Despite the massive growth of e-commerce, online retailers like Amazon are establishing a brick-and-mortar presence to engage and create loyalty with customers, who still want to see and touch products they’re purchasing. It’s another indicator that all retailers—and shopping centers themselves–must be prepared to reinvent themselves as the retail landscape continues to undergo seismic changes.
This was one of many insights on the emerging real estate environment shared at the 2017 Hollo School of Real Estate Jerome Bain Developer Luncheon on November 17 at the InterContinental Miami.
At the event, Bill Hardin, Hollo School director, and Eileen Cardelle, FIU admissions manager and adjunct faculty member, welcomed two representatives of Miami-based developer Courtelis Company, who shared wide-ranging insights on the future of shopping centers in challenging times.
“Commercial real estate is a relationship business,” Hardin said. “We’re happy to have Rod Castan, president of Courtelis’ leasing and management services, and Brian Kiely, their CFO, because for Courtelis, relationships are part and parcel.” Cardelle, who worked with Courtelis for five years, said the developer, founded in 1963, “is very smart, but most important, very ethical.”
Castan (BBA Finance ’85), also past Florida state director of the International Council of Shopping Centers (ICSC), said Courtelis’ “deep roots in South Florida,” as well as his own, have enabled them to anticipate and be responsive to shifting trends in commercial and residential development. He also paid tribute to FIU, his alma mater, as a factor in his success.
“I owe a lot to FIU for launching me on a 30-year career. I started as a young, green rookie straight out of FIU in this business,” said Castan who, in his 23-year tenure at Courtelis, has been involved in development of 30 shopping center and commercial projects.
Courtelis’ early signature development was The Falls shopping center in South Dade. It currently is involved in retail, residential, and mixed-use projects in Pembroke Pines, Doral, South Dade, Naples, and Orlando.
“So what about the alleged ‘retail apocalypse’?” Castan asked, referring to major retailers like Sears, J.C. Penney, and Macy’s closing stores or going out of business. “Low unemployment and interest rates, 2 percent inflation, and 5 percent retail property vacancy rate doesn’t sound like an apocalypse to me.”
The root cause of failure is often debt overload and “toxic private equity,” he said. “Retail is still growing – over 4,000 stores opened across the country in 2016. For every company closing stores, 2.7 are opening stores.”
New developments appeal to the “time-starved.”
But with online sales accounting for 29 percent of growth, and e-commerce up 64 percent in the past three years, retailers and developers have to reimagine themselves “to appeal to time-starved consumers,” Castan acknowledged.
He cited Courtelis’ new Murano Apartments in Orlando, developed with Miami-based Kislak Organization and HMG Courtland Properties, creating a walkable community with gaming rooms, fitness area, and nearby retail, designed to appeal to millennials.
Coral Town Plaza in Naranja, opening in April 2018, and Pines City Center in Pembroke Pines, opening in June with Courtelis’ client Terra Group, are both mixed-use projects that bring living space, retail, health and fitness, and arts and culture in walkable communities.
They are anchored by Walmart and Publix, respectively, and Courtelis’ established name helped draw the stores. “Again, it’s about relationships,” Castan said. “Retailers look to work with groups like Courtelis and Terra that have this kind of credibility. Developers come and go; they know we’ll do what we say we will.”
Wanted: Fitness and health-focused businesses.
As focus on health and lifestyle has increased over the past decade, so has shopping center space devoted to health, fitness, and beauty. There’s also a lot of growth in the natural and organic foods sector, with Publix Greenwise stores expanding to compete with Lucky’s Market, Sprouts Farmers Market, and Trader Joe’s, Castan said.
While it may seem counterintuitive, well-known online brands including Warby Parker, Suit Supply, and Bonobos are “going omni-channel,” opening physical locations to better connect with customers. Since Amazon bought Whole Foods, it has established a presence in the grocery stores.
During a Q&A, Castan was asked how small retail centers can stay competitive in a tough environment. “Consider consolidating space to bring in an anchor or unique destination tenant to increase traffic,” he said. Iconic local establishments can help drive successful retail environments as well. Citing a popular restaurant in Pinecrest, he noted, “Consider the history and the traffic draw of a small mom and pop restaurant such as Wagons West restaurant in Suniland Shopping Center as an example.”
About the future of big malls, Castan said, “Quality malls like Aventura haven’t seen a drop in rents. Many are tourist-driven, and are adding hotels and entertainment. Smaller secondary malls such as Southland and Westland malls are vulnerable – but sometimes pain is where opportunity happens.”
He noted that retail space is being used in unconventional ways, such as medical and educational facilities; Courtelis is also expanding to health-related development projects, including assisted living facilities. “3D-printing concepts are likely to expand – almost like combining manufacturing with retail,” he said. “Electric car manufacturers are looking at big-box space rather than the traditional open lot. You can reduce the peaks and valleys with diversification.”
Castan also advised aspiring development professionals that “real estate is a wonderful business if your mindset is long-term.” Citing shifting loyalties of millennials, he noted that the ICSC, whose NEXUS Conference will be in Palm Beach in January, has connected with FIU and its new generation of students in its ongoing efforts to stay fresh.