News and Events
Big-Box Giants Downsize to Drive Productivity with Smaller, Urban Stores
RCS President and CEO Ivan L. Friedman talks to Retail Traffic about small format trends.
Mar 30, 2011 Retail Traffic Elaine Misonzhnik
As U.S. chain retailers absorb the lessons of the Great Recession, many big-box chains have started to shrink average store footprints to reflect the growing importance of multi-channel shopping, adapt to urban settings and recognize the need to optimize portfolios.
Gap Inc. is shrinking the average size of its Old Navy stores from about 25,000 square feet to approximately 10,000 square feet, according to Ivan L. Friedman, president and CEO of RCS Real Estate Advisors, a New York City-based retail real estate consulting firm.
Smaller stores might not necessarily translate into lower real estate costs, however. In many of the urban markets the retailers are targeting, including New York, Chicago and Los Angeles, the sky-high rents per square foot will likely minimize any savings on overall real estate costs, Friedman says. A smaller specialty retailer might be able to save on common area maintenance (CAM) charges by opening smaller stores, but big box anchor tenants like Target and Wal-Mart normally pay rents based on percentage of sales and would not realize significant savings by pursuing smaller units in large cities.