Schuckman Realty

The New Normal is Abnormal

2011-08-15T07:30:00.001-07:00

I’m an optimist. People like me were the ones who would always think “the glass is half full.” Things have changed, but not completely. In spite of an anemic economy, catastrophic real estate markets, disappointing trends, radical shifts in the shopping center business, and a recession that won’t go like a house guest that can’t take a hint, we optimists are still willing to say, “well, at least the glass isn’t empty...yet.”

From my perspective, the optimistic thing to do is to just keep searching for the "new normal,” and the new opportunities it is presumed to bring. That doesn’t mean I think there will be anything normal about the “new normal.”

Right now, the new normal is stuck behind millions of jittery consumers, thousands of credit-starved small business owners, and the 9% of Americans still unemployed. The world of retail will just have to wait until it gets to the front of the line. The wait is even more difficult because brokers, developers and retailers keep getting the same mixed messages.

These days, it’s typical to see a cover story lamenting 12-month lows in consumer confidence just a column inch away from a breathless report about Starbucks breaking pre-recessionary sales records. I see those frustrating paradoxes as hopeful, though faraway, signals of a new, but very different retail industry starting to evolve.

Landlords are continuing to lease their space and keep their shopping centers occupied but their attitude is different. One landlord, a third generation developer, recently told me that he’s never worked so hard before, and just to maintain his family's wealth. He may be working hard, but at least he’s getting somewhere.

Once upon a time, the grocery-anchored center, the darlings of the industry, was as reliable as an atomic clock. Today, with the bankruptcy of A&P, landlords have to endure some stomach churning predicting the anchors they’ll have in the future. I would shrug off any amount of stomach churning. It’s painful to see landlords trapped in a surreal “Three Little Bears” fairy tale—the only grocery style chains available to fill the void are always too small or too big, but never, just right. I know landlords who used to pray for the day they’d get their supermarket space back, praying they won’t.

There’s no doubt that where the market place stands now, the prospects for a national tenant taking these boxes are at all time low. The fact that the health & fitness concepts are starting to play the role of anchor, doesn't much excite small store shops who paid up to be next to the grocer.

It also doesn’t help that the new, brewing trend is "category killers" getting slaughtered by the internet. Victims, so far, include Circuit City, Linens N' Things, Blockbuster, and now Borders. You can see the writing on the For Sale sign, when Staples is the second largest online retailer in the world! Trust me: even of the “category killer” category hasn’t ended yet, it’s definitely the beginning of the end. And then will come the slowly dissipating need for retail space with high occupancy costs. Best Buy recently announced their intention to downsize their stores nationwide up to 15,000 SF. In many cases they are talking to Staples, but I recently walked through both stores, they sell the same stuff!! New retail concepts were once attractive to venture capital and private equity. They still are, just now, the first retail location they open up is in cyber space.

When colleagues ask how I imagine the future, they’re wondering how I think the new normal is going to look, and all I know is it won’t look very normal at first. Expect the evolution of retail to dominate the landscape through a concept I call “experiential retail.” Uses that drive customers to the shopping center will evolve into “touch, feel, and eat” categories that you have to be there to experience. It just won’t be available online.

I’m already seeing an explosion of medical uses for retail locations. From dentists to pediatricians to urgent care facilities, the medical industry is factoring larger and larger into the shopping centers’ tenant mix. Health and fitness facilities ranging from 100,000 + SF big boxes to 2,000 SF franchises are growing nationwide. Restaurant- and entertainment-oriented uses is and continue to be a growing presence in the shopping center.

The future is still hazy, and hardly near rosy. The majority of uses mentioned above are rent sensitive and need tenant allowance, just a few predictable challenges. The new normal will bring new challenges we can’t even define today. And that’s coming from an optimist. But, who knows...seeing the world as a glass half full may be part of the new normal, too.

By Kenneth S. Schuckman

2011 Mood A lot Better

2011-06-27T08:19:00.000-07:00

The 2011 ICSC Recon show was breath of fresh air. Last year there was a smell of sulfur in the convention center and feelings were very negative. The real estate reps at most of the retailers were pretending to be interested in locations, mostly to justify their positions to avoid being laid off. This year there was a smell of roses in Las Vegas. Now I am not saying that the recession is over. The attendance was comparable to last years dismal showing. The difference is that the folks that were at the show were there for a purpose. Meetings were meaningful. The members of the shopping center community that came to Vegas were there to make deals. The ones that should have never been coming out in first place stayed home.

"The roses aren't blooming but they are budding." We are not out of this bottoming process yet, but the feeling is that we have turned the corner. Tenants are looking to expand, banks appear as if they are starting to loosen up, and transactions are increasing in volume. The malaise of last year is gone but we have a long way to go. The ICSC of 2011 showed our community that the cycle has turned, and the days to come are looking brighter.

The Lessons I've Learned - Stanley Schuckman

2010-08-31T13:55:00.000-07:00

At the end of this year, I will have been in the real estate business for thirty nine years, and like the many seniors in our business, I’ve seen it all. I’ve seen the boom years as well as the slow periods when business is hard to find, and in one of those slow periods, there was no business to find at all. That period was the first recession I confronted after entering the real estate business, which resulted from the 1973 Arab oil embargo. This event made such an impact on our economy that the recession lasted for over two years. The shopping center business actually didn’t move into full swing again until 1977, and that is a long period of time. In fact, that period of time is the same length it takes to complete a college education, and I received some education during that recession. I learned how hard it was to make a living, but facing such a difficult challenge forced me to nurture my creative skills and I learned how important it was to be patient and persistent. By 1977, I initiated the development of a good number of shopping centers, and even today, after thirty plus years, those properties are still recognized as some of New York’s best retail projects, and that is because of the skills I developed during the years of that recession. I mention this for the benefit of all the young brokers and developers who are facing their first serious economic slowdown.

During that first recession, I learned how to plan a retail project, how to assemble property, and I learned what was necessary for the retailer to succeed. But there was another lesson that I learned during those years, it was the most important key to achieving success, because it held the answer to succeeding in our business during the difficult periods. I learned how important the broker’s integrity is. No shopping center can sustain success over the long term if it isn’t designed properly, but neither can the retailer succeed over a long period of time, if the location or market isn’t properly identified and defined. I learned that long term success didn’t allow for short cuts, it demanded an approach that didn’t miss anything that might affect either the real estate or the retailer, and that required the ability to see what the future held for both the real estate and the retailer. I learned that to have integrity as a retail real estate broker, it required a strong working knowledge of the needs of both the owner and retailer. But if the broker didn’t apply that knowledge with integrity, the long term agenda of the parties to the transaction could well be lost. Those early years taught me that a broker’s best path to a successful future was a perspective of his personal interest flowing out of his serving, first and foremost, the interests of parties to the transaction, and secondarily his own personal interest. I learned that a broker’s integrity was the key to achieving long term success for all the parties to a transaction, the owner, the retailer, and himself. These are the main lessons I learned during that first terrible recession, and those lessons enabled me to succeed in not only the good years that followed but also the difficult ones. Today, every shopping center I initiated during that first recession sustained its high value over the years and with rare exception, every retailer’s location I found during that period also sustained its high value through many years.

Understanding the needs of both the owner and the retailer, and dealing with integrity, has enabled Schuckman Realty to achieve a track record consisting of completing some 450 major tenant deals and some fifty shopping centers across Long Island, the boroughs of the City of New York, Northern New Jersey, and in other parts of the country.

Believe me when I say, the future can be very bright notwithstanding how things seem, it only a matter of learning and applying the right lessons.

Fall 2009 Schuckman Editorial - Stanley Schuckman

2010-08-31T13:00:00.000-07:00

There is no doubt that 2010 will be another challenging year for the shopping center industry, but that does not mean there won’t be many opportunities to capitalize on. When times are good the industry’s weaknesses are not so obvious. However, recessions reveal those weaknesses, and our team is learning that each flaw represents an opportunity for the future. Generally, a weakness results from a mistake that occurs before a retailer signs a lease or before a developer puts his shovel in the ground to start building a shopping center. Mistakes that occur so early in the life of a retail store or shopping center, more often than not, result in a poor performing store or a good number of stores that don’t perform well in a shopping center. The result: stores ultimately close and shopping centers eventually fail. Each time a store closes in a shopping center a real estate broker has a new shot at making another deal. However, unless a real estate broker is able to recognize the retailer’s or shopping center’s weaknesses before a “store closing” sign is placed on the store’s window, or a “property for sale” sign is placed in front of the property, there isn’t much of an opportunity for the broker. By that time, the broker is competing with the entire world. IN other words, opportunities are always available to the “professional” retail broker both in good economic times and bad.

If a broker understands what it takes for a retailer to operate a successful store, and for a shopping center to succeed, the broker will undoubtedly be able to recognize new opportunity, regardless of the economic climate.

At Schuckman Realty we take great pride in our understanding the sounds principles of market research and that proper site planning are the keys to a retailer and shopping center’s success. We are constantly analyzing the retailer’s location, the retailer’s overall market penetration strategy, and the retailer’s operation relative to each competitor. We are continuously evaluating shopping centers to determine if the site planning is adaptable for second and third generation use, and evaluating the merits of the shopping center relative to the market it is intended to serve. This is what we do at Schuckman Realty every day, and it is why we have succeeded during the good times and the bad for thirty years.