Retailers Returning to Main Street

Though the majority of retail stores will continue to be located in malls, retailers are slowly moving back to Main Street to diversify their storefronts, according to findings of a recent survey.

Retailers plan to have eleven percent of their stores in urban street-front locations by the end of year, compared with eight percent last year, the 2007 National Retail Federation Retail Real Estate study conducted by AMR Research. To compensate, companies have cut back slightly on their number of mall and strip mall locations (44 percent this year vs. 48 percent last year).

The survey of 43 retail real estate executives also found that retailers are continuing to move toward lifestyle centers, with nine percent of company stores in that format compared with eight percent last year.

“Urban storefronts are beginning to play an increasingly important role in retailers’ real estate strategies,” said Carleen Kohut, NRF chief Financial officer and manager of NRF’s Real Estate Executives Council. “Throughout the country, traditional main streets are being revitalized to include an assortment of new retail shops, from department and clothing stores to coffee shops.”

When determining the best location for a store, four out of five retail real estate executives say that demographic information is the most important. Respondents believe that other crucial factors include evaluating competitive information (51%), traffic patterns (49%), and geographic factors like the existing and future population (49%).

Though the real estate industry remains extremely competitive, complexity and extensive due diligence contribute to 24 percent of retailer respondents taking more than six months to sign a contract once a site has been approved. On average, retailers said they screen ten potential sites for each one that is approved. About 36 percent of stores are owned while the remaining 64 percent are leased.

After a contract is signed, retailers said it takes an average of three to six months if the store is part of a remodel or new construction to occupy the space. A ground-up project often takes more than twice as long with the majority of retailers acknowledging that those projects often take more than twelve months. While many factors contribute to duration of construction, there is no denying the risk associated with not opening a site on time and on budget, according to the survey.

The 2007 NRF Retail Real Estate study will be released in its entirety at NRF’s Annual Convention, Jan. 13-16, 2008, in New York.