It is now apparent that retail drives our economy. Instead of bashing indulgent consumption, it is time to embrace it. As we approach the holiday season then, it might be a good time to take note of the trends from 2013.

1.      Return to the City or Something Resembling Downtown. The new retail “centers” are increasingly not the regional mall or even the suburban lifestyle center, but rather revitalized downtown areas and neighborhoods near downtown with street level retail amid offices and apartment dwellings resembling downtown areas. The urbanization of retail has created interesting different options for consumers, and interesting lease issues for both landlords and tenants.


2.      The New King of the Hill.  It was not so long ago that Gap was the most desired retail tenant and thus had the leverage to demand incredibly favorable lease terms. Due to increased competition and merchandising challenges, Gap does not have the leverage it once had. Then it was Barnes & Noble. But now the future of the book store as a concept is in question – the video store is already obsolete. Department stores because of their credit and the amount of space they take have always had a great deal of leverage. The recent trouble of JC Penny though should cause landlords to be cautious about their department store deals. So who are the current retailers who have the most leverage? Apple for sure. American Girl would garner a lot of interest from any landlord. Top line restaurants are huge draws.  In fact, even when retail demand slowed, restaurants continued to experience growth. We still have to eat, and we apparently prefer to eat out. Upscale movie theaters, with gourmet restaurants included, are highly coveted. In terms of department stores, the sale of Saks makes them a very interesting prospect. And of course WalMart still gets whatever it wants.


3.      A New Outlet. Besides the proliferation of outlet centers, retailers have started putting their outlet stores in full line centers. Shoppers who are willing to pay top dollar, still like to get a bargain on name brands. The outlet store is no longer confined to the outlet center.


4.      Condo Centers.  Financing new centers is more complicated and harder to obtain than ever before. All new centers have an office, residential and/or hotel component. In many cases there is first floor retail below those components. Lenders are requiring that these components be isolated for financing security. The ownership could be structured as an air rights deal. But lenders seem to prefer a condominium structure leading to a renaissance of condo deals.


5.      The Lender Does Matter. Incredibly, more and more tenants are entering into leases without any SNDA. The lenders are in some cases refusing to give one at all and in others are requiring forms that cancel important lease terms. Tenants are increasingly faced with the realization that they simply cannot get an SNDA or that they may even be better off without one. Another related trend is that lenders are actually reviewing leases. We all have heard (or used the excuse) that a lease term could not be given because the landlord’s lender would not approve. Historically, that may have been more of a subterfuge than reality. But in today’s environment lenders really are reviewing usually ignored lease terms like condemnation and casualty and demanding changes.


6.      City Food. Admit it, food trucks are fun. And food trucks can offer limited menu, specialty food items that a permanent restaurant cannot offer. Food trucks are not just at random street corners any more. There are now food truck centers, and savvy suburban centers are now adding food trucks in the parking lot as an amenity and update on the old kiosk idea and having the truck pay rent. Interesting approach to keeping fresh changing restaurant options.


7.      The Web or Bricks? Sales on the web continue to grow as retailers get better and better in reaching their customers and providing a good sales experience over the web. However, most retailers have come to realize that a bricks and mortar store is a necessary part of their sales process. Consumers like to touch and feel products and like the experience of interacting with live people from time to time. This dynamic has changed how retailers lay out their store design and how they choose locations.


Do your part to help the American economy and splurge this holiday season. Think of it as patriotic.