The Future of Drone Technology in Commercial Real Estate​

The Technical Advances of Drone Usage Across Industries

Technology advances so quickly it often feels faster than it should. As a professional in my thirties, I have lived through the advent of home internet and the progression of dial-up to wifi; pagers progress to the handheld technological magic we commonly refer to as our smartphones; and music being played from a Walkman, to a portable cd player, and now the multiple streaming platforms that give me access to any song at anytime and anywhere. Drone technology is progressing just as quickly, and we are continually seeing applications of drone usage across various industries.

Even in an industry that is often late to adopt cutting edge, and even sometimes commonplace technology, drones have made their mark in commercial real estate. We have discussed laws and regulations around drone usage as well as how our team, among others, have utilized this technology in marketing commercial real estate assets. Which begs us to ask, where is drone technology going? And, more importantly – what does that mean for commercial real estate?

The Future of Drone Application in Daily Life

The future has arrived and the vision of a world where drones are fully integrated into our daily lives has come to fruition. Drones have already become very commonplace and are even being integrated into our daily routine, including law enforcement using them to patrol large crowds. We saw this at this year’s Coachella music festival, where local law enforcement utilized drones to prevent potential safety incidents.

Photographers can be hired for events to take bird’s eye views of the festivities, delivery services have begun amassing fleets to launch same-day and even same-hour deliveries, and a few cities have begun utilizing drones for disaster response. These are just a few ways industries have applied drone technology. Drones have been fully integrated, and now companies are finding ways to further this technology through augmented and virtual realities.

Augmented Reality, Virtual Reality, & Mixed Reality

The first two terms have been buzz words in the marketing community in recent years and we should take a moment to clarify the difference between the two. Virtual reality (VR) aims to create a new environment, fully immersing the user’s reality into a digital world while augmented reality (AR) enhances a user’s experience in the real world with virtual elements through overlays and digital lenses. A tangible example of augmented reality would be social media filters or Pokémon Go.

There is also a third segment called mixed reality (MR) which combines aspects from AR and VR. The relationship between AR and MR is more similar. The concept is still settling into its own stride and MR products have hit the market such as Microsoft’s Hololens. This hybrid reality anchors the user’s virtual world into the user’s real world enabling a virtual object to interact with the real world. Not only would a virtual object like a box, or person be able to interact in our reality; a user could also be fully immersed in a virtual world that blends together with real-world surroundings.

Drone Application for Commercial Real Estate

This is an exciting time in technology which directly correlates with a multitude of industries. Commercial real estate can take advantage of new technology by utilizing drones to help create AR, VR, and MR elements for marketing.

Drones will aide in the ability to create virtual tours of properties and /or build interactive renderings of what a future building or build-out could be before funding construction costs. Furthermore, developers could create virtual worlds and test concepts on consumers before a property is even built.

Marketing campaigns will become immersive experiences, giving an investor the ability to tour and interact with a property from the comfort of their office or home.

The future also holds applications of drone and MR technology outside of marketing. The combination of the two could provide safer, easier and quicker site inspections.  A site inspection could be conducted remotely, providing a safer route for sites that are under construction or structurally damaged. Thermal cameras could also be utilized and surveys could be conducted through automation.

Drone technology could also improve building security and work hand in hand with human surveillance. Companies could monitor properties remotely and improve response times by utilizing drones to investigate potential security risks.

As technology advances, the commercial real estate industry will find new ways to pair drone technology with best practices. Drones have the potential to provide improved client experiences through convenience and impressive visual collateral. The possibilities are endless, exciting and inspiring.

The Secret to Success in a Commercial Real Estate Career

If you are considering commercial real estate as career, or find yourself within the industry looking for ways to accelerate your growth, the one piece of advice I will offer is to align yourself with the right mentor.

Your talents and energy are needed more than ever in an industry that is late to adapt to new technologies, innovations and creativity. The commercial real estate industry is in constant fluctuation and is going through a rapid transformation as the industry tries to meet the needs of the next generation.

The Challenge Facing Commercial Real Estate

In my opinion one of the most critical challenges facing the commercial real estate brokerage industry is a major talent shortage. Senior executives are getting older, working later in life and there is a wide age divide between the deal makers (that account for roughly 80% of all real estate transactions) and the younger talent that is still building their track record after surviving the great recession. This talent disparity began as a result of the first dot com bubble in the late 90s when most of the entrepreneurial-minded graduates opted to jump into the new and exciting world of technology, which was fueled by stock market investors seeking to capitalize on the potential of newly created tech companies. This bubble burst in early 2000s, but the trend initiated a shift from traditional financial services companies like commercial real estate toward the creation of Silicon Valley and other international tech sectors that are still growing today.

As a person embarking on a new career in commercial real estate, today’s industry presents a huge amount of opportunity in a wide open field that seeks new energy, innovation, and creativity more so than at any time in history. New demands from millennial consumers are pivoting the entire way that users look at commercial real estate space and transforming investment real estate decisions. At the same time, most major firms have strategically decided to stop costly training programs for young professionals, deciding instead to use those resources toward the (somewhat less risky) practice of poaching existing talent from competitors.

The reality is that most new people coming in to the industry must quickly find their path to success or they will be part of the 90% of new commercial real estate brokers that do not make it past their fifth year in the business. One common denominator that successful people in our industry have is that they attribute part of their success to aligning themselves with the right mentor.

How To Find a Right-Fit Mentor

While exploring career options within commercial real estate, most graduates look for the well-known companies, the right discipline (leasing v. sales), and the desired segment (office, industrial, or retail, etc.) However, to really increase your odds of a successful real estate career nothing compares to finding the right mentor. Whatever field and discipline you decide to follow, make sure you are aligned with the right mentor, and the right mentor can be different for everyone. Mentors are sometimes called “senior agents” or “senior partners.” These are the people who you will learn from and, in exchange, you will alleviate much of their workload. This is why I refer to the individual in this role as the “right-fit” mentor. 

Here are two questions you should ask yourself to make sure you are aligning yourself with the right person:

What is your value proposition to your mentor?

Even though your knowledge of real estate may be limited, you should by now understand what unique qualities about you make you different. If you do not know or need clarity, consider asking your parents, teachers, or co-workers. Do not ask your close friends because they may have many similarities to you and may not be able to identify what makes you different.

You should be able to recognize if you are the one that is going to look at spreadsheets and loves to analyze, or if you are you the social one that loves to meet people and talk to everyone. A few questions to ask are:

  • Are you the planner who loves to think big picture or are you a task master who thrives on crossing out your daily to-do list?
  • Are you the life of the party or are you the one who makes sure no one gets hurt at the party?

There are no wrong answers and everyone brings value to the table – your ability to accurately identify yours will allow you to thrive.

Do I Complement My Mentor?

Once you identify your value proposition, you want to complement your mentor’s talents rather than duplicate them. In other words, if your mentor is a strong business generator then you want to be the one that can help them transact that business. If you are If you’re the analyst you want to find a mentor that loves to meet and talk to people.

I have a colleague who early on aligned herself with a senior agent that refused to respond to marketing inquiries. The Senior excelled at earning business and would get some wonderful assignments. He was horrible at following up with marketing inquiries and opted to “sell” his deals to people he already knew or was seeking business from. Being new in the industry, my colleague took on the task of following up with every marketing inquiry and was able to grow their clientele and create new opportunities from each marketing campaign. Being task oriented and following up on details was her strength and balanced out her Senior who was naturally more reactive to opportunities and had a terrible time sticking to a schedule. She found a way to create value to his business, and years later he is now retired and she has a very successful brokerage business.

Conclusion

There is a lot of good advice out there on how to succeed in our industry and what I offer is simply one very important component to your development: find your value and use it to complement a senior agent/mentor.

Technology’s Potential in Property Marketing: Drone Usage & Applications

Now that we have learned about important laws and regulations on the use of drones, let’s discuss how drone technology is integrated into marketing usage within commercial real estate.

Drone Photography

One of the most pivotal components of marketing commercial real estate assets is photography. In order to create any collateral, you need a picture of what you are selling – ideally many pictures in fact and strong ones at that. Drones have brought a wonderful new perspective to real estate photography.

Because drones are able to take a bird’s eye view of the property, photographs are now able to give an investor an image of the property at all angles. This also provides your marketing team with high quality and unique photography options to create visually striking marketing collateral.

A drone can only fly up to 400 feet, so if you want to get a trade area shot that encompasses a larger radius, stick with helicopter or plane aerials. Costs for drone photography vary, but they tend to be less expensive than helicopter or plane photography. Drones can get very distinct shots of the property at angles a helicopter of plane cannot achieve.

Drone Video

The next practical application of this technology is drone video. Often, if you are hiring a drone pilot to fly drone aerial photography you will also contract them to get drone video footage. Property marketing videos have become more commonplace in commercial real estate to give an investor the opportunity to view the property more immediately than a property tour.

Drone Video has also given marketers a new medium to craft telling and compelling marketing campaigns. Getting the video footage  is only the first step in the process; the next step is contracting an editor and visual effects artist to cut and animate the footage.

This can be costly, but when done correctly drone video adds layers of sophistication and distinction to property marketing campaigns.

Contracting Drone Photographers and Pilots

One of the greatest challenges in executing both drone photography and video is finding a pilot you can trust. To set yourself up for success, start by finding out if they are licensed by the FAA and carry an insurance policy. This is very important, especially if something were to happen during a shoot. Secondly, do some research to discover what your drone preferences are. What kind of angles do you like and how do you like your video footage shot?  Providing this information to your photographer will help cut extra costs and will also help your pilot deliver exactly what you want and what you need to deliver to your post production team. This extra step will save a lot of time and money on re-shoots and the overall post production process.

The Future of Technology in Real Estate Marketing

With the advent of VR, we can only presume that drones will be a huge part of where commercial real estate marketing is going. There’s the potential for every technological opportunity from virtual reality tours to area flyovers. Drone technology is also becoming more exact. Now, many of the drones  carry bluetooth technology and motion sensors allowing the pilot to direct the drone with the slide of their own hand. Drones can also detect when they are in range of a no-fly zone and will often times not work until they are within safe parameters.

The future is opening new doors for real estate marketing — don’t let potential pass you by​.

Merging Talent, Experience and Values as a Client-Centric Team​​

Patrick Toomey and Tom Lagos have joined forces at JLL. While running competing teams in the industry, they found that they shared a deep conviction in a client-first approach to the business. Tom and Patrick also realized that they would have the proper balance of business development and execution to have a high-quality and high-volume team.

With Patrick’s institutional principal-side background, he is able to provide a perspective and level of service to clients that is unequaled in the industry. Tom has a dynamic business development strength and deep client relationships with an outstanding track record that, when combined with the execution side that Patrick provides, will bring outstanding brokerage experience to their clients. Together they have transacted more than 500 individual commercial retail real estate deals valued at more than $4 billion, which provides a depth and experience that is unparalleled in their peer group. Their focus will be on multi-tenant retail center disposition assignments. The JLL platform is an excellent place to bring these skills and experiences together.

Joining Patrick and Tom is Jordan Uttal, who will be spearheading the team’s net lease practice. Jordan has years of experience in this space, as well as a unique background in marketing having been one of the founding members of a Silicon Valley startup specializing in interactive online marketing, which is now publicly traded and valued in the billions. Jordan has brought this background to the commercial real estate industry and has developed numerous innovations for marketing commercial properties. His depth of knowledge and insight on net lease investments will be a tremendous asset to the team and its clients alike.

Heather Boren joins the team from Colliers where she led the Shopping Center Advisers team as the lead analyst and underwriter. Heather has valued and marketed hundreds of properties and her depth of knowledge and experience go well beyond that of underwriting. Heather teaches ARGUS (the industry standard underwriting program for commercial real estate) at Pepperdine University and UCLA, and is a professor of real estate at Pepperdine University. She teaches graduate-level ARGUS and leasing strategies.

Maadhevi Comar also has come from the Shopping Center Advisers team to lead the marketing effort of the group. With a broad experience in positioning commercial properties for sale, plus an advanced degree from University of California Berkeley, Maadhevi produces quality work on the team’s best-in-class marketing products.  Maadhevi leads not only property marketing but also all of the team’s outbound marketing materials.

Finally, Alex Salvatierra leads the team’s graphic production effort. With years of experience in graphical production in the commercial real estate field, Alex’s work is known to be the highest quality. He produces all of the team’s visual content. Alex is not only known for his industry-leading work, but also for training top level professionals at Colliers International and Matthews Retail Group – individuals who still benefit from his insights and lessons today.

Together we are excited and honored to be part of the JLL team, and look forward to providing the highest level of execution for our clients!

Disneyland Retail: a Case Study for Driving Value

Although not a standard street in the typical sense, Main Street U.S.A Disneyland is destination shopping at its finest: classic retail storefronts, a delicious candy store filled with fudge, toffee and caramel apples shaped as Mickey Mouse, an old movie theater playing “Steamboat Willie,” and even a French-style cafe where you can rest your tired feet with a cup of coffee. It’s no surprise that Disneyland is supposed to be the most magical place on earth, so why wouldn’t it resemble the most magical of Main Streets?

As I watched snow fall from the sky (ok fake snow) in front of Sleeping Beauty’s Castle, biting into my caramel apple, my inner real estate curiosity got the best of me and just in time for the holidays – I started to think if Main Street was a real street with non-Disney owned real shops, how sustainable would it be in a retail market? And how would it be valued?

Comparable Market Rents

From a financial perspective, we can compare Disneyland’s Main Street to many high-street retail environments, especially being located in Southern California. Main Street in Santa Monica is a beautiful water adjacent community with a collection of eclectic shops, bars, cafes, and restaurants. You’ll come across Urth Cafe, Coffee Bean, and local favorites like The Victorian and O’Briens. Rents on the street also seem just right for this wealthy area with prime asking rents over $5.00 per square foot/per month plus NNN expenses for just a small stretch of about a mile. And you won’t forget the very first Starbucks in California opened right there.

Downtown Ventura evokes old historic California charm with predominately local “mom and pop” shops and eateries. Strolling along you will come across locals grabbing a cup of coffee at Palermo or a late-night brew at Rookees Sports Bar. Although it certainly has its fill of national brands, rents around $2.00 per square foot/per month plus NNN expenses keep this ocean town balanced between up-ward rents and small-town charm.

That Destination Feeling

With people traveling to visit from all over the world, Disneyland creates a feeling of wanting to spend more money. In our recent article regarding the state of the Retail Industry, shopping centers and retail are taking note creating a “resort-type experience.” For instance, Westfield has recently created projects in the Woodland Hills/Warner Center area including The Village and the proposed $1B development at the Promenade. Retail is moving away from the old indoor mall concept. Rather, Westfield and other developers are investing in the consumer experience. Now, it is more common to find open-air concepts with beautiful landscaping, sculptures and art, music, DJ events, children play-areas, wine and beer tastings, and more to keep customers staying longer.

Millennials are contributing to the growing demand for experience-driven-retail. Our shopping center advisers’ resident millennial expert Marisa explains she will, “choose to spend $20 towards trying a new restaurant over buying a new top” in our recent article Boomers and Millennials. Retail is evolving to capture the new generation of customers. Disneyland is also evolving by creating new attractions for Star Wars and Marvel, to meet with new demands. Such new experiences will attract more visitors and more customers.

Property Positioning

Based on the above characteristics, our team would position the property to owners who look for highly sought-after trophy and core assets. Our unique Property Positing Matrix [see below] showcases assets across four quadrants. We could safely assume that Disneyland’s Main Street would fall along the bottom quadrants focused on buyers who enjoy long-term stability and strong trade areas rather than high-yield opportunities. And based on our transaction history of achieving historical low cap rates for many of our clients, our goals would be the same for such a property.

 

Ultimately, Disneyland’s main street retail would fit just nicely in today’s retail environment. The only downside is Disneyland does not serve alcohol (except for an exclusive members-only club); that means there are no local pubs to help foster sales. At least the $6.00 candy apples and $5.00 lattes are perfect for prime locations.

 

The New American Strip Mall

Boring, old-fashioned, dirty, necessary. These are the words that might come to mind when Americans today think of a traditional strip mall. Ever thought about the work that goes into designing a strip mall? It may be hard to fathom that there is any sort of methodical reasoning that goes into the physical design of these classic shopping centers, especially the ones that haven’t been remodeled since the early 70’s.

The Old American Strip Mall

Dating back to the 1880’s, utility always dominated architectural design or style when it came to erecting a strip mall. At this time, the streetcar made urban expansion possible. This new transportation allowed residents to enter the perimeter of cities where it was assumed that land values were higher. Due to sprawl caused by the streetcar, speculators erected single-row shop fronts and were cheaply built solely to produce enough revenue to pay the land taxes. Coined as “Tax-Payers”, these buildings were meant for easy destruction at some point in the near future. However, with the introduction of the car, the intended sprawl strips were changed and the Tax-Payers weren’t demolished. More of these buildings were established to accommodate cars in the fashion of the “Main Street” commercial site, with room for perpendicular parking along the facade. As Tax-Payers became more popular, they began to be moved to the rear of the property line with a parking lot separating the façade from the street to accommodate more vehicles. The Tax-Payers would continue to thrive and become precedents of many of today’s strip malls. Many iterations of the strip mall would come from this, including the enclosed shopping mall and power centers.

There are many commonalities of strip malls across the nation. They are between 5,000 and 100,000 square feet and are of plain style, most likely to keep costs down. Many have flat roofs and are 1-story, as in the tradition of the tax-payer. They include asphalt roofs, painted block, metal-framed windows, concrete sidewalks, and asphalt parking lots. This may be the case for strip malls designed in the latter half of the 20th century, but what about strip malls today?

Shifting Toward the New Strip Mall

As consumer interests start to change, the type of stores that go into strip malls change, and in turn change the design as well. One may think that strip malls are failing due to the ease of online shopping; however, it is the opposite. Strip malls are thriving today because many have transformed to become more service-oriented; they include interests such as yoga, salons, spas, urgent care facilities, and insurance. Becoming more service-oriented involves much more of an experience over the normal goods-oriented strip mall. This experience is reflected in the design of the mall’s exterior design and layout in addition to what its tenants may offer. The priority has now shifted to match the aesthetics of these new tenants and the surrounding neighborhoods. By doing so, it can attract more consumers from the outside in, contributing to an already prosperous industry.

Shopping centers are still thriving in an upward trend largely due to a more extensive design process. It all starts with the idea of a concept that matches the needs of the area, followed by an extensive research of market trends, surveys, mall positioning, retail circulation, zoning, and more. Choosing the right architect is also crucial to convey a concept and could contribute to the success or failure of the shopping center. Though this may seem like a simple task, it is beneficial to have a special team and or expert mall adviser to conceptualize, efficiently manage, and coordinate the design planning phase. Up until recently, it was not understood by many that there needs to be an organized approach towards shopping center design and planning. Better shopping center development is crucial and is becoming more apparent across the country, contributing to a better, more enjoyable, and more efficient shopping experience.

Strip Malls are an important part of American history and have completely altered the experience of shopping for many people since their creation. While homogeneity has cast its shadow on many strip malls throughout America, today’s centers involve a much more extensive design process that attempts to imitate the design of the neighborhood and create an experience for many service-oriented businesses. Strip malls have thrived since their creation, and their success will continue far into the future. The new American Strip Mall: enjoyable, unique, and of course, still, necessary.

The Value of a Tenant During a Sale

Receiving an offer or pending renewal can seem exciting for any owner. However, when it comes to selling the shopping center, not all deals are created equal. In fact, it can affect the valuation process. For an owner, a vacancy can be a negative on the one-hand, and a value-add opportunity for a buyer on the other-hand: owners and buyers may have different visions and goals. Through our expertise in navigating such situations, our Shopping Center Advisers’ team provides solutions to our clients.

During the marketing and due diligence process, our team develops a strategy to position the property to various buyers. We offer a comprehensive national platform specializing in the disposition of multi-tenant and grocery-anchored shopping centers. As such, we understand the ins-and-outs of shopping centers including how to handle vacancies and pending leases during the underwriting and valuation stages. Then we craft a three-step marketing approach based on the valuation and ideal buyer pools to best position the property for a sale. Additionally, we understand that a shopping center is fluid and may undergo changes during this process. Before signing on the dotted line, however, it is important to understand the value of the lease and its effect on the center.

Lease Terms

An institutional owner may like long-term leases, for instance, or be willing to provide Tenant Improvement (TI) allowances in exchange for higher per square foot rents. Another owner may prefer shorter-term leases or provide free rent instead of TIs. When a vacancy is positioned to prospective buyers, we can leave it up to them to create a vision for the space and center with the idea of negotiating their own deal. We don’t want to rain on the leasing professional parades either. Rather, in our article How Leasing Agents Can Create Value in the Sales Process, we describe how teaming-up with leasing experts can “drive value to the overall transaction.” It becomes a win-win for all parties involved.

Fair Market Rent

During the sale phase, tenants may be entering into their option notification period and desire to negotiate the Fair Market Rent. Prospective buyers are underwriting to specific market rents as part of their valuation and offer. If negotiations begin to take place this could impact a buyer’s future negotiation power and ultimately, their sales price. Part of our team’s diligence is to review the lease terms before going to market. We’ll be able to spot potentially overlooked items and advise accordingly.

Team Management

We can often be an extension of your management team. Many clients have different departments for leasing, asset management, and dispositions. While the leasing team is off and running trying to get spaces leased, the disposition team is focused on the transaction and sale. We act as a bridge across your internal departments to help align visions and goals. In our recent article Why You Need a Transaction Manager Role, we detail how our team provides a “unique promise” of facilitating “clear and direct communication.”

While revenue growth is important to any shopping center owner, the number one goal during the sale process is the actual sale. More specifically, maximizing value along with securing the right buyer. If you are not sure how a prospective lease may impact your property’s value, contact us and we’ll be happy to provide our in-depth insights.

Why You Should Work With a Transaction Manager

The role of a transaction manager is almost always found in residential real estate; no top producing agent or team would be caught without having someone whose focus is coordinating the transactions. However, when it comes to commercial real estate, where arguably the process can be even more detailed and timely, not every group or team has a transaction management department. The role of the transaction manager is extremely important: the focus is not just on coordination but strategy and keeping the deal flow for a secured closing. ™

As an integral component at Shopping Center Advisors, a transaction manager is vital to both the team and deal process. Having a single point of contact helps streamline the process for many of our clients, both private and institutional groups alike. Private individuals and funds find comfort in having a single point of contact who is responsible for the data and information gathering and coordination. A transaction manager role is no stranger for our institutional level clients – many of whom have dedicated managers and departments themselves. Our team is an extension of your in-house acquisitions team.

Team Process

In many teams, the division of labor is based on each person’s strengths. Those who handle the business development side are focused on increasing sales and relationships. Not every person can be a “jack of all trades.” A transaction manager can help offset the nitty-gritty and detail aspects of a transaction by staying on top of the salient business terms. The business development members can then focus on developing existing and new relationships. In our article,“Don’t Be a Lone Wolf,” Tom Lagos describes the Strategic Coaching program and surrounding yourself with “complementary team members and the results of a strength-focused team.” The manager can be a valuable position. As deals become more complex, the transaction manager can utilize his or her strengths to keep the deal flow focused.

Having great verbal and written communication is essential, as a transaction manager is often communicating across multiple avenues including phone, e-mail, and in-person. The goal of good communication is to manage expectations among the parties, and ensure documents are addressed timely. And in real estate transactions, timing is everything.

Deal Process

Before a property goes to market for disposition, the manager analyzes and oversees the documentation to be gathered. Often this includes abstracting leases, financial review, ARGUS modeling and/or oversight, and makes strategy recommendations based on the review process.

During the marketing process, the transaction manager can be responsible for integrating the documents using platforms such as Real Capital Markets. In our recent article, we share insights on how this platform provides a “War Room” component for uploading and maintaining the pertinent documents to a transaction. This tool is helpful for a transaction manager, who can oversee permission levels of prospective buyers. He or she is also often responsible for putting together data analytics on offers, and drafting counters.

During the due diligence phase, the manager is then responsible for review of the purchase and sale agreement, coordinating the documents among multiple parties including the buyer and seller, and escrow and title. The Secured Close™ is our team’s unique promise of a managed transaction: facilitate clear and direct communication.

We create a detailed reporting and follow-up process that ensures the buyer, seller, and escrow agents are accurately following the purchase and sale instructions while mitigating any issues that might arise. Thereby, this proven process helps us keep all parties aligned during the transaction. While our team often represents the Seller in a transaction, our goal is to create a process where the buyer, seller, and escrow agents are following the purchase and sale instructions while mitigating any issues that arise.

Some states even have a specific role called the “Transaction Broker.” This role mirrors many of the tasks and expectations of a transaction manager. A transaction broker assists the buyer, seller, or both by performing specific roles related to the contract.

While a common role found in many real estate arenas, having a transaction manager has enabled our team to improve both our team process as well as the transaction process – not only for us, but our clients as well. We are therefore able to uniquely service shopping center owners. Whether you own a single shopping center or a portfolio across the nation, the Shopping Center Advisers are ready and able to help you through every step of the process.

Understanding Your Property Type & How to Market It

Property marketing can be a complex formula in understanding both the buyer and property. Our team has found that breaking that formula down to two equal parts has been a proven way to properly position a property on the market.

Understanding the buyer is the foundation to our property marketing methodology. Next step is understanding the property.

What Type of Property is it?

Classifying the subject property type is just as important as finding out what kind of buyer bucket the property fits into. Our metrics begin with distressed and go all the way up to generational.

A distressed property would be one that sounds just as it is described – a property that would need a lot of capital improvements, potential lease-up strategy, and would probably market with an “as-is” financial analysis. Distressed properties are very specific to certain buyer profiles, and we typically see more of the private equity and sole ownership buckets purchasing these types of properties.

Opportunistic and value-add properties typically appeal to the dreamer – one who can see the potential in either the property or the trade area. When our team markets a property that fits into this category, we usually form the offering memorandum around the possibilities rather than the “as-is” narrative. This usually includes a projected financial analysis as well as a strong market and area overview section. A prime example of this would be our Hacienda Plaza property in La Puente, California. Typically these types of properties offer a higher yield in a shorter amount of time than a distressed property, and usually have some sort of characteristic that would attract a Syndicator or REIT.

Once we move on to the lower quadrants of the property positioning chart, we see core through generational. These properties are highly sought after and are highly attractive to the more institutional buckets. Marketing these properties revolves around a narrative of the stability and long-term viability rather than high-yield opportunities. Our offering memoranda become more financially driven and focus on the tenants and overall market landscape. For a property to be considered core or above, there are very distinct characteristics it must have i.e., strong tenancy, high occupancy rates, stable to upward trending financials, and a strong trade area that is either consistent or growing. Of course, these are not the final say in what makes a property core or higher, but they are common traits among the properties we have marketed and sold.

 

Marketing the Property

Once our team has fully vetted the subject property and has placed it on our property positioning chart, we take active marketing steps to not only target the specific buyer profile but also tailor each marketing campaign to the property type.

For a distressed property we might take a softer approach and target a specific pool of buyers that seek distressed properties by creating a very direct valuation and offering memorandum. Often third party platforms would be leveraged at a higher rate such as Loopnet, TenX, Propertyline, and Costar. A buyer for a distressed property is very specific, and the marketing campaign would reflect that specificity.

Value-Add and opportunistic properties have to appeal to the macro-minded individual. Our team generally places a stronger emphasis on graphic elements, trade area information, and photography. Our visuals tend to emphasis the property’s potential as well as its inherent value. We usually launch a full eBlast marketing campaign and often leverage third party marketing platforms such as Real Capital Markets as well as produce a property video.

When we start marketing core through generational properties, our team creates a full eBlast campaign, leverages third party marketing platforms such as Real Capital Markets, and produces a property video. Although these property types do appeal to the more institutional buckets, the buyer pool also widens to include high net worth individuals as well as REITS and funds. We tend to place a heavier emphasis on the underwriting, but also make sure we are implementing highly stylized graphics. Since the buyer pool widens, our marketing campaigns have to appeal to that larger audience.

Ultimately, each property is unique in its own right. Even with our property positioning chart and formula, there will be exceptions to our methodologies. Each of our marketing campaigns is customized and individually built to reflect each property’s unique characteristics.

We make sure to maximize exposure, create a best-in-class campaign, and always strive for our team’s promise of a secured and managed close. If you would like more information on our process or how your property fits into our positioning chart, please feel free to contact us.

Retail is Not Dying it is Thriving. Time to Change the Message.

Every week the newspapers paint a dire picture of the retail industry – one where the retail industry is driving off a cliff, much like the iconic scene in Thelma and Louise. There are countless articles about thousands of store closings, the number of brand name retailers calling it quits, no new shopping centers being developed, and NACREIF advising institutional investors to bet on boring industrial real estate instead of shopping centers. I find myself wondering aloud “what, should I sell warehouses instead of neighborhood centers?” And, what will happen to all the people that I have met during the past 23 years of transacting shopping centers? What will they do for a living? Then, I am awakened from my mid-day dream. I answer my doorbell to find a delivery guy dropping off a package of print cartridges my wife ordered a few hours ago on a Sunday afternoon.

Outlook Not so Bleak?

It is so easy to believe that the convenience of ordering online and having items delivered within days, and sometimes hours, is quickly killing the retail industry. It is easy to believe that online retailers are killing traditional department store retailers such as Sears, K-Mart, JC Penney, and other well-known retailers like Toy’s R Us (a childhood favorite) who recently announced bankruptcy.

However, what if I told you that in 2017, retailers will open 4,000 more stores than it closes, what if I told you that retail sales have increased over $100 Billion over same period the year before, what if I told you that shopping center operators are reporting some of the most historic performances from their tenants? These are all true statements that paint a rosier picture of the retail industry but this reality does not sell newspapers or inspire debate and dialogue. Join us as our team discusses three common and widely publicized misconceptions of today’s retail environment:

1. The Numbers Don’t Lie

There exists a perceived bias that online retailers are causing the downfall of brick-and-mortar stores. However, by taking a closer look at the numbers, the reality becomes more nuanced. Online sales only represent about 8.5% of total retail sales, as an example, only accounts for less than 5% of total U.S. market share. Therefore, there is still a lot of money left on the table.

One of the best examples comes from electronic goods. Once thought to be an example of the end to brick-and-mortar, Best Buy has dug itself out of the trenches and seen an increase in ROA reaching 9% in 2017, which is close to its higher ranges of 9.36-12.64% from 1998-2001.

These shifts in ROA are an indicator that for Best Buy, they were efficient in increasing earnings. Other companies, such as Sears, were unfortunately in the business of a consumer good that had declining sales before the influence of online competition.

2. It’s Customer Service, Not the Internet

With technology constantly arising and evolving, it is easy to blame the internet for the demise of retail. Despite what the media would have you believe, the neglect of the customer service aspect is really what is causing so many retail companies to close up shop. Instead of believing the myth that physical stores are becoming obsolete, brick-and-mortar stores can focus and shift strategies toward tangible realities that can bring more consumers through the door. In order to get customers off of their screens and into a store, that particular store is going to have to offer them something they can not receive online.

Certain types of tenants are surviving by making their expertise, guidance, and assistance indispensable. They cultivate a need to go physically into the store and perhaps even make shopping a desired experience. Keeping with a prior example, Best Buy has successfully executed this notion. Research shows that, despite a steady economic incline, less and less people are buying big ticket items. Instead of caving into defeat, these tenants have restructured their approach. The employees can be seen more as educators rather than salespeople. Executives take the time and money to train employees to better answer and support consumers’ inquiries. Technology can be confusing and expensive for a lot of users. Consumers want to compare and speak with staff who are knowledgeable about what exactly can satisfy their needs. Getting hands on experience and talking to someone who can thoroughly explain a product makes a huge difference in consumers’ eyes as this is something you simply cannot get online. And now, with majority of retailers matching online prices, the instant gratification of having a product becomes an even bigger appeal. This service coupled with the ability to physically try various products at once with no shipping wait or fees, make a very compelling argument as to why shoppers should still purchase in-store.

3. The Psychology of Spending More

The argument for online shopping vs. brick-and-mortar shopping comes down to one factor – convenience. Online shopping is most attractive to those who need something in a hurry or would rather not leave the comfort of home. However, the average buyer doesn’t usually just stick to one or the other. It’s a mix of both online and in-person shopping, and the need for an in-person shopping experience will never go away for two main reasons.

First, social media has practically taken over our society. Instagram, Snapchat, Facebook, and Twitter have all infiltrated everyday life. With the creation of shopping centers that feel more like you’re at a resort or on vacation, people are more inclined to spend more time and therefore more money. The buyer is then encouraged to post pictures on social media as part of the user-experience. One great example is The Village in the San Fernando Valley, where Westfield has strategically placed artwork with captions throughout the center to encourage social media interaction. Second, niche markets and stores are all the rage in today’s shopping world. When going to a shopping center, today’s buyer wants a mix of both large chain stores and smaller, mom-and-pop stores that may satisfy a niche interest. Buying your favorite type of matcha or that one vinyl that you’ve been looking for isn’t as fun online as it is in a small store where you are made to feel like a VIP. To read more about how the trends of today’s dominant group of buyers, click here.

A resort-type shopping experience in today’s world will never be hindered by online shopping. Want a quick getaway? Just hop in your car and indulge in a relaxing and stress-relieving trip to your nearest shopping center.

These are the facts. It is not to say that online retailers aren’t considered a competitor, just that there is so much fight left in the business of retail. As we round out the 3rd and 4th quarter of 2017 and prepare for the ICSC Western Conference and the Fall ULI meetings in Downtown Los Angeles, let’s keep in mind these realities. It is up to us to change the message and deliver the truth.