PRINT THIS STORY:

CHANGE TEXT SIZE:

CREDIT CRUNCH CHANGES FACE OF BANKS, CHAINS RETHINK REAL ESTATE TEAMS, LATIN AMERICAN PARKING GETS TIGHT

CONVENIENCE STORE OF THE FUTURE MAY BE UNMANNED

RFID technology may provide an unexpected solution to one of the biggest problems in retailing: finding good help. At last month's National Retail Federation conference, Freedom Shopping, a Hickory, N.C.–based technology firm, showcased an unmanned convenience store prototype. The store uses RFID (radio frequency identification) bar codes to eliminate the need for a clerk. Shoppers simply place items onto the register area, as they would at any supermarket self-checkout station. A computer reads the codes; the shopper pays by credit card, with cash or using a debit thumbprint; and leaves. The transaction time is typically about six seconds, said Michael Daily, president and COO of Freedom Shopping. “The RFID tag is really the key to our success,” he said. “They cost 13 cents each to make and can read up to 100 codes a second.” The tags adhere to any item. “The labor savings is huge,” said Kevin Kent, the company's director of business development. “It's definitely a high-labor-to-transaction-ratio model.” Freedom Shopping has already rolled out the product at three Michigan locations: the Ford Motor Co. building, in Dearborn, a hospital in Garden City, and a high school in Howell. The company hopes to introduce the technology at shopping centers and airports within a year, Kent says. “It depends on the ticket items being sold in the store, but I could see it in the mall, possibly in a kiosk setting,” he said. The company is in talks with Barnes & Noble to introduce the system at those stores. “We're connecting the digital realm with the physical realm,” he said. “This really provides the next step in convenience retailing.”

RETAILERS FAVOR HOLISTIC REAL ESTATE STRATEGY

Retailers favor holistic real estate strategy U.S. retailers are placing more importance on real estate teams and viewing real estate strategies holistically, according to an AMR Research survey of 40 real estate executives at retail chains. Retailers are now managing their entire portfolio of real estate assets through a single lens by integrating market planning, site selection, project management, lease administration, and facilities management processes, the survey says. Nearly half of the respondents said their real estate department reports directly to the CEO. The average real estate department employs 169 staff members, the survey says. Retailers are also shifting from Excel spreadsheets and homegrown technology to using customized software to manage real estate transactions. In 2006 25 percent of these retailers used customized software to manage real estate, and that grew to 36 percent last year. Market planning and site selection are the two real estate activities that respondents said need the most improvement at their companies. Another concern is the increasing length of time it takes to open stores, respondents said. About a third of them said they need between three and six months to open a store once the lease is signed. Participants said they screen about 10 sites for every one that gets approved. The survey was conducted on behalf of the National Retail Federation.

SUBPRIME CRISIS CAPSIZES RELATIONSHIPS

The subprime mortgage crisis has spurred many banks to lay off employees in their commercial and residential mortgage divisions, upending some of the important relationships retail real estate developers, especially REITs, have cultivated with their underwriters. “Anecdotally, we've heard that many of the banks got rid of a lot of the people that were underwriting, both residential and commercial real estate,” said Phillip Martin, a REIT analyst at Cantor Fitzgerald, on an earnings call. It was a cold January on Wall Street, with Morgan Stanley cutting 600 mortgage-related jobs and Lehman Brothers cutting about 3,000 from its mortgage business. Private companies with more personal connections to local and regional banks may have an advantage in this environment, observers say. Kite Realty is relying on a network of contacts formed through more than 20 years as a private company before becoming a public REIT. “We have an advantage here in that we were a private company doing business for a long time, depending on commercial banking relationships,” said CEO John Kite on a fourth-quarter earnings call. “Because of that, we didn't focus on one relationship manager, but we knew the president of the bank, the chief lending officer, the chief credit officer. One of our greatest strengths is having had to be a user of capital when we weren't a public company. Those are deep, long relationships.” In fact, Kite has seen its list of potential lenders increase since the mortgage crisis set in. “We've actually had some growth in relationships,” Kite CFO Daniel Sink said on the call, “because there has been some turnover in some of the larger banks, and some of the people that we have had strong relationships with have branched off into new ventures with new banks.”

LATIN AMERICA CAR BOOM CREATES PARKING SQUEEZE

Latin American retail landlords are coping with the region's latest demographics trend: an exploding car population. “The standard ratio of one parking space per each 25 square meters will be hard-pressed in the near future,” said Mario Castro, vice president of operations at Fondo de Valores Inmobiliarios, a Caracas, Venezuela–based mall developer and operator firm. Last year some 1.1 million new vehicles were sold in Mexico, amounting to about a quarter of the total sold throughout Latin America. In South America some 3.3 million new cars were sold last year, up 24 percent over 2006. South America's vehicle penetration rate is just 11 percent — that is, there are about 40 million vehicles against a population of 374 million, according to Carlos Gomes, senior economist at Scotia Capital, the economic research unit of Toronto-based Scotiabank. Brazilian mall developer Renato Rique has only to look at the traffic at his country's malls to appreciate the way car ownership has mushroomed there. Some 729,000 cars arrived at the 699,500-square-foot Shopping Iguatemi Salvador, in the state of Bahia, in December — 104,000 more vehicles than in December 2006. “We managed to accommodate the increase within our 4,800 parking spaces,” said Rique, president of Rio de Janeiro–based Aliansce Shopping Centers.

Newly affluent consumers are buying cars and visiting malls more often, says Leonardo Domnanovich, operations manager of Cencosud Argentina's shopping center division. Cencosud Argentina's primary mall, Unicenter, in Buenos Aires, will be adding on about 3,000 parking spots at the end of the year as part of an extension to the 5,500 spaces it has now. With car ownership rates likely to keep rising, it will not be enough just to plan for today's volume, insists Jesús Acosta Castellanos, general director of shopping centers at Monterrey, Mexico–based Grupo Acosta Verde. “During the first two years, parking supply will probably be in excess, but insufficiency later becomes a real problem,” he said. Money spent on parking is a sound investment and is generally recovered in about three years, says Edgar Rodríguez, director of operations at Mexican mall owner-operator Grupo Frisa. It is advisable to make some of those spaces larger, too, says Rodríguez. Grupo Frisa is building its parking spaces about 20 percent larger at its posher malls. “In those malls, we have many consumers, particularly women, driving bigger vehicles, like minivans,” said Rodríguez, “and they want more maneuvering room.”