A team remaking its company's home town, a site-selection ace that is forging new ground in advising retailers and a man behind a burrito chain's expansion strategy are charting the course of retail.
This year's crop of Players — our annual look at some of the figures influencing the future of retail real estate — is a select bunch. Each player represents a key link in the retail real estate chain.
We have a developer, Westcor, a retailer (or in this case a restaurant chain) Chipotle and we have a consultant, Buxton Co. Traditionally we pick one person per company for the honor. But Westcor didn't want to pick just one figure among its leadership crew. So we opted to tap them all instead. For the others we have Tom Buxton, founder, president and CEO of the Buxton Co. and Monty Moran, president and COO for Chipotle.
Westcor sticks out because of the role the company is playing in the rapid growth sweeping the Phoenix market. The city is expanding at a breakneck pace. Estimates are that it will add 1 million new residents per decade between 2003 and 2030. In 2000 the Phoenix MSA population was 3.2 million. By 2010 its population will be 4.4 million and by 2020 it will be 5.4 million.
That puts Westcor, a 40-year Phoenix institution with 39 properties with 18 million square feet in the region, in a unique position. The firm has four major projects in the works, most of which will be large-scale mixed-use centers that are part of vast, master-planned communities.
Meanwhile, Buxton has formed a series of initiatives aimed at different potential customers to hone their retail strategies. In addition to retailers themselves, Buxton has divisions aimed at consulting municipalities, hospitals and developers.
“With hospitals you have locations with 1 million customers — which some malls don't get. You have a built in customer base that stays longer than they would at a mall. But when you consider what most have — the gift shop and the cafeteria — there is a huge opportunity,” Buxton says.
Programs like these led to Buxton landing on Fast Company's 2005 Fast 50 list of top innovators and technology pioneers. And this year Buxton was named a finalist in the 2006 American Business Awards for Most Innovative Company.
Lastly, Chipotle is one of the fastest-growing and most sought-after restaurants chains in operation today.
One of the reasons pointed to for the chain's success: the fact that it offers healthier fare than the standard quick-service chain.
“We're on a mission to find the very best ingredients we can while operating in a sustainable way,” Moran says. A quarter of the beans served are organic, while all of the pork, half the chicken and one-third of the beef are naturally raised without hormones or antibiotics. But management isn't satisfied: “We want the food we're serving to better five years from now,” he says.
The Master Planners
Westcor's management team — (from left to right) senior vice presidents Michael Treadwell, development leasing; Bob Williams, development leasing; David Scholl, development; and Tracey Gotsis, strategic marketing, — launched what they called the Phoenix 20*20 initiative in 2005.
“Phoenix 20*20 was really a strategy to unveil to our customers — the retailers — that just as they've depended on us for 40 years to take care of their growth here, we'll do that for the next 20,” says Scholl. “There are hundreds of companies that have had the presentation made and most have adopted it as the growth plan for their company.”
Last year was all about marketing that plan. Now, execution has begun. First up: SanTan Village in Phoenix suburb Gilbert. The 500-acre project is already well under development. In will ultimately offer up 2 million square feet of retail. Other Phoenix 20*20 projects include Prasada, the retail component of a master-planned development in Surprise, Estrella Falls, a 300-acre mixed-use project that will rise in Goodyear and Palisene, the 700-acre retail component of a 2,200-acre master-planned community near Scottsdale.
Part of what's helped Westcor forge ahead has been support of Santa Monica, Calif-based parent Macerich Co. “We work together,” Scholl says. “The solutions we find here might be tried elsewhere. It's not just about us, but what this will mean for the whole company.”
The Site Selection Whiz
More than a decade ago, Tom Buxton — then a corporate vice president of real estate, design andfor Radio Shack Corp. — had a realization.
“What became obvious to me is in the retail world, nobody knows who their customers really are,” Buxton says. “Our marketing, real estate and retailing people all had different opinions about who we were trying to reach. As a result, we would open stores and a bunch would just not be successful.”
That experience led Buxton to think there had to be a more scientific way to figure out what people were buying. Answering that question became the mission of Buxton Company. The firm, which Buxton launched in 1994, has since done that and more combining technological expertise, a massive database — 25 terrabytes and counting — and consulting services. What makes Buxton's approach to site selection different is the fact that the company does more than crunch numbers.
“We'll have clients come in and say, ‘We need a site where there are $100,000 households in a 5-mile radius with an average income of $50,000,’” he says. But that's not precise enough. “When you really parse who is buying the product, we'll find that total population doesn't matter. What they may need are 15,000 people who are real customers within a 7-minute drive.”
That sort of approach helped Buxton convince Kinko's to re-think its expansion strategy dramatically. As a result, it ended up doubling its number of stores.
The company also has CommunityID for cities forming retail strategies, HealthID aimed at hospitals and in May it launched TenantID aimed at developers.
The Burrito Booster
Chipotle President and COO Monty Moran swears that he was the first person to eat a Chipotle burrito made by Steve Ells, the founder and CEO of Chipotle. The two were friends and Moran knew of Ells' aptitude in the kitchen. One night in the early 1990s he went over for dinner. However, he was stunned by the menu.
“When he told me we were having burritos, I was really disappointed. I thought, ‘how good can a burrito be?” recalls Moran.
Pretty good, apparently, especially when you consider Chipotle's growth over the past 13 years. The chain has expanded from a small burrito joint in Denver to more than 525 restaurants and 14,000 employees nationwide. And earlier this year the company's stock more than doubled in value during its IPO. It opened at $22 per share and rose as high as $48 per share before closing at $44. Moran. who became president two-and-a-half years ago, was integral in the IPO. Before that, he served as Chipotle's outside general counsel.
Chipotle is a star performer in the restaurant industry with second quarter revenues increasing to $204.9 million from $156.3 million last year. It's leveraging that performance into aggressive growth with plans to open 80 to 90 new restaurants per year.
Moran also is focused on attracting and retaining restaurant managers. “We say that the manager is the most important job in the organization,” he says. “That will allow us to staff more restaurants.”