News and Events
Getting Real About Real Estate Operations
Executive Vice President Eileen Mitchell addresses the trend of outside advisors helping retailers manage their real estate portfolios in an article written for Shopping Center Business.
Aug 15, 2010 Shopping Center Business Eileen Mitchell
Throughout the housing boom, real estate departments at major retail chains hummed with the kind of activity normally reserved for beehives. With their packed calendars, hectic travel schedules and well-worn Blackberries, retailers’ senior negotiators labored to close deals at a frenetic pace amid one of the largest retail expansions in U.S. history. The rush of new deals created towers of paperwork for lease administrators and left no shortage of fine print to be pored over by legal.
And then, virtually overnight, everything changed. The Wall Street meltdown and collapse of the housing bubble translated into a dramatic slowdown in retail expansion. Once buzzing with activity, retailers’ real estate departments suddenly became oases of calm.
The onset of the so-called Great Recession forced retailers to be ruthless about slashing corporate expenses. This changed the cost-benefit analysis of maintaining internal real estate departments¬, which are basically service hubs rather than self-supporting profit centers. Outsourcing real estate ops to experienced third parties became an extremely attractive option. Indeed, a host of national retailers have moved to do precisely that in recent months, and the trend is bound to continue.
But corporate cost-cutting is not the only reason retailers are turning to outside help. With the collapse of consumer demand, chains were confronted with the need to better manage their portfolios. Smart operators understood the need to reduce their occupancy costs and leverage their kick-outs and lease-term expirations to get the best possible deals from landlords. And yet, few retail companies were structured to do this effectively.