Emerging economies are leading the rebound, but Minnesota is keeping up with new and renovated malls.
A veteran of the retail industry for more than 20 years, Deborah Carlson still finds the sector endlessly fascinating.
As the director of Bloomington-based Cushman & Wakefield/NorthMarq’s retail brokerage, Carlson says “it’s the most interesting and fastest changing of all the real estate disciplines.”
Carlson, also president of the Minnesota Shopping Center Association, keeps tabs on not just the state’s retail landscape, but beyond its borders, as well. She recently pondered a Cushman & Wakefield/NorthMarq report on the ever-changing global shopping center scene.
Q: How has the global financial crisis and recession affected the shopping center industry worldwide?
A: A dramatic drop in global consumer spending resulted in retailer bankruptcies, mergers, acquisitions and consolidations between 2009 and 2011. Even more resilient retailers, like Starbucks, retrenched and scrapped global expansion plans, resulting in significant declines in construction and investment levels. As global consumer spending has slowly and steadily regained its momentum, shopping center investment activity has increased — in some cases dramatically — and new development has followed, mostly in emerging economies.
Q: What signs are you seeing of that rebound in Minnesota?
A: Retail sales here are on the rise, and vacancies continue to shrink. This was true in 2013 with a vacancy low of 7.2 percent, and [is] expected to continue this year. But retailer growth is problematic. Existing stock is being leased up, especially in better centers and locations, and new development is just now starting to come to market. So there may be a short lag of new stores until development catches up.
Q: What are some of the notable projects in the works in the United States and Minnesota?
A: Outside of Minnesota, the most notable include the 2.9 million-square-foot American Dream Meadowlands in East Rutherford, N.J. (with Triple Five ownership from Mall of America); the 1.6 million-square-foot Shops at Summerlin Centre in Summerlin, Nev., outside Las Vegas; and DeBartolo Development’s 1.4 million-square-foot Ka Makana Ali’i Mall in Oahu, Hawaii.
In Minnesota, the Paragon Outlet Mall in Eagan with over 100 tenants is a game-changer. It has the unique opportunity to impact surrounding retail — including the Mall of America — and enhance and increase shopping trips to the Twin Cities from outstate Minnesota and surrounding states. It will fill the niche of upscale outlet retail, including such offerings as Lucy, True Religion and Saks Off Fifth.
The redevelopment of the Ridgedale Mall is also significant, with Macy’s finishing up their store consolidation and construction continuing on the Nordstrom store and additional retail.
The other big news is the development of pad sites locally — we are seeing lots of small centers and single-tenant buildings being built in front of big boxes. It’s great for the small retailers to be sharing the traffic created by big-box retailers — and the discounters and grocers make some profit on selling off the pad sites while enhancing their draw. And there’s a grocery whirlwind these days — Cub buying most of Rainbow, HyVee and Fresh Thyme coming to the market, new stores under construction including Lakewinds in Richfield and a Jerry’s store in Woodbury. Nine Rainbows are left to be filled.
Q: How is the industry addressing the challenge technology poses to retailers?
A: Customers — including Internet shoppers — still want to see and touch the product, but retailers don’t need as much space. So they are downsizing their stores, or relocating to smaller units or closing and consolidating stores in specific markets. Secondly, more direct sales through the Internet and smaller brick-and-mortar stores then affects how retailers distribute their product. So the industrial real estate sector is also growing as the demand for large fulfillment centers rise.