. Barth opened just in time for Thanksgiving. And, Din Tai Fung will open soon.

    Westlake Center

    Seattle

    The addition of Nordstrom Rack and Zara (in early 2014) to Westlake Center resulted in filling in the common areas on two floors, creating more retail space and improving the pedestrian traffic flow. This renovation is well underway with additional mall upgrades to continue into the new year.

    Seattle Premium Outlets

    Tulalip

    More than 100,000 square feet was added this summer. New tenants include Armani Outlet, Max Studio’s, The North Face, Forever 21, Diane Von Furstenburg, Vince and more. Nearby, Cabela’s opened on the Tulalip Tribes’ development this year. For those unfamiliar with the store, it is a hunter, fisherman, camper and outdoor person’s 112,000 square feet of heaven.


    Puget Sound also attracted many new retailers:

    • Arc’teryx opened its first U.S. branded store at Fourth and Pike in September. Arc’teryx specializes in high-end technical gear for the mountaineering, skiing, snowboarding, climbing, hiking and running enthusiast.

    • The University Village expansion introduced several retailers to Washington, such as Scotch & Soda, Calypso (luxury apparel and accessories) and Hot Mama (designer clothing).

    • Cellairis, providing fashion-forward cases and accessories for mobile devices, and Spanish shoemaker Camper are just two of the new stores that opened at Bellevue Square.

    Existing retailers, confident in Puget Sound area sales potential, have added stores. Apparel tenants are expanding: Tommy Bahama opened a second location at Bellevue Square; and T.J. Maxx opened a two-level store in downtown Seattle near Third and Pike. Fast-casual restaurants are going strong with additional stores from Chipotle Mexican Grill, Panera Bread, Five Guys Burgers and Fries, Jimmy John’s, Veggie Grill, PotBelly Sandwich Shop and Panda Express.

    International investors look to buy retail centers in Puget Sound, but the availability is minimal and the prices are extremely high with cap rates below 6 percent for premium properties. Local ownership is reluctant to sell prime assets, noting “What would I buy instead?”

    My take on 2013 retail when all is said and done? Though nationally a sales increase in excess of 3 percent seems unlikely, Puget Sound will enjoy better than national average sales, lease rates will continue to rise at a steady, but conservative pace and retail vacancy rates will continue to decline.

    Let’s just say, if this were a wedding ceremony still in progress, I’d be feeling pretty good about the band.

    Susie Detmer is an executive director at Cushman & Wakefield/Commerce Real Estate Solutions focusing on retail leasing and sale in Puget Sound.


    Other Stories:


    
    Email or user name:
    Password:
     
    Forgot password? Click here.