Urbanization: Challenge or Opportunity for Retail Industry?

Urbanization is one of the most powerful  forces, presenting some the biggest challenges but also opportunities for real estate globally. The rate of urbanization is creating a tier of true global cities, with huge opportunities for local and international retailers alike.

Pace of urbanization…

UCitiesrbanization is not a new phenomenon, but what is striking about urbanization today is the sheer scope and pace at which it is occurring. More than 1 million people move to cities globally every week and according to the UN, 6.3 billion will be living in cities by 2050, 67% of the World’s population.

Today’s urbanization is a truly global phenomenon, albeit with regional nuances. Half of the world’s fastest-growing large cities are in Asia and the top 10 are all in China. More than half of the Chinese population is now urban, but barely one generation ago, only one-fifth lived in cities. Parts of Eastern Europe and the Middle East are also witnessing astounding urbanization. In Africa, roughly a third of the one billion population is urbanized, but by 2030 it will increase to half. Perhaps most surprisingly, Latin America is now the world’s most urban region, surpassing Europe and North America.

Population growth and the growth of middle classes…

Urbanization is partly being driven by the growth in the world’s population, which according to some commentators is forecast to reach 11 billion by 2100, up from 1.6 billion in 1900. And, as medicine advances, people will live longer; the world’s population of over-65s alone will increase by over 200 million in the next decade and reach 2 billion by 2050. Also closely linked to the urbanization trend is the growth of the middle class, which is now the dominant class globally. The middle class is predicted to grow from 1.8 billion in 2008 to 3.2 billion by 2020, and to 4.9 billion (out of a projected global population of 8.3 billion) by 2030. This will present huge opportunities for retailers and developers of the relevant retail real estate.

Integrated urban retail; sustainable place making…

Across the world, the urbanization effect is having a huge impact on real estate and on retailer, developer and investor strategies. International retailers are likely to increasingly focus on the major city markets with the greatest opportunity; developers will create new future-proofed space in markets with favorable demographics and economic prospects. Successful place making will sit at the heart of the leading Retail cities of the World.

Favorable market conditions will not necessarily translate into a wave of new traditional retail property development in the same way witnessed during previous periods of economic recovery. Retail development will continue, but certainly in the more developed economies, how retail places are developed and integrated into urban environments is changing.

The City Shake-up: Top-ranking 30 Cities on JLL’s Intensity Index

By: President & CEO of JLL

Real estate investors are getting more aggressive.

As they move across borders searching for attractive returns, and as multinational corporations extend their footprints into new markets around the world, many are asking strategic questions about the dynamics of different cities. In recent years, we’ve seen a gradual shift in the mindsets of many of our investor clients: they’re recognizing cities as emerging political and business powerhouses.

Cities compete with one another for capital, corporations and talent. Their governments are increasingly recognizing the role of real estate as a contributor to – rather than a consequence of – city competitiveness. With more than half a trillion US dollars of commercial real estate traded each year across the globe, knowing which cities attract the most capital provides valuable insights into city success.

Reviewing the top 30 destinations for real estate capital over the past three years supports the traditional perspective: the global major business hubs are dominant, and the top 30 account for nearly half of all commercial real estate investment (with few notable exceptions – like Shanghai, Beijing and Moscow, which were added recently – they’ve been the same group of cities). At the top of the list are four “Super Cities:” London, New York, Tokyo and Paris, which are responsible for nearly 20 percent of commercial investment activity. They possess a powerful combination of economic scale and influence, deep corporate bases, highly liquid real estate investment markets and large, diverse and high-quality commercial real estate stocks.

No surprises here. But further investigation tells a more complex story.

What makes a city “intense?”

Scaling cities’ intensity – ranking cities and real estate investment by volume relative to the city’s economic size (rather than sheer volume alone) – dramatically changes the picture. This ‘Investment Intensity Index’ provides a useful barometer of a city’s health and real estate liquidity.

Measuring investment intensity, London maintains the top market position. You’ll need to look down the list for its fellow “Super Cities,” though: Paris is 12, and New York is 25, while Tokyo is well down the list at number 65.

Why the reshuffle?

The Rise of Vibrant, Tech-rich Cities

Mid-sized, vibrant and frequently tech-rich cities are punching above their weight on this measure. They include a number of European cities – such as Oslo, Munich, Stockholm and Copenhagen –scalable, tightly planned cities with a good quality of life that is attractive to corporate tenants. These factors are increasingly being incorporated into investment strategies.

Effects of Transparency

The transparency of a city’s real estate market offers another measure of investment attractiveness. We just issued the latest Global Real Estate Transparency Index, a survey that we undertake every two years to help clients assess the risks of transacting and operating in international markets.

Comparing city investment intensity with levels of real estate transparency reveals a remarkably good fit and highlights the importance that investors place on high transparency, with a combination of robust regulatory and legal frameworks, fair transaction processes and good quality market intelligence.

Transparent and liquid real estate markets, supported by a high quality commercial stock, can provide significant competitive advantage and are key indicators of successful cities.

Mid-year Observations: Stars Aligned for Retail Investment Sales

Post the recent ICSC ReCon, Rebecca Wells, Executive Vice President of Midwest Retail Capital Markets at JLL shares her views on retail investment sales. The stars have aligned for extremely favorable selling conditions with market fundamentals and financing availability the best we’ve seen in years.


200,000 SF Retail & Entertainment Expansion at Streets of West Chester, Ohio


The number of high quality retail amenities available to residents of the Greater Cincinnati and Dayton, Ohio market will soon get a double dose of development with two new retail locations now launching. The Streets of SWC SP Overlay 062014West Chester is a 167,638-square-foot lifestyle center, located at 9465 on Civic Center Drive. LPC Retail is now kicking off the pre-development leasing and marketing for the second phase of its retail center with a 200,000-square-foot planned expansion slated to open in spring of 2016. The Streets of West Chester expansion will join the opening of the new Bass Pro Shops, beginning construction this summer, adjacent to The Streets, and will provide shoppers with new retail, restaurants and entertainment.

“The development of these two new retail locations represents the largest concentration of boutique-like retail amenities in the West Chester area,” said Judith C. Boyko, Township Administrator of West Chester. “These are the type of retail destinations our diverse and sophisticated residents demand, and we expect both to be very successful footholds in our retail fabric.”

A significant expansion has always been part of the master plan for the Streets of West Chester, according to LPC Retail. The company purchased the center earlier this year, and is moving forward with the original vision for the property, which includes specialty and big box retail space as well as additional restaurant destinations. The first phase of The Streets of West Chester includes 167,638 square feet of premier retail, entertaining and dining amenities. The center is currently anchored by AMC West Chester 18Theatres, Barnes & Noble, P.F. Chang’s China Bistro, Bravo! Cucina Italiana, Mitchell’s Fish Market, and the recently added Ann Taylor LOFT.

“There is a great deal of shopper demand and new development momentum in this area that will benefit our site and our loyal shoppers,” said Phil Pearson, Senior Vice President-Asset Management of LPC Retail. “The addition of Bass Pro Shops adjacent to our property is a huge advantage to our site, as it will expand our access to Allen Road and connect us directly to IKEA and its 36,000 shoppers that come into this area each weekend. We’re well positioned to become the regional hub for high quality retail in the area.”

To capitalize on the current retail momentum, LPC Retail has appointed JLL’s local retail leasing experts to bring the phase two of its development to life. JLL’s Jenn Williams and Melissa Ruther will spearhead the leasing of the retail expansion. Projected ground-breaking is scheduled for fall 2015 with completion scheduled in spring of 2016.

“The second phase of Streets of West Chester has the right mix of location, demographics and strong consumer demand coming from a growing residential and healthy office market to capture a number of new retailers to fuel this development,” said Larry Kilduff, JLL’s Midwest Retail Market Lead. “Our team has already spoken with a number of retailers who have expressed interest in the regional appeal of this area given northern Cincinnati’s explosive growth.”


Retailers’ $600B secrets to luring Millennial shoppers

They’re online, but they still like going to stores. They have money to spend but love coupons and promotions. Here’s how to navigate the retail preferences of the 18-34 crowd.

They may be young, with many life experiences still to come. But when it comes to spending habits and material addictions, retailers and retail landlords can’t afford to ignore Millennials.

With cash to spend, and the need to own the latest-and-greatest goods and gadgets, the youngest group of adult consumers, born between 1980 and 2000, already spends $600 billion a year in the United States alone….and show no signs of slowing. In fact, they’re on track to spend $1.4 trillion annually by 2020, accounting for roughly 30 percent of all retail sales.

Few generations have taken so divergent a path from the lifestyles, desires and shopping habits of their predecessors as these highly connected and cost-conscious consumers. Parents of Millennials probably didn’t spend their first paychecks on devices to connect them to social networks 24/7, tagging and uploading in their sleep. But neither did they enter the workforce in the midst of the Great Recession.

“They certainly use their comfort with technology to their advantage and it’s often to compare prices, learn about the latest trends and capture the best deal possible before they walk into a physical retail space”- Julie Rickey, JLL’s director of retail property marketing

When it comes to today’s consumer culture, Millennials are more explosive than boomers; and for retailers, they outpunch Generation-X as the X-Factor to shopping savviness. Targeting their interests and needs could mean mega-sales – or turning your back on $1.4 trillion.


So what can retailers and retail property owners do to capture Millennial spending? New research from JLL identifies marketing strategies that appeal to consumers 18 to 34 years old. Here are six ways retailers and landlords can successfully market and sell to Millennials:

1. iMeet + e-shop = they spend. Meet Millennials online.

From chat rooms to FaceTiming, and dial-up connections to 3G networks, Millennials came into the world as technologists. They connect with the world through mobile devices and when it comes time to shop, they research products, compare prices while shopping and consult with peers or online consumer reviews to aid their evaluations. Millennials use various media simultaneously and expect instant gratification, with little patience for stale website content, outmoded technology or outdated merchandise and in-store displays.

Technology influences Millennials more than any other age group. Compared with the population in general, they’re 262 percent more likely to be influenced by mobile apps and advertising, or by blogs and social networking sites (247 percent).

“They certainly use their comfort with technology to their advantage and it’s often to compare prices, learn about the latest trends and capture the best deal possible before they walk into a physical retail space,” said Julie Rickey, JLL’s Director of Retail Property Marketing.

Clearly, digital tools that engage these shoppers and enhance their in-store experience are a good investment.

2. Solicit the savings, captivate through coupons. They like [and need] a good deal.

Millennials wield great spending power, but many are unemployed or underemployed. Among 18 to 29 year olds, the effective unemployment rate was 15.5 percent in April, according to Generation Opportunity, which tracks Millennials. While 24 percent of Millennials earn more than $75,000 per year, another quarter earn less than $25,000, and an equal amount live with their parents. Understandably, these shoppers are highly sensitive to price and exhibit a penchant for coupons and special promotions. While shopping in stores, they use mobile devices to compare prices.

In short: Push coupons and targeted promotions. Research shows that 38 percent of Millennials are influenced by savings-related signs and in-store displays, compared with 28 percent of all shoppers. Shopper loyalty programs, the ones that reward “frequent spenders,” influence more than half of Millennials, compared with 40 percent of shoppers in general.

“For Millennials it’s all about value,” Rickey explained. “They are highly price-sensitive and will continue to place great emphasis on price and value. Those core principles are not going to change anytime soon, so it’s up to the retail industry to adapt to this shift in consumer demand.”

3. “Like, going to the mall” doesn’t end with the teen years. Online shopping is convenient, but they still like physical stores.

Four of five Millennials prefer to buy in stores vs. online, and more than half make monthly visits to their favorite stores in most retail categories. JLL research shows they will seek out good deals in stores and online, but gravitate to gathering places and experiences that retail properties can offer.

But these consumers are less likely to visit lifestyle centers (shopping centers that combine the traditional retail functions of a shopping mall – but also have leisure amenities oriented towards upscale consumers), as they typically cater to older and more affluent shoppers. Lifestyle center landlords can counter those tendencies by offering a broad choice of dining, apparel brands favored by young adults, fitness centers, hair salons, bicycle shops, pet stores or dog runs, and uniquely local offerings. And while Millennials gravitate to discounted grocers, they don’t frequently shop at outlet malls, which may be similarly discounted in price but are often inconveniently located

4. Hands-on, in store, before heading out. Millennials need to play prior to purchasing.

Stock stores with mobile coupon scanners and in-store kiosks that allow shoppers to test merchandise, as well as check the web for customer reviews in real-time. Millennials are 77 percent more likely than the average shopper to be influenced on brand decisions by in-store experiences.

Millennials like to touch and try out products, know what their peers think, and will hesitate to purchase untried goods. Retailers need to provide mobile-enabled websites and apps that help customers find deals, research items and read reviews.

5. So fresh and so green. Millennials are defined by their affinity for change and their support for sustainability.

With pop-up shops, which conjure a sense of newness and continual change while filling vacant space, retailers cater to Millennials’ desire for ever-evolving spaces with fun sensory experiences, and can feature refreshed showrooms and merchandise. Dense, pedestrian-friendly developments appeal to Millennials, as do green spaces and evidence of environmental sustainability.

Stores and properties that promote sustainability will win this group’s respect and business, and hosting special events, concerts and exhibits connect them with entertainment in the consumer’s mind.

To learn more about how Millennials are impacting commercial real estate, read JLL Research’s full report,Millennial Consumers: What You Need to Know to Reach Them.


Copa do Mundo and beyond: Brazilian retail surges

Players from 32 countries are pouring into Brazil for a month-long contest of extraordinary soccer skill, known as the Copa do Mundo, the 2014 FIFA World Cup. Cheering them on will be an expected 3.7 million fans and tourists, adding an astonishing $3.3 billion USD ($6.7 billion Brazilian Real) to this nation’s economy. According to Brazil’s Ministry of Tourism, the average foreign visitor will attend four Copa do Mundo matches and spend approximately $2,488 during their stay.

“Tourists coming to the matches spend more. It is a specific audience and we want to win them over during the World Cup”, Tourism Minister Vinicius Lages told reporters. But while the Copa do Mundo will provide a temporary boost Brazil’s economy, the impact on the retail industry here will last much longer.

The World Cup will only pique the interest of international investors and retailers, who already have fueled unprecedented growth in Brazil’s retail sector, JLL research shows. Brazilian shopping centers have recorded an average annual growth rate of 8.4 percent in the last four years, and 58 malls are under construction, the research shows.

Last year, retail sales rose R$129 billion ($57 billion USD), a 74 percent increase since 2009. “The low unemployment rate and greater access to credit has created a flourishing middle-class that spent more than R$1.17 trillion 2013,” said Alex César, head of JLL Retail in Brazil. “Since the recession we’ve seen tremendous international interest in Brazil, and we don’t anticipate a slowdown anytime soon.”

In the past two years, 55 new international brands have entered the Brazilian market, including German-based restaurant Vapiano, which operates in five continents and 28 different countries. In advance of the World Cup, Vapiano scoured Brasil for the perfect site to open its first location. It may have taken a year, but the restaurant company nailed down a space in Ribeirão Preto, the countryside of São Paulo, and then found a second São Paulo location in Itaim Bibi, a business and residential neighborhood.

“The low unemployment rate and greater access to credit has created a flourishing middle-class that spent more than R$1.17 trillion 2013. Since the recession we’ve seen tremendous international interest in Brazil, and we don’t anticipate a slowdown anytime soon,” said Alex César, head of JLL Retail in Brazil.

“We’re planning to open 35 new locations worldwide this year, and we got a double start in Brazil, opening two spaces in São Paulo,” said Mario C. Bauer, CEO of Vapiano Franchising International. “Fast casual is the modern fine dining, and Brasil’s thriving middle class is a niche that our concept fits. We are looking forward to developing our operations alongside Brazil as it continues to flourish.”

From food to footwear, U.S.-based retailer Nike is also running toward Brazil head-on, not only by outfitting the national team but by opening two new stores. Nike’s first soccer-only store offers the latest football gear in Copacabana, Rio de Janeiro, and spans three stories and 9,000 square feet. Last month, the company opened its largest location south of the United States, a 25,000 square-foot, build-to-suit Nike Factory Stores in Recife, capital of Pernambuco in the northeast region of the country.

“Opening a Nike football-only store in the heart of Rio is part of our commitment to sport, to the city and to Brasil. We have a long-term investment plan in the country, and for a while now we have been focusing our attention on Rio, with events and activities offered to the Cariocas (Rio natives),” said Cristian Corsi, Nike´s General Manager in Brazil.

Other international retail newcomers range from iconic fast-fashion brands and restaurants to luxury retailers. Spain-based Desigual opened its first shopping in São Paulo, U.S.-based Forever 21 opened its first store at Morumbi Shopping in São Paulo, and UK-based Topshop has two stores in São Paulo and one in Ribeirão Preto.

Beyond the games, Brazil’s financial and political structure is stable, with inflation under control, said JLL’s Cesar. “Brazil’s retail market, though still emerging, is well on its way to maturity,” he said. “Despite of some barriers to entry, Brazil poses great value for retailers’ expansions, and those thinking long-term will have the most success.”

Income + Housing Growth = Retail Revival


U.S. cities with a strong energy industry presence have experienced increasing employment and burgeoning housing demand. That means retail real estate is seeing some sparks fly. Download the full report


Dallas: Fresh Concepts in the Urban Core


Mark Newman

Last October when Gables Residential announced that its new development in Uptown would be anchored by a Whole Foods Market, it probably surprised and thrilled the 20-somethings living in the trendy neighborhood. But it doesn’t take long to figure out why the Austin-based grocer would move into our urban core, engage street level foot-traffic along McKinney Avenue and gain market share. This is a trend we’re seeing across brands in cities coast to coast. Even Detroit, which remains one of America’s hardest hit urban centers.

Empty nesters and millennials are returning to the urban core and paying premiums to be in the middle of everything. The area offers a vibrant mix of museums, restaurants, bars, walking/biking trails, urban green spaces – and all of that right outside their doorstep. But a basic need has always seemed to be missing. Where are the grocery stores? Organic or not, everyone has to eat.

The recent and on-going surge of population in the urban core has forced the supermarket industry to reevaluate how it can serve customers in an urban environment without the traditional surface parking options.

By 2040 nearly 10.5 million people will live in and around Dallas-Fort Worth, making our region the fastest growing U.S. metro in the country.

As mixed-use projects in neighborhood pockets proliferate, market share will be absorbed by grocers who are able to adapt to the urban style in creative ways while also improving their product offerings to meet the tastes and demands of the urban resident.

Safeway has proven experience with urban designs on the coasts and is poised to take advantage of that. Whole Foods and, surprisingly to some, Wal-Mart, have both shown a commitment to structured parking and the foot-traffic profile of urban retail. In most of our minds, when we talk about urban supermarkets we picture a smaller, specialty format. But, it’s the grocer who can provide the traditional supermarket experience in a dense neighborhood that will benefit the most.

We’ve already seen the success of several projects that have figured out the delicate balance between designer produce and demographics. Look at The Shops at Park Lane where structured parking has been embraced; or how Central Market at Preston and Royal scaled back its footprint to seamlessly slip into the Preston Hollow strip center; and the Trader Joe’s on Lower Greenville that has flourished in the counter-culture pedestrian-heavy streetscape.

As Dallas continues to boom and evolve into an increasingly dense urban environment, changes will have to happen. Grocers will need to figure out how to orient to the sidewalk rather than the parking lot. Consumers will increasingly embrace mass transit, leaving their SUVs at home in favor of ride on the trolley.

For more information, contact Senior Vice President Mark Newman.

VIDEO: What Lenders are Looking For


The retail industry has endured five hard years of recovery since the Financial Crisis, but a retail resurgence is well underway with consumer spending expected to rise by 4 percent this year.

The Pursuit of Happiness: Retailers Renovate for Enhanced Customer Experience

Ongoing evolution in the retail industry—including near-global access to the Internet and speedy adoption rates of smartphones—is forcing retailers to create a brick-and-mortar shopping experience that rivals the convenience and immediacy of the Internet. As a result, hundreds of retailers in thousands of locations are committing capital to renovating stores for an enhanced overall customer experience. Retailers should consider these three key questions when defining the type and magnitude of renovations to enhance their customers’ experiences:

1. Are we offering an omni-channel experience? Retailers striving to build a true omni-channel experience are merging at-home, in-store and mobile commerce into one seamless shopping experience. Customers want continuity, so the look and feel of every channel, from mobile to desktop to in-store, should be the same.

For example, AMC Theatres recently added an expanded food and beverage menu to concession stands and replaced conventional movie chairs with wide, comfortable recliners. In addition, AMC began offering guests the opportunity to buy tickets online—and reserve actual seats at the theatre—before arriving. The omni-channel experience of buying tickets online translates to a brick-and-mortar customer experience unrivalled in the entertainment industry. In fact, AMC sells more tickets with fewer seats – to sold out audiences.

2.  Are we leveraging the right technology? To keep people in their stores, smart retailers are making their locations interactive and engaging with the right technology. Tablets and smartphones can be used to promote convenience by taking customer payments rather than making them wait in line, demonstrate product features, offer more item options and encourage social sharing. In addition to tablets, the use of large displays purposefully engross customers, making them forget they’re inside a store.

3. Are we collecting actionable data to help personalize the customer experience? An Infogroup Targeting Solutions study found that 54 percent of marketers have already invested in data solutions to date, and nine out of 10 plan to do so in 2014. Smart retailers know that truly personalized experiences are only possible when customer information about behavior, history and whereabouts is gathered. Collecting this actionable data through customer loyalty programs, point of sale data and online shopping behavior ultimately enables retailers to implement dynamic browsing, customized displays, personalized recommendations and shopper-specific discounts.

JLL and Food Lion collected data that revealed that the grocer’s customers were increasingly focused on produce. Based on that finding, Food Lion wasted no time renovating its stores to better position its produce offerings and, in the process, enhancing the overall customer experience.

In addition to the renovation work completed at AMC and Food Lion, smart retailers can enhance the customer experience and ultimately maximize return on investment of store renovations with modified layouts, in-store kiosks, virtual walls, virtual dressing rooms, augmented reality and new product offerings.

Customer experience is individual to each retailer and the clients they target. It’s crucial for retailers to ask the right questions and understand the role big data, technology and the omni-channel experience play in their overarching strategy so the appropriate renovations programs can be developed.

By Steve Jones, Lead of Retail Project & Development Services, JLL