Chapter 8

Retail Locations

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PPT 8-1

The Most Expensive Shopping Streets in the World

Street Fifth Avenue (48th to 58th St.) 57th Street (5th Ave. to Madison Ave.) Oxford Street Location New York City New York City London Cost / sq foot / year $580 $500 $400 $375

Madison Avenue (57th New York City to 72nd St.) Ave. des Champs Elysee
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Paris

$360

Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

PPT 8-2

Shopping Centers

A shopping center is a group of retail and other A shopping center is a group of retail and other commercial establishments that is planned, developed, commercial establishments that is planned, developed, owned, and managed as a single property. owned, and managed as a single property. Two main configurations: strip centers & malls Two main configurations: strip centers & malls Strip centers have parking in front of the stores and do Strip centers have parking in front of the stores and do not have enclosed walkways linking the stores. not have enclosed walkways linking the stores. Malls have a pedestrian focus; customers park in Malls have a pedestrian focus; customers park in outlying areas and walk to the stores. Traditional malls outlying areas and walk to the stores. Traditional malls are enclosed with walkways between two facing strips are enclosed with walkways between two facing strips of stores. of stores.
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PPT 8-3a

Shopping Center Definitions

Concept Sq. Ft. Including Anchors Number of Anchors
1 or more

Type

Type of Anchors
Supermarket

Trade Area *
3 miles

SHOPPING CENTERS
Neighborhood Convenience 30,000-150,000

Community General Merchandise; convenience

100,000-350,000

2 or more

Discount dept. 3-7 miles store; supermarket; drug; home improvement; large specialty/ discount apparel

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PPT 8-3b

Shopping Center Definitions

Concept
Categorydominant anchors; few small tenants

Type
Power

Sq. Ft. Including Anchors

250,000-600,000

Number of Anchors
3 or more

Type of Anchors

Trade Area *

Category killer; 5-10 home improve- miles ment; discount department store; warehouse club; off-price

SHOPPING MALL Regional General Merchandise; fashion (mall, typically enclosed)

400,000-800,000

2 or more

Full-line dept. store; junior dept. store; mass merchant; discount dept. store; fashion apparel

5-15 miles

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PPT 8-3c

Shopping Center Definitions

Concept
Similar to regional but has more variety and assortment

Type
Superregional

Sq. Ft. Including Anchors

800,000 +

Number of Anchors
3 or more

Type of Anchors
Full-line dept. store; junior dept. store; mass merchant;

Trade Area *
5-25 miles

Fashion/ specialty Outlet Theme/ festival

Higher-end, fashionoriented Manufacturers outlet stores Leisure; tourist oriented

80,000-250,000

N/A

fashion apparel Fashion 5-15 miles

50,000-400,000 80,000-250,000

N/A N/A

Manufacturers 25-75 outlet stores Restaurants; entertainment miles N/A

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PPT 8-4

The Largest U.S. Shopping Malls

Name
Mall of America Del Amo Fashion Center South Coast Plaza/Crystal Court Woodfield Mall SawGrass Mills

Location
Bloomington, MN Torrance, CA Costa Mesa, CA Schaumberg, IL Sunrise, FL

Gross Leasable Space in Square Feet

4,200,000 3,000,000 2,900,000 2,700,000 2,300,000

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PPT 8-6

Types of Leases (appendix P. 255)

Percentage Fixed - Rate Percentage leases - rent is based on a percentage of sales. Retailers also typically pay a maintenance fee based on a percentage of their square footage of leased space. Most malls use some form of percentage lease.

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PPT 8-7

Variations of Percentage Leases

Percentage lease with specified maximum percentage of sales up to a maximum amount. Rewards retailer performance by allowing retailer to hold rent constant above a certain level of sales

Percentage lease with specified minimum - retailer must pay a minimum rent no matter how low sales are. Sliding scale - rent as a percentage of sales decreases
as sales go up.

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PPT 8-8

Fixed Rate Leases

Fixed rate leases - used by community and

neighborhood centers. Retailer pays a fixed amount per month over the life of the lease. Not as popular as percentage leases

Graduated lease - a variation of the fixed rate lease

Rent increases by a fixed amount over a specified period of time.

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PPT 8-11

Exclusive Use Clause

Prohibits the landlord from leasing to retailers selling competing merchandise

Specify no outparcels (parking lot store that blocks view of establishment) Specify if certain retailer leaves center, they can terminate lease.(I.e. if Wal-Mart leave so can I)

Escape clause
Allows the retailer to terminate its lease if sales dont reach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease.
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PPT 8-12

Environmental Issues

Above-ground risks - such as asbestos-containing

materials or lead pipes used in construction.

Hazardous materials - e.g. dry cleaning chemicals,

motor oil, that have been stored in the ground.

Retailers Protection comes in 2 forms:

Stipulate in the lease that the lessor is responsible for removal and disposal of this material if its found. Retailer can buy insurance that specifically protects it from these risks.
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PPT 8-13

Other Legal Issues

Zoning and Building Codes

Zoning determines how a particular site can be used. Building codes determine the type of building, signs, size, type of parking lot, etc. that can be used

Signs
Restrictions on the use of signs can also impact a particular sites desirability (Bal Harbour)

Licensing Requirements
Some areas may restrict or require a license for alcoholic beverages; can be changed through intense lobbying efforts
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Levy/Weitz: Retailing Management, 4/e Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved.