When the shopping center industry began to consolidate in the early 1990s, the market for third-party property management suddenly became more competitive as most REIT owners already had their own management arms in place. The message was clear: Third-party management firms would either have to find new ways to build a competitive advantage, such as making plays in new markets and offering more extensive services — or perish.
Today, one of the giants of the third-party management industry is Urban Retail Properties. The Chicago-based firm, which manages more than 45 million sq. ft. of retail, government and office space in 24 states and the District of Columbia, has roots in both ownership and development that go back 30 years.
The company developed Chicago's Water Tower Place in 1976 and 900 N. Michigan Avenue in 1989, and was part of a REIT from 1993-2002. That history has given it a unique perspective and capability to service property owners, ranging from individual owners to institutional investors. NREI recently talked with Ross Glickman, Urban Retail's CEO, about the company's short-term strategy and state of the shopping center industry.
NREI: Nearly three-fourths of your management portfolio is in the shopping center sector. Do you envision that you will continue to be weighted heavily to retail going forward?
Glickman: Our core business is retail, and it will continue to be so. There are alternatives to shopping centers and they are not necessarily regional malls, although we manage a substantial number of regional malls for third parties. We see tremendous management opportunities in big boxes, off-price retail, strip centers — we have about 25 in our fold — and lifestyle centers. We're also involved in central business districts and the revitalization of city blocks.
NREI: You also manage government buildings (18% of your portfolio) and office buildings (8%). Aren't the skill sets needed for each property type vastly different?
Glickman: The whole government sector has become very diverse, and the discipline and skill sets are very different from running a retail establishment. For us, it started out with an RFP for the Ronald Reagan Building International Trade Center in Washington, D.C. This is a 4 million sq. ft. building that opened in 1998, and we were awarded the leasing and management of it. That started us down a track of getting GSA contracts very aggressively. We understood the challenges but we didn't have the expertise, so we ended up partnering with the John Drew Co., which has expertise in trade center exhibition work and event planning.
NREI: To what degree is development still part of your menu of services?
Glickman: We have a full-service development component within Urban. It's vital to our organization. We do ground-up development. It runs the gamut, from renovations to expansions. In 2003, we opened a 37-story office tower in Century City in Los Angeles, which is the world headquarters for MGM. We built that from the ground up.
NREI: Do you believe that mixed use will be a staple of the retail industry going forward, and if so how do you envision Urban's role?
Glickman: Our genesis has always been mixed use, and it will be a vital staple. We started out by building Water Tower Place and 900 N. Michigan Avenue. Both these vertical mixed-use establishments house condos, hotels, retail and office. We feel that those models, where they can exist, are absolutely justifiable and have a tremendous amount of upside.