Is real estate still a good diversifier?

by Jim Dunphy for the CCIM, July, 2011

The State of the Shopping Center Industry in the US

As a retail developer for the past 12 years, a CCIM for the past 16, and a commercial real estate professional working in the retail discipline for the past 29 years (leasing, managing, investment sales, site selection and construction management), I feel comfortable in saying retail commercial real estate is the most dynamic discipline of all the commercial fields.  That said, it’s really not that complicated.  An “A” site meets the following criteria critical to almost all retailers:  visibility, access, sufficient parking, and signage at a signalized intersection with a customer profile in close proximity suited for your retailer.  The current economic climate is such that if you do not have an “A” site you really should sit back and get comfortable; it’s going to be a while before you can dispose or develop your property, for retail related uses.

The contraction of the economy is not the only factor we are confronted with as developers and owners of retail projects.  The world has truly changed and has been impacted by the availability and ease of purchasing on-line.  If a good or service can be bought on-line, it is just a matter of time before that efficiency hits your bricks and sticks retailer.    That’s not to say that the shopping experience is dead; to the contrary, look at the success of the traditional mall.  Both indoor and outdoor spaces create a shopping experience that occasionally all Americans like to enjoy.  It is part of our culture.  However the impact and efficiency of the internet cannot be denied.

All is not lost for the neighborhood and grocery-anchored shopping center developer.  There are many service-oriented users and restaurants requiring space.  For example, you must go out to get your hair cut.  An online solution has not yet been developed that can do nails, dry-cleaning, tailoring, etc   Grocery-anchored centers are the darlings of the retail investment world right now, and there are many good reasons for that, none greater than groceries are hard (not impossible), but very hard to buy on-line.  However, a well placed, “A” location, smaller retail center with these service-oriented users and restaurants can and will be successful long term.  If you can provide convenience and service with the traditional attributes of good locations, as mentioned above, you will be successful long term.

Not complicated, but not easy.  We build and invest in grocery-anchored retail.  We have developed smaller neighborhood centers or “key box” retail as it is sometimes referred to and have been successful with our tenant mix following this basic philosophy.  If it’s service or restaurant oriented, we believe it has long term viability.

Jim Dunphy, CCIM
Tampa, Florida