2A — October 12 - 25, 2018 — M id A tlantic
Real Estate Journal
www.marejournal.com
Mid Atlantic Real Estate Journal
Mid Atlantic R eal E state J ournal Publisher, Conference Producer . .............Linda Christman AVP, Conference Producer ...........................Lea Christman Account Executive ........................................... Steve Kelley Account Executive ............................................. Kim Brunet Account Executive ........................................ Marisol Chase Senior Editor/Graphic Artist ..........................Karen Vachon Office Manager ...............................................Kerrin Devine Contributing Columnists ...................................Mike Harris Mid Atlantic R eal E state J ournal — Published Semi-Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 350 Lincoln St., Suite 1105 Hingham, MA 02043 USPS #22-358 | Vol. 30, Issue 19 Subscription rates: $99 - one year, $148 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion 781-740-2900 | Fax: 781-740-2929 www.marejournal.com
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Showroom-Like Stores Could Overthrow The Ba- sis For Retail Rents, Writes Cremodels Executive I Mike Harris f present trends continue, retail rents might one day be based on traffic and customers rather than tradi- tional metrics such as sales per square foot or percentage rent, observes Mike Harris, Manag- ing Director of CREModels, in a new column for Forbes.com. “E-commerce is transforming retail real estate and yet the most drastic changes may still be ahead,” writes Harris, whose CREModels provides financial modeling, due diligence and technology consulting. In the Aug. 14 column for Forbes.com (“From Stores To Showrooms: Evolving The In- Store Experience And Un- derwriting Practices”), Har- ris notes that landlords like Macerich and CBL Properties are increasingly cultivating relationships with the types of digitally native retailers that tend to open showrooms—the likes of Casper, Warby Parker, thredUP, Adore Me, Everlane and UNTUCKit. They are also ramping up the customer and property data they collect and spearheading pilot programs to share this
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The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
type of information with data- hungry tenants. Given enough time, Harris contends, tenants’ marketing departments could start to regard the highest- traffic malls and shopping districts as key influencers in their own right. “We may now be in the first stages of this evolution,” he writes. “Instead of thinking about real estate as ground zero for transactions, clicks-to-bricks operators are asking landlords for data on how physical stores can help them acquire customers.” Such shifts could lead to a different conception of the ba- sic business contract between landlords and certain tenants, Harris continues. Productivity- related stats such as sales per square foot or percentage rent could give way to calculations focused on traffic and custom- ers. To illustrate what this
might look like, Harris cites the Software-as-a-Service dis- tribution model, in which third- party providers host customer apps online. “In this world, marketers frequently pay a lot more for each new customer than they would have received from just a first sale alone,” he writes. “Applied to real estate, this type of pricing could upend the concept of a rent-to-sales ratio.” Instead of a retailer attempt- ing to keep rent far below its sales, an operator may be will- ing to pay substantially more than the initial transaction in recognition of the value of the customer connection, Harris explains. In the era of multichan- nel retailing, the difficulty in determining when and where continued at www.marejournal.com
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e Mid Atlantic RE Journal 1/4 pg,, October 12
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