Tag Archives: focus

Let’s focus on supply side

Saturday, Dec. 23, 2017|2 a.m.

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To stop the entry of drugs into our nation, elected officials run an aggressive federal agency– the Drug Enforcement Administration– as well as are working together with police around the nation. Officials are spending billions of dollars to lower the supply of drugs by arresting dealerships and smugglers and filling our jails with small drug wrongdoers.

It costs more to keep a detainee than it does to support a student in college. And we have a president who states he desires a multimillion-dollar wall developed along the border with Mexico that, in his viewpoint, will stem the flow of immigrants and drugs.

So the actions our authorities are taking would seem to suggest a belief that a reduction in the supply of drugs will reduce the demand for drugs.

On tax reform, our chosen authorities have identified that we need a big tax decrease for the rich and for corporations in this country to provide more cash to use to increase the supply of tasks.

In this case, elected officials appear to believe that if we construct new stores and put more stuff on the shelves, this boost in supply of products offered will result in more tasks. To the contrary, some economists mention that providing more money to prospective customers such as middle- and lower-income employees and senior citizens who will then buy stuff will increase need for more jobs.

In my viewpoint, elected authorities are taking a wrongheaded position in both cases, but in opposite ways. I believe we need to strongly attack the need side in each case: Increase the need for items through tax relief for the middle- and lower-income earners and decrease the demand for drugs through expanded healthcare for those who are addicted together with a huge education program about the risks of substance abuse to keep people from beginning to utilize drugs in the very first place.

Doing that would save countless dollars, and the supply problem would look after itself. No demand, no requirement for supply. Attempt as they may, elected officials cannot have it both methods.

Out With the Old: Gap Closing 200 Shops, Shifting Focus to Old Navy, Athleta Brands

Old Navy Posts Rising Income Even as Sales Fall at Gap and Banana Republic Stores

Apparel mainstay Gap Inc. (NYSE: GPS) is moving its focus from its earliest and traditionally most successful brand names to its newest and fastest growing brand names in Athleta and Old Navy.

Space executives announced at a financier conference today that both brands have “significant runway in front of them” after increasing sales at Old Navy balanced out declining sales at its Gap and Banana Republic stores.

The business anticipates Old Navy to go beyond $10 billion and Athleta to exceed $1 billion in net sales in the next couple of years, mainly owned by growth in online and mobile channels and a modest U.S. shop expansion.

The choice marks a major shift far from its flagship Space and Banana Republic brand names, where sales have actually stagnated, leaving the retailer burdened an aging fleet of stores exposed to older, struggling shopping center real estate.

Due to the fact that of that, the company will be shifting its focus to where consumers are going shopping, simultaneously increasing its presence in its more lucrative worth and online channels, the company stated this week at the Goldman Sachs 24th Annual International Selling Conference.

“Over the past two years, we’ve made considerable development evolving how we operate – starting with getting fantastic item into the hands of our consumers, more consistently and faster than ever before,” said Art Peck, president and CEO of San Francisco-based Space Inc. “With much of this foundation in location, we’re now moving our focus to growth. We will utilize our renowned brands and significant scale to deliver growth by shifting to where our customers are shopping – online, value and active.”

Those new strategies include a major expansion of its popular Athleta Lady line concentrating on the kids’s athleisure segment, even as its main competitor in the sector, Lululemon, previously this year announced it would be closing all its standalone Ivivva shops by the end of the third quarter.

Over the next 3 years, Gap Inc. anticipates to include about 70 net new stores, with the addition of about 270 Old Navy, Athleta and outlet and factory stores throughout its portfolio. That expansion will be balanced out by closing about 200 of its Space and Banana Republic places.

Through the very first half of this year, Gap Inc. has actually closed 13 Space stores while opening only three. It has actually closed 8 Banana Republic stores while opening three. It has closed only 5 Old Navy shops while opening 13.

Earlier last month, at its quarterly earnings teleconference, Peck hinted that the company was going to strongly lower Gap and Banana Republic’s direct exposure at struggling shopping centers.

“We’re constantly looking at the routing edge of our fleet and the leading edge of our fleet and comprehending what the distinctions are in performance and truly trying to determine locations where we simply should not be at completion of the day and honestly, determine locations where possibly the consumer has actually moved on and we could reposition the shop too,” Peck said.

Space anticipates to lower costs by about $500 million over the next 3 years by leveraging its size and scale, cross-brand synergies and simplifying operations. The company plans to reinvest a portion of the associated savings in its growth initiatives.

Space and Banana Republic very same shop sales have been succumbing to the past couple of years. Gap compensation sales were down 2% in the very first six months of this year, down 3% in the exact same period last year, and down 8% in 2015. Banana Republic sales were down 5%, 10% and 6% in the very same period.

Old Navy sales however, have rebounded comfortably this year, up 6% in 2017 after a 3% decrease in the first half of 2016. This year’s outcomes make Old Navy one of the fastest growing apparel brands in the U.S. The company attributes the turn-around to its “commitment categories,” gowns, pants, knit tops and shorts.

In addition, the company has actually built a rewarding online and mobile service with double-digit sales growth. Space’s online store sites are built on an exclusive e-commerce platform that supports cross-brand shopping, omni-channel services and an approaching buy online, pick-up in store service, in addition to a brand-new ‘personalization engine’ powered by customer information.

The seller operates about 3,200 company-owned stores around the world with about 450 franchise stores, and e-commerce websites.

Reconnaissance Wrap-up: Shopping mall Owners Shift Focus to Profit from Recaptured Shop Spaces

Contrary to Bleak Headings, Las Vegas Convention Retail Trade Conference Attendees See Chance in Shifting Retail Landscape

About 37,000 merchants, retail brokers, financiers and other retail experts gathered in Las Vegas today for Reconnaissance, the industry’s biggest trade convention, amidst a concrete sense of aggravation– not a lot about the retail realty company, which stays evenly excellent, however rather over the bleak headlines and negative narrative concerning store closures and retailer bankruptcies that have actually dominated recent headlines.

Guests adopted a protective stance with a hint of defiance about what many described to CoStar as overblown sense of negativity by news outlets and market analysts in reporting and dissecting the woes of retailers such as Sears, JCPenney, Macy’s and a series of apparel chains and others that have actually revealed closures.

Throughout the sessions, brokers, proprietors and sellers ridiculed headlines pronouncing a “retail Armageddon” and the death of brick-and-mortar stores.


Brokers, owners and sellers loaded the Leasing Shopping center at Reconnaissance 2017 in Las Vegas today.”Contrary to a lot media coverage, the world is not concerning an end by any methods, for either physical retail or online retail. Just the opposite,” stated Ben Conwell, senior handling director with Cushman & & Wakefield.”Disruptive, yes, but great opportunities remain. We’re very, very bullish on the effective combination of the retail world with supply chain network.”

By the 3rd day, nevertheless, the narrative at the yearly celebration of international consumerism had actually moved to hammering out deals and sharing leasing and sales strategies in the changing enviornment. Conference goers worked their phones and loaded the Las Vegas Convention Center flooring checking prospective offers.

Panel discussions concentrated on repurposing malls and shopping mall with the latest food, beverage and home entertainment concepts, redeveloping aging Class B properties and rooting out the “surprise cash traps” in burdensome co-tenancy clauses and other leases terms.

“Everyone wants to find out exactly what the next hot food and home entertainment idea is going to be– what’s the next Topgolf, what they can do to get a piece of the action before the market becomes too saturated,” said Cushman & & Wakefield Vice President Garrick Brown. “The next decade is going to be all about mixed-use and redevelopment, developing a city feel in a suburban area.”

Hessam Nadji, president and CEO of Marcus & & Millichap, stated the repeating concern he is asked by customers is, “How do we turn the existing characteristics and unfavorable headings into chance?”

Westfield and other major shopping center gamers have actually mainly weeded out B and C residential or commercial properties and are focused on structure ‘fortress’ financial investments in their finest assets and areas, Nadji said throughout the investment brokerage’s annual Retail Trends conference at the Renaissance Hotel.

The world’s biggest shopping mall owner, Simon Property Group, (NYSE: SPG), this week revealed strategies to invest another $1 billion in redeveloping its homes. Over the previous 5 years, Simon stated it has invested more than $5 billion to update and broaden its homes, adding dining establishment and entertainment area and redeveloping previous outlet store sites to keep up with the altering choices of its customers.

Nadji stated shopping mall owners and investors need to think of how finest to reposition their residential or commercial properties based on specific consumer requires in their trade areas, including healthcare, dining establishments and tenants such as home improvement stores linked to the recovering single-family real estate market.

“It has to do with recycling the realty. It’s not about the retail,” Nadji said.

Alexander Goldfarb, REIT expert with Sandler O’Neill + Partners, stated this year’s Reconnaissance seemed like “a mission for the down-to-earth reality about the state of physical retail.”

“While the management teams seemed more sincere about the extent of the pressures on the industry, the message was the very same as in current profits calls– demand for quality areas endures, and now needs some additional sweat to accomplish,” Goldfarb stated.

Regardless of concerns over the possibility of extra outlet store closures and liquidations, leasing spreads for recaptured area seem staying intact. And while bigger sellers may be throttling back growth plans, new principles and small-shop occupants seem to be expanding, Goldfarb stated.

Richard W. Chichester, president and CEO of Faris Lee Investments, invests a great deal of his time listening to and recommending retail proprietors about the chances and challenges of rearranging underperforming shopping centers.

“The repurposing of retail is something individuals have actually discussed for several years, but most have not seen it yet,” Chichester said. “At no time in our professions have actually basics been more crucial. The most important thing is the quality of the realty– not the tenants. If it’s strong real estate and there’s an excellent business strategy, it’s defensible.”

Retail is the most complex and sophisticated of the significant commercial home types, with a smaller sized swimming pool of more extremely competent players in the market today dealing with locational, layout and co-tenancy concerns that merely do not exist in workplace, multifamily or industrial possessions, Chichester asserts.

“Retail is constantly fluid, transferring to the expectations of the customer. Amazon is now among the largest landlords in the nation, through a big traditional e-commerce presence,” Chichester said. “With its warehouse type stores, Wal-Mart was among the earliest examples of omni-channeling. When you take a tube of tooth paste off the rack, their system currently understands and is currently sending out the order to replenish their inventory.”

“Wal-Mart and Amazon are going to fulfill in the middle in a big collision,” Chichester stated in closing.

rue21 Files Chapter 11; To Focus on Finest Performing Stores

Another teen specialty apparel merchant, rue21 Inc., has actually applied for chapter 11 personal bankruptcy reorganization.

Last month, rue21 began the process of closing approximately 400 underperforming stores in its 1,179 shop fleet in order to improve operations. The locations were identified as unprofitable, underperforming, or not a tactical fit going forward.

rue21 employed Gordon Brothers Retail Partners to start liquidating the stock and close the stores by July 2017.

rue21’s occupancy cost in 2015 216 was approximately $118 million and in fiscal year 2017 it is expected to be around $119 million (prior to the shop closings).

The retailer will initially ask the personal bankruptcy court to cancel the remaining term on 22 of those leases, while attempting to market other of the leases.

Warrendale, PA-based rue21 likewise added it may examine additional store closings as it continues to manage its real estate lease portfolio.

“These actions are being carried out with the objective of strengthening the business’s balance sheet, attaining a more effective cost structure, and concentrating resources on a tighter retail footprint in order to pave the best course forward for rue21,” stated Melanie Cox, CEO of rue21

Historically, rue21 experienced strong development, with sales growing from $296.9 million in 2007 to $1.137 billion in 2015, Todd M. Lenhart, acting CFO of rue21, mentioned in an insolvency court filing.

However, after years of success and growth, business has actually come under substantial pressure in the last few years, stemming in large part from an evolution of client tastes. For example, the girls’ division represented 54% of the business’s overall gross sales in 2015, while in 2016, it represented just 50.2% (with divisional gross sales of $608 million and $568 million, respectively), a material year-over-year drop.

In addition, the company has experienced a decline in in-store deals due to online shopping. While its online existence is broadening and improving, its historic online platform was not as robust as its competitors, Lenhart mentioned.

In current months, the company has also been concentrated on revamping its ecommerce strategy and increasing the number of clients who engage with rue21 on its digital platform.

ULI/PwC Study: More Investors Shifting Focus to '' 18-Hour ' Cities

Financiers Progressively Bullish on Austin, Charlotte, Nashville; Decreasing Belief for Houston, DC, Chicago in Annual Financial investment Outlook Survey for U.S. Metros

U.S. and worldwide property financiers checked by PwC and the Urban Land Institute (ULI) are significantly bullish on secondary markets such as Nashville, Charlotte and Austin, which edged out ongoing gateway cities such as San Francisco, Los Angeles and New york city City to record 8 of the top 10 rankings for investor outlook in the latest PwC/ULI-authored Emerging Trends In Property 2016 report.

The conclusions mirror growing self-confidence in the investment capacity of these so-called “18-hour cities,” which likewise include Dallas/Fort Worth, Charlotte, Seattle, Atlanta, Denver and Portland. “We are finding a tangible desire to place a rising share of financial investment capital in markets outside the 24-hour entrance cities,” kept in mind Mitch Roschelle, partner with U.S. realty advisory practice leader with PwC.

One survey participant, a financier at a big global institution, expressed surprise at the number of secondary markets that have actually become “suddenly hip” among the institutional crowd, including Denver, San Diego and San Antonio.

Investors have actually been moving gradually to increase their risk tolerance in these markets as the recovery in U.S. economy and realty markets remains to grow, strengthening absorption and tenancy in virtually all markets. It doesn’t hurt that these second-tier markets have actually experienced more moderate compression of cap rates and enhancing yields relative to the entrance markets where investors have actually paid a premium for prize properties and bid up the prices of even less-quality possessions, according to the report.

ULI and PwC presented their joint-report at a conference held this year in San Francisco, where the super-heated property market has raised concerns about affordability and the prospective impact of a downturn in the technology sector on industrial home.

A separate ULI report launched today suggests that the San Francisco Bay Area is at danger of losing millennials to less expensive housing markets. About three-quarters of millennials checked for the report stated they were considering leaving the region within the next five years.

One-third of the respondents from the South Bay area in the Silicon Valley, which has the largest number of millennials, state they are not pleased with their real estate alternatives.

Amongst the report’s other findings:

With office-using tasks making up 39 % of the work gain, office absorption, occupancy and rent development has been brisk in both CBD and suburban workplace markets, with more of the very same expected in the coming year.

With prices currently near record levels in numerous main markets, financiers will direct more capital into the increasing secondary areas, along with restaurant/retail sale leaseback opportunities, and alternative assets such as cell tower, outside advertising and even possibly energy and facilities REITs. Investors will certainly likewise take a closer take a look at redevelopment and other value-add opportunities, including conversion of outmoded industrial centers to “last-mile” distribution centers serving e-commerce, or trendy workplaces. Institutional investor interest will certainly rise in niche property types that are benefiting from altering demographics and innovation trends, such as medical workplace, data centers and senior housing.

Trends compeling middle-market CRE brokerages to grow through consolidation or end up being niche professionals or regional/boutique firms will significantly impact designers, fund supervisors and equity companies. Smaller designers are significantly relying on neighborhood bank loan providers for advancement capital, as big lenders are now more cautious due to federal governing examination.

One Chicago developer that had long worked as an independent on high-end metropolitan construction tasks reported that he just recently moved under the umbrella of a large firm with cross-border companies, noting that “the contractors and owners of building now are completely various” and little builders aren’t equipped to stand up to market down cycles. The cost of pursuing advancement projects, which may take 18 months or more to begin, can cost a home builder countless dollars, he lamented.