Kimco Predicts Positive Retail Trends for 2015

By Keith Loria, Contributing Editor

Conor Flynn, Kimco Realty

The National Retail Federation has predicted that purchases during the 2014 holiday shopping season were going to increase 4.1 percent over last year.

In response to the report, Kimco Realty further predicted that next year the retail market will remain strong, as retailers continue to tailor the shopping experience and personalize it for consumers.

“We expect an increase in new store openings led by major discount and off-price retailers and the fast casual restaurants,” Conor Flynn, Kimco Realty’s president, COO & CIO, told Commercial Property Executive. “There will continue to be interest from traditional outlet tenants that will consider relocating to power centers, which generally offer lower occupancy costs. In addition, we believe that the declining gas prices will benefit the consumer and lead to an increase in spending which is good for retail.”

However, Kimco expects new construction in the sector to be constrained and is looking very selectively at some ground-up development opportunities.

“We expect that for the near future, new supply will remain constrained, with some ‘green shoots’ of new development starting to spring up over the next three years,” Flynn said. “We still see redevelopment opportunities as our best use of capital at the moment. The catalyst for these new development and redevelopment projects are being driven by the demand from junior anchor box tenants as most public strip center companies, including Kimco, are between 97-98 percent occupied in spaces greater than 10,000 square feet.”

Turning to smaller businesses, the mom-and-pop retailer, especially those in the service sector, are forecasted to return to the open air shopping centers, enhancing their abilities to connect to the local communities.

“This is evidenced by our Q3 results, which showed that over 50 percent of our new leases signed in that quarter were with pure mom and pop retailers,” Flynn added. “We’ve found that community banks are more open to provide financing for small business entrepreneurs than in the past several years. In addition, as some housing markets have stabilized, there are more opportunities for business owners to utilize home equity financing to help them fund their business.”

A new trend that’s emerged of late is online retailers opening brick-and-mortar stores. This, according to Flynn, will create an “omni-channel” presence that’s here to stay.

For example, eyeglass retailer Warby Parker opened retail locations and showrooms in 11 cities, men’s footwear brand Jack Erwin opened its first store in TriBeCa, and Microsoft has opened locations throughout the country to showcase its new products.

“Bonobos, Rent the Runway, and Plated are three more examples. Now with Amazon opening its first brick-and-mortar store in New York City, omni-channel retailing is showing itself as the new normal for retail,” Flynn said. “As the lines blur between enclosed malls, outlet malls, power centers, grocery centers, and online and mobile channels, retailers are finding new ways to innovate and engage consumers. Shoppers want the ability to buy a product online, pick it up in the store, or have their local store ship it to their house, if they so choose.”

As for other trends to keep an eye on for 2015, Flynn said to monitor corporate responsibility and sustainability programs, which are becoming the industry standard.

“We have a few new programs in the works for 2015, including our Illumi-Nation lighting enhancement project, and we believe you’ll see our peers making strides on this front as well, as more investors demand it, and landlords and tenants start to see the benefits,” he concluded. “Investors are not the only ones with an increased focus on more than just the bottom line—shoppers are now increasingly health-conscious and environmentally aware. We expect you’ll continue to see an increase in tenants offering fitness services, specialty wellness goods, and organic foods and other products, again further enhancing the tenant mix at open air centers.”