S.E.C. Real Estate Observer

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Whew, 2008 has come and gone! After a very rough period, landlords are finally seeing some great days in the retail game. About time! It could not happen too soon for those of us who own shopping centers.

Most of the retail categories are seeing a lot of activity. However, brick-and-mortar retailers still remember 2008 too. Potential tenants are doing things much smarter this time around. We property owners must also be smarter about how we do things. Thus, the title of this article: “Lease with a Purpose, Not Just to Fill Space.”

I recently read a quotation from Anne Mastin, the executive vice president of real estate at the Columbus, Ohio-based Steiner & Associates. The quotation reads, “The best developers curate their centers and do not simply fill space. They have to focus on creating reasons for the consumers to spend time there.” Steiner certainly knows how to create experiences. S.E.C. Members know this, but do we do it?

In one of the centers that I frequent, there are three restaurants that struggle in an in-line space. I ask you, which is worse: a vacant space or a space that has acquired a reputation of tenants who keep on failing? Sometimes we are so happy to have a “butt in the seat” that we forget that the only thing worse than a vacancy is a lease space with a bad reputation.

So, what do we focus on? Think about the experience of retailing. For instance, when you take the kids to a movie, what do you usually do before or after the show? We My family and I go out to eat. After the meal itself, do we want desert? Sometimes. But before I spend $12.00 per serving on huge hunks of chocolate for each kid (and I do love chocolate), I suggest that we go get ice cream. Kids love getting to choose among all those flavors and it is usually much cheaper than the deserts at a sit-down restaurant. Then, we let those little guys run around and burn off some of that sugar before we put them in the theater for two hours.

Does your retail project have a purpose? Sometimes when I am not so busy, I just sit in the parking lots of our retail center to try to pick out trends. We own a center that is anchored by a Lowe’s Home Improvement, a 24 Hour Fitness, and a Best Buy. It is amazing how many times I have seen people dropping off their cars at the NTB Tire store and then walking across the center to Lowe’s or Best Buy. I lucked out; it wasn’t planned, but it certainly works. We all hate waiting to get our car’s tires rotated, but it is not so bad when we can walk across the parking lot and get something else done.

When Kris and Rob were young, it was a big deal for Tricia and me to take them to Mariano’s Mexican Restaurant. Mariano Martinez, who invented the frozen margarita (true story—his first machine is in the Smithsonian—look it up), had a large patio at the restaurant. This patio had a common area, in the center of which was a place where kids could run wild and explore. We could see them from our table, which gave us the ability to watch them and let them have a great time. Most importantly, this afforded Tricia and me the opportunity to carry a conversation. It was almost like having a date night, but we didn’t need a babysitter. Mariano’s became a place for us to meet other couples with our kids. It was much more than just a meal out; it was a place to congregate.

Take a few minutes to sit and watch how the centers you really like work. The well performing centers do not just happen; they are carefully planned. The new generation of adults wants experiences, not just retail. The retail experiences of young adults who congregate at malls is different than the retail experiences desired by those of us who hate shopping. Successful retailers realize that lifestyles change, and they work to give those who spend money what they want.

Sometime, I want to lead a panel at one of our S.E.C. meetings on what goes together in retail. It might be very interesting to see what our members come up with. Last words: fill your space with purpose.