Network Notes: Retailers Returning to MS as Urban Storefronts Take on Greater Prominence

Download Main Street News PDF - 2008/03

Although the majority of retail stores will continue to be located in malls, merchants are slowly moving back to Main Street to diversify their storefronts, according to findings from the 2007 National Retail Federation (NRF) Retail Real Estate study conducted by AMR Research.

The study, which surveyed 43 retail real estate executives, found that retailers plan to have 11 percent of their stores in urban street-front locations by the end of year, compared with 8 percent last year. To compensate, companies have cut back slightly on their number of mall and strip mall locations (44 percent this year versus 48 percent last year). The survey also found that retailers are continuing to move toward lifestyle centers, with 9 percent of company stores in that format compared with 8 percent last year.

"Urban storefronts are beginning to play an increasingly important role in retailers' real estate strategies," notes Carleen Kohut, NRF chief financial officer and manager of NRF's Real Estate Executives Council. "Throughout the country, traditional main streets are being revitalized to include an assortment of new retail shops, from department and clothing stores to coffee shops."

When determining the best location for a store, four out of five retail real estate executives say that demographic information is the most important factor. Half of the respondents believe that other crucial factors include evaluating competitive information (51%), traffic patterns (49%), and geographic factors like existing and future populations (49%).

While the real estate industry remains extremely competitive, complexity and extensive due diligence result in one-fourth of retailer respondents (24%) taking more than six months to sign a contract once a site has been approved. On average, retailers said they screen 10 potential sites for each one that is approved. About one-third (36%) of stores are owned while the remainder (64%) are leased.

After a contract is signed, retailers said it takes an average of three to six months to open a store if it is part of a remodel or new construction. A ground-up project often takes more than twice as long, with the majority of retailers acknowledging that those projects often take more than a year. While many factors contribute to the length of construction, there is no denying the risk associated with not opening a site on time and on budget.

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