Growth In Internet Sales May Impact On Leasing And Development, But Others See It As Another Challenge To Be Overcome

Growth In Internet Sales May Impact On Leasing And Development, But Others See It As Another Challenge To Be Overcome

By Murray Shor

At first glance, the fact that internet sales are booming should have a crushing impact on future dealmaking, already staggered by record-setting vacancies and lackluster leasing and development. This is despite the fact that many soothsayers are seeing signs on the horizon of improvement across-the-board– and they expect positive holidays sales due in part to the early start of door-busters and deep discounting right after Thanksgiving Day celebrations.

First the hard facts. E-commerce spending is expected to jump 13.7% this quarter up to $51.4 billion. Certainly for many consumers and for many types of merchandise, there are distinct advantages over buying at the store.

The shift from brick-and-mortar to the internet by shoppers, according to some analysts, is to avoid the hassles of crowded malls, long waits, lines at the checkouts, and battling others for very popular “hot items,” the early AM or late-night hours for “special deals,” and the increased stress of limited “deep discount” merchandise in high-demand.

And, they point out, many of these deals are available only on the internet, top retailers are offering free shipping to home or convenient store locations, and free shipping for returned merchandise.

Though many retailers are predicting record sales at the stores beginning late Thanksgiving Day, as many consumers are opting out of battling Black Friday frenzy in favor of hitting their keypads and picking up the deals without stirring out of their homes.

And then, others point to the latest technology being used to drive customers to the stores. “Top retailers like Target, Toys ‘R’ Us, for example, are using new apps on Iphones that enable savvy shoppers to download coupons and sales flyers that are redeemed in the stores,” said one consultant. “It’s all about using every vehicle available to sell merchandise”

To some dealmakers in the industry, the opposing effort to enable customers to shop from home and avoid the stores, could hamper future leasing efforts by reducing the need for brick-and-mortar outlets.

Different Approach

However, one seasoned veteran takes a different approach. “We are so deep into the fecal quagmire which is our current and ongoing economy that it’s impossible to isolate any one factor as an impacting reason for a hit on sales.”

He pointed out that he is currently leasing “a well-located strip center adjoining a new Walmart Supercenter…and a forecast of growing e-commerce will not change my leasing efforts.”

Another leasing executive stressed that “we are constantly improving our language in the lease terms. We had a problem involving overages, for example,” she explained, “where some retailers were deducting from store sales merchandise bought over the internet that were returned to a local store. So we’re defining and refining this area.”

One leading broker in the Mid-Atlantic region said he’s already seen an increase in retail deals over the last month or so. “Granted,” he said, “we’re talking of a small number, but when there had been almost zero deals before, even a little uptick in the last quarter—and compared with last year—is a sign for joy.”

One landlord expanded on the problems of definition in a lease clause when it comes to defining and apportioning online sales. “If we grant any tenant the right to terminate a lease because of tenant’s inability to exceed a particular sales threshold, we require that the definition of ‘sales’ includes online revenue derived from zipcodes.”

Optimistic Future

“Yep, we’ve been going through the toughest period I’ve ever seen in some 40 years,” said one West Coast leasing rep. “But I’ve also been hitting a few dealmaking events around the country and there is a growing optimism for the future of this industry.

“You can’t deny there is an impact from online retailing. But even the strongest proponents of e-commerce admit that there’s no replacement for getting the customer into a store, having the opportunity to take advantage of impulse buying, of the advantages of touching the merchandise, trying it on, instant gratification. You’re never going to get this same impact from a computer and 2-dimensional pictures.”

A New York-based owner with close to 100 neighborhood centers around the country, who has recently acquired several properties, was extremely upbeat on mainstream shopping. “We’re constantly in a state of flux. One period we were all rushing to the suburbs, now there’s a trend to in-fill closer to main population centers, and even into the CBDs of cities. I look at the demographics and the projections showing steep growth, and I can’t see but a strong demand for more stores and centers—once we get out of the economic slump and the high unemployment. Internet sales, just another challenge that we can and will cope with.”

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