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Monday, April 14, 2014

Blurring Lines Between Retail and Technology - Growth in E-commerce and Mobile Purchases

By Rodney McDonald (Toronto)

Blurring of the lines between retail and technology is the key message from a panel session I moderated at CanTech, the Canadian Retail Technology Conference, hosted by Informa Canada in Toronto on April 10, 2014.

The four panelists mentioned seven examples of the use of technology by consumers, retailers, and retail landlords: 1) e-commerce and mobile technology by consumers to make purchases; 2) Revit by landlords to design new base building retail spaces, 3) social media, such as Twitter, by consumers to follow the latest trends, which influences consumer retail sales; 4) tracking online store customer purchase data by U.S. retailers to understand their customers' purchasing preferences when planning an initial physical retail store in Canada; 5) web sites and electronic outdoor signs by mall owners to help visitors more easily find a parking spot; 6) pinging of customer cell phones in stores by retailers; 7) and sophisticated virtual technology tools by landlords to show a digital fly-through of their mall interior to retailers designing or redesigning a store in their mall.

The four panelists were Elizabeth Evans, Associate Dean, Academic Undergraduate Programs, Ted Rogers School of Management, Ryerson University; Brad Keast, Vice President, Development, Osmington Inc.; Anthony Casalanguida, Director of Retail, Oxford Properties Group Inc.; and Colin Graham, Founder, President & CEO, Arcade Inc.

Elizabeth Evans presented the latest Statistics Canada Retail Trade data. Annual growth of non-automotive retail sales is 1.59% with average annual growth from 2005-2011 of 1.7%, and a projection for much of the same ahead. By comparison, annual growth in e-commerce from 2005 to 2011 was 13.3%, with an annual growth projection of 8.9%. Mobile is expected to equal e-commerce in 2014. These trends are due in part to the Millennials, who are mutli-taskers, connected, and tech savvy, and want to make purchases anywhere, anytime.

I polled the 75-person audience. In the last 12 months, 100% of the audience made a purchase online and 50% made a purchase using a mobile device. I am part of that group - recently, I purchased yet another book online and used my iPhone to purchase a plane ticket with the airline's app.

Brad Keast talked about the future of retail at Toronto's Union Station. Toronto's Union Station is Canada's busiest multi-modal passenger transportation hub - regional commuter rail and bus, intercity rail, subway, bike, and soon-to-be airport rail express - with more than 250,000 people passing through daily and double to tripple today's numbers projected by 2030. Toronto's Union Station is currently undergoing a $800 million revitalization with 160,000 square feet (sf) of new retail space, including a new retail concourse. Osmington Inc., through its subsidiary Redcliff (Union Station) Inc. is the head lessee developing the new retail space for restaurants, shops, services, culture, and entertainment. Smaller format stores might use display technology rather than display space to display products, or big box retailers could have a smaller version of their store to help a commuter purchase an item - a television or lumber, for example - and have the item delivered from a fully stocked suburban store closer to the commuter's home. 

Anthony Casalanguida talked about Yorkdale Shopping Centre. Located north-west of downtown Toronto, Yorkdale boasts 1.5 million square feet of retail floor area, over 250 stores, including many luxury retailers, and the second highest sales per unit area of any mall in Canada. Yorkdale is undergoing a $330 million expansion to add 288,000 sf of retail, including a 188,000 sf Nordstrom. As the panel discussed what the blurring of the lines between retail and technology means for retail landlords, Mr. Casalanguida reminded the audience that Yorkdale's two original anchor tenants - department stores Simpson's and Eaton's - are each no longer in business. Yorkdale adapts. 

Using interior images of Yorkdale, Colin Graham presented a tablet-based technology that retailers and landlords use to virtually visualize and digitally experiment with options in 3D. The software can be used to provide a virtual fly-through of a mall, to virtually move stores around the mall to see how each store fits in different locations in the mall, or to virtually see how different storefront designs fit in with the mall and neighbouring stores. The technology allows retailers and landlords to experiment and play what-if in a dynamic 3D virtual environment. 

Personally, I like the blurring of retail and technology and new retail formats beneath busy passenger stations, for reasons no one mentioned during the panel session: financial, environmental, and social sustainability. Making purchases online, on my iPhone, or at Toronto's Union Station before I hop on the subway home saves me time, which I can spend with my family (social sustainability), saves me from driving around, which reduces my energy use and greenhouse gas emissions (environmental sustainability), and saves me money (driving less saves me $10-15K annually), which I can invest, save for later, or spend at retailers (financial sustainability, for me, retailers, and landlords).

By blurring the lines between retail and technology, consumers, retailers, and retail landlords are co-creating the future.

Selling Non-Core Industrial Product: Strategy and Theme Required

By Erik Foster (Chicago)

Selling non-core industrial product can be a tricky proposition, but one that can be successful with the right strategy.

In 2013, many people predicted massive volumes of Class B industrial sales and the assumption was that activity would follow the path of the core, Class A product—where large portfolio sales are the norm. B product followed a different path, however, leading many people to assume the volume didn’t appear. The volume did appear, just not with the bold headlines received by the large national core portfolios.

Costar reports that dollar volume for industrial sales were $10.1B for A assets and $23.9B for B assets in 2012. In 2013, the volume jumped to $25.6B and $49.2B, respectively.  Both A and B saw significant gains, with B increasing almost 50%. Yet the overwhelming market perception is still the same—not many B assets traded. 

A deeper look reveals that the B sales were concentrated in one-off transactions, user sales and a very small number of portfolio sales.  Yet many B industrial portfolios were broken-up and sold through a painful and purposeful “restaurant menu” process that split up the assets. While this may be a way to sell some buildings, does it provide the best execution for the seller? In many cases, those portfolios were the victims of poor disposition design.

One key factor in positioning B product for sale is to have a cohesive theme that can create value for the investor. The B portfolios that have traded successfully have a level of congruence amongst the assets; they have a “theme”, such as, submarket location, similar building quality, similar tenant types that occupy the space, etc. 

There is little industrial product on the market, debt is inexpensive (but threatening to go higher) and equity sources are hungry for industrial assets. Adding to our bullish opinion about B sales are these improving fundamentals: space is being absorbed and rental rates across B (and A) industrial asset classes are improving. 

If a B portfolio has a theme, it will have a higher likelihood of transacting as a portfolio and sellers will not endure a scattered, time-consuming and expensive menu approach.  The portfolio will have congruent attributes, which will cause buyers to look at the offering not as a smattering of buildings haphazardly thrown together by a potentially desperate seller, but as a portfolio with interchangeable parts.  Sellers must choose a disposition strategy wisely for their B buildings, take time to understand how the assets work with one another, and make service providers think critically about the disposition strategies they are suggesting.  The end result? B portfolios with a theme translate into better execution and greater returns for the investors.


Thursday, March 27, 2014

Avison Young named one of Canada’s Best Managed Companies

By Mark Rose (Toronto)

Avison Young is very pleased to announce that – for the third consecutive year – our company has been named one of Canada’s Best Managed Companies, sponsored by Deloitte, CIBC, National Post, Queen’s School of Business and MacKay CEO forums.

We sincerely thank our loyal clients, employees and partners for making Avison Young one of Canada’s Best Managed companies once again. Please click here to read press release.

Winning this prestigious national award three years in a row gives us third-party confirmation that our business model, values, accomplishments and culture are making a difference in the commercial real estate industry.  We are committed to establishing a solid, sustainable organization that is built to last, and we couldn’t be more proud to be named among the distinguished group of Best Managed winners.

We are also honored by the recognition that we can deliver results for our clients and our organization through a different approach to our industry, led by our Principals and  built on a unique client-service model. We are most proud of our culture of collaboration as a team, to meet stakeholder goals, deliver results and, most importantly, have fun doing it.

Established in 1993, Canada’s Best Managed Companies is a national awards program recognizing Canadian companies that have implemented world-class business practices and created value in innovative ways. Applications are reviewed by an independent judging panel that evaluates how companies address various business challenges, including new technologies, globalization, brand management, leadership, leveraging and developing core competencies, designing information systems, and hiring the right talent to facilitate growth.

Wednesday, February 12, 2014

Live, Work and Play Lifestyles

By Rand Stephens, Houston

Trends in real estate development that cater to people’s wants for a live, work and play lifestyle are here to stay. How these trends continue to morph is the question, but it is clear they will have dramatic impacts on the future success of anything resembling a community.

The concept of “community” is abstract, but here is one that resonates with me:

A group of people with diverse characteristics who are linked by social ties, share common perspectives, and engage in joint action in geographical locations or settings.”

In addition to where we live, communities are also any place where people come together, like work, places of worship, health clubs, schools, entertainment venues like movie theaters, grocery stores, restaurants, hospitals, etc.

So, what are the underpinnings of a successful community? What differentiates one health club from another…a corporation from another…a place to live from another?

Creating places for human connectivity, or "people places" may be the single most important factor for a community of any kind to be ultimately successful. The emotional part of the brain drives us to connect with other people because it makes us feel better; human connectivity brings happiness, pleasure and joy to people's lives, and there is plenty of research to support this.

A great example is Starbucks. Everything about their stores and product appeals to human interaction. Starbucks has created a community at the store level around the total experience, which includes a quality cup of coffee. People wait in line to buy coffee. It makes no sense; there are plenty of places to buy a comparable coffee, or to make one at home, but Starbucks has made their stores people places and not just about the coffee.

The live, work and play lifestyle at its very core is a manifestation of people wanting to be connected and interactive with others. The best real estate development provides the infrastructure to support these base level needs in all of us.

The postings on this site are those of the bloggers and do not necessarily represent the views or opinions of Avison Young.