Positioning Retail Real Estate for a New Generation

February 1, 2018

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Levin Management Retailers Optimistic for 2018 Following Positive Year and Holiday Season

Annual Outlook Poll Shows Shifts Related to Economy, Industry Evolution

NORTH PLAINFIELD, N.J., Feb. 1, 2018 – Coming off a positive year and holiday season, retailers within Levin Management Corporation’s (LMC’s) 100-property, 14 million-square-foot portfolio are fundamentally optimistic about what 2018 will bring. The North Plainfield-based commercial real estate services firm today released the results of its 2018 Outlook Retail Sentiment Survey, which also point to shifts stemming from current economic conditions and the continued evolution of the retail industry, itself.

By the numbers, 64.1 percent of LMC survey participants in the annual January poll reported 2017 annual sales at the same level or higher than 2016. This compares to a five-year trailing average of 57.5 percent. And, for the holiday season, 66.2 percent of respondents reported same-or-higher sales compared to the 2016 holiday season, while 67.0 percent reported same-or-higher in-store traffic. This compares to five-year trailing averages of 62.7 and 60.4 percent, respectively.

“These statistics all are historically strong and indicate retailers had a very good year in 2017,” noted LMC President Matthew K. Harding. “We are particularly encouraged by the 6.6 percent positive differential in year-over year holiday traffic as compared to the trailing five-year average. At a time when news headlines are focused on the growth of e-commerce, this shows that consumers continue to value the experience of shopping in bricks-and-mortar locations.”

Findings by trade and governmental organizations mirror the LMC results. The International Council of Shopping Centers (ICSC) recently reported 90.0 percent of consumers made purchases in physical stores during the 2017 holiday season. The National Retail Federation (NRF) reported a 5.5 percent increase in holiday sales year-over-year, with Kiplinger reporting a 5.9 percent increase. Overall, 2017 retail sales were up 4.2 percent from 2016, according to the U.S. Census Bureau.

A Positive Outlook, Hiring Shifts and Expansion

Within this context, 68.1 percent of LMC survey respondents indicated they are feeling optimistic about 2018 store performance. “A relatively strong economy, historically low unemployment and growing consumer confidence set the stage for ongoing improvement for retail in 2018,” Harding said. “Kiplinger anticipates in-store sales will grow 2.4 percent in 2018, the strongest advancement since 2014. With no foreseeable major changes on the horizon, we, too, anticipate another year of continued momentum.”

LMC asked its retail tenants whether low unemployment has brought noticeable change to the hiring climate. More than one quarter (28.1 percent) of survey participants indicated they have observed some shifts. Of those respondents, 63.3 percent are seeing fewer qualified job candidates in their pools of applicants. Additionally, 53.3 percent reported demand for higher starting salaries, with 20.0 percent indicating demand for more employee incentives.

LMC also asked tenants whether their companies anticipate opening additional stores in 2018. A healthy 30.4 percent answered in the affirmative. “We continue to hear about planned store closings, yet this is an important reminder that retail is an industry of constant evolution,” Harding said. “As some concepts reach their end, others expand and thrive. It is encouraging to see so many of our survey respondents fitting into the latter category.”

Changing Times

Still, the ability to prosper in today’s increasingly digital and mobile world requires retailers to embrace shifting strategies. Nearly half (49.6 percent) of LMC’s 2018 Outlook survey respondents indicated they have adapted their business model in response to the growth of ecommerce. The most popular changes involve heightened focus on technology and service.

Of those survey participants whose companies have made changes, 54.3 percent have increased their use of technology-centered marketing tools in-store, while 56.3 percent have upped technology-centered marketing to reach customers outside the store. Other strategic shifts embraced by more than half of those that have made changes include increased training and focus on customer service (58.9 percent), and added in-store services and incentives (51.0 percent).

“Our survey indicates retailers are using multiple avenues to distinguish themselves and win business,” noted Melissa Sievwright, LMC’s vice president of marketing. “It has become clear they are leveraging technology to get consumers’ attention and enrich the in-store shopping experience. There are elements of touch, feel and interaction in a physical store than cannot be duplicated online. The emphasis on training and service reflects that our tenants understand what is important to their customers today.”

Nearly half (48.7 percent) of LMC survey respondents report measurable benefits stemming from their business model adaptations.

LMC’s next Retail Sentiment surveys will be conducted in May, exploring year-to-date performance and technology issues, and in October/November, gauging expectations and plans for the holiday season. For more than 65 years, LMC has served as a trusted single-source commercial real estate services provider for institutional and private owners. LMC today maintains a diversified, retail-focused portfolio in the Northeast and Mid-Atlantic states. The firm’s capabilities continue to evolve with new technologies, efficiencies and sustainability-focused initiatives to serve a new generation of properties, investors and tenants.

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