E-commerce is out of industry executives' minds as they focus on more tangible threats, according to SCW's 2002 Industry Forecast survey of top owners, developers, managers and lenders. Survey respondents say the economy will be their No.1 concern next year.
Retail bankruptcies, surplus space, vacancies and security are all mentioned as potent issues that will affect business in 2002. Even so, respondents are anticipating the end of the current recession and are making plans to spring back into action when the upswing begins. Redevelopments and mergers/acquisitions are predicted to be primary growth vehicles in 2002. And well-located, grocery-anchored centers are expected to be the darlings of lenders and developers alike.
While no one can say exactly what will happen in 2002, our readers enjoy giving it a try. Many included anonymous write-in comments with their survey responses. Their comments prophesy some interesting trends for the coming year.
“There may be a trend for owners to try and lease to local governments so the customer/consumer will not have to go to large government buildings because of security concerns,” one respondent writes.
“We'll see rents so high that business can't offer goods or services cheap enough to the consumer,” one respondent predicts. “Wal-Mart doesn't have this problem, which will compound small business woes.”
Another respondent bemoans the plight of the small-market developer. “Though it is silly to think smaller areas can offer the same amenities as large market centers, the consumers we see do have an expectation that we can just wave a magic wand and start up an ice rink or add a Nordstrom.”
Write-in responses also included some sound advice on tenant mix. “Much the same way consumers shoot for a balanced portfolio, developers will likely need to spread a little ‘risk’ to match consumer buying trends,” one astute respondent says. “We'll need centers that have a quality mix of upscale and discount.”
Not surprisingly, respondents agree security concerns will occupy the spotlight in 2002. Most owners and managers say they will institute new security procedures in the coming year to safeguard against unexpected attacks.
Most respondents say increased manpower will be the mainstay of new security plans. “We're making sure that security people are more visible and making sure they look like they would be accountable if a situation was to occur,” one respondent says. “Too many times security people looked like and, in fact, were ‘Barney Fife’. This isn't to say we need Navy SEALS, but the security people need credibility.”
The complete results of the 2002 Industry Forecast survey are included on the following pages, along with editorial commentary explaining the statistics and comparing this year's results to those of last year's survey. The results are as follows:
Respondents are primarily owners and managers of shopping centers.
- Respondents are primarily in high-level positions within their firm, such as CEO, Owner, Partner, President or Vice President.
| • | CEO/Owner/Partner/President | 43% |
| • | Director/VP | 21% |
| • | Mall Manager | 10% |
| • | Mall Marketing Director | 2% |
| • | CFO or Director/VP of Finance | 1% |
| • | Chief Information Officer | 1% |
| • | Other | 12% |
| • | No answer | 11% |
| Base: all respondents. | ||
| • | Shopping Center Developer/Builder/Owner | 63% |
| • | Shopping Center Management Firm | 23% |
| • | Finance/Investment/Insurance/Pension Fund | 9% |
| • | Other | 14% |
| Base: all respondents; multiple answers. | ||
Respondents own and/or manage an average 3.4 million sq. ft. of retail space.
| • | Less than 100,000 sq. ft. | 17% |
| • | 100,000 to 249,999 sq. ft. | 10% |
| • | 250,000 to 499,999 sq. ft. | 10% |
| • | 500,000 to 749,999 sq. ft. | 6% |
| • | 750,000 to 999,999 sq. ft. | 4% |
| • | 1 million to 4.9 million sq. ft. | 20% |
| • | 5 million to 9.9 million sq. ft. | 8% |
| • | 10 million sq. ft. or more | 16% |
| • | No answer | 10% |
| Base: all respondents. | ||
The economy is expected to gain the most attention in 2002. Security issues score a distant second place.
- Related issues, such as retail bankruptcies, surplus space disposition and vacancies and decrease in disposable income are also expected to gain attention in 2002. These topics were not among the most important topics in the previous studies.
- In the 1999 and 2000 studies, e-commerce was expected by the largest percentages of respondents to gain attention the following year. This topic has moved to the bottom of the list for 2001.
- As a result of September 11, 2001, the majority of respondents expect consumer safety, security concerns to gain attention in 2002. This topic was not included in previous surveys.
| • | The economy | 81% |
| • | Consumer security/safety* | 58% |
| • | Retail bankruptcies | 57% |
| • | Surplus space/vacancies | 47% |
| • | Decrease in disposable income* | 41% |
| • | Availability of capital* | 39% |
| • | e-commerce | 11% |
| • | Serving minority populations | 9% |
| Base: all 2001, 2000 and 1999 respondents; multiple answers. *These topics were not included on the 1999 and 2000 surveys. | ||
Among industry-specific trends, the redevelopment of aging centers is expected to gain attention in 2002 by 64% of respondents.
- This topic was also expected to gain attention in past surveys.
- 44% of respondents expect construction slowdown to gain attention in 2002.
- Respondents expect convenience, safety and security issues and value to have the most influence on the shopping centers of the future.
| • | Redevelopment of aging centers | 64% |
| • | Construction slowdown** | 44% |
| • | Retailer mergers/acquisitions | 39% |
| • | Mixed-use properties | 35% |
| • | Mergers/acquisitions among shopping center owners/managers | 34% |
| • | Lifestyle centers** | 33% |
| • | Main street/urban renewal | 32% |
| • | Public/private alliances* | 21% |
| Base: all 2001, 2000 and 1999 respondents; multiple answers. *This topic was not included on the 1999 and 2000 surveys. **These topics were not included on the 1999 survey. | ||
Over one-fourth of respondents (27%) have or plan to implement changes to increase security as a result of September 11, 2001.
- Respondents are most likely to mention additional manpower, increased planning and a higher level of alertness in response to the September 11 attacks. (See sample comments to right.)
- Respondents indicate plans to spend between $0 and $500,000 for security systems in 2002.
Changes Implemented as a Result of September 11
- “A number of things, including additional personnel, restricting access to rooftops, utilities locations and loading docks. No curb parking.”
- “A review of the crisis management plan and additional areas of security will be reviewed and changes made where needed. We have asked that all of our properties be ‘on alert and aware.’”
- “Additional man power and far more aware of the surroundings.”
- “Fine tune the Emergency Plans to include the new dangers.”
- “Increased general coverage and implemented new procedures for deliveries. Increased training of security personnel.”
- “More dialogue with center management concerning safety/security procedures.”
Grocery-anchored strip centers are most likely for development/renovation.
- Mixed-use facilities and big boxes/power centers are also likely in the plans for respondents to develop or renovate.
| • | Grocery-anchored strip centers | 54% |
| • | Mixed-use facilities | 38% |
| • | Big boxes/power centers | 36% |
| • | Main street/urban centers | 31% |
| • | Lifestyle centers | 30% |
| • | Freestanding stores | 29% |
| • | Regional malls | 20% |
| • | Other | 2% |
| • | No answer | 7% |
| Base: all respondents; multiple answers. | ||
The majority of respondents believe grocery-anchored strip centers will be most attractive to financiers in 2002.
- As noted previously, this type of center is also planned for construction/renovation by the majority of respondents.
- While nearly half of respondents expect the availability of capital to be the same in 2002 as in 2001, one third of respondents expect capital to be less available.
| • | Grocery-anchored strip centers | 61% |
| • | Mixed-use facilities | 32% |
| • | Big boxes/power centers | 30% |
| • | Freestanding stores | 24% |
| • | Lifestyle centers | 24% |
| • | Main street/urban centers | 23% |
| • | Regional malls | 17% |
| • | Other | 1% |
| • | No answer | 7% |
| Base: all respondents; multiple answers. | ||
Respondents are most likely to believe that an oversupply of space exists in big boxes/power centers and regional malls.
- Ironically, big boxes/power centers are planned for development or renovation by more than one third of respondents (36%).
- One in ten respondents does not believe an oversupply of retail space exists.
| • | Big boxes/power centers | 55% |
| • | Regional malls | 50% |
| • | Grocery-anchored strip centers | 24% |
| • | Freestanding stores | 20% |
| • | Main street/urban centers | 10% |
| • | Lifestyle centers | 9% |
| • | Mixed-use facilities | 6% |
| • | Other | 2% |
| • | No answer | 5% |
| Base: all respondents; multiple answers. | ||
About this survey
Forecast 2002 Study
- Investigation conducted exclusively for Shopping Center World.
- Methodology and data collection by PRIMEDIA Business Magazines & Media
- Data collected October through November, 2001.
- Methodology conforms to accepted marketing research methods and procedures.
Objectives
The research objective has three main components:
- Investigate the topics shopping center owners, managers and financial/investment readers predict will gain the most attention in 2002.
- Explore the plans subscribers have regarding these topics.
- Compare the results of the 1999, 2000 and 2001 studies.
The e-mail survey method was used to meet the study objective.
E-Mail Survey Method
On October 24, 2001, a mass e-mail was sent to a total of 4,000 Shopping Center World shopping center owner, developer, manager and finance subscribers, selected on an nth name basis from those who had previously provided e-mail addresses. Each e-mail contained an invitation to participate in the study and a link to an Internet survey. On November 5, 2001, follow-up e-mails were sent to 10,106, including the 4,000 subscribers in the original mailing. The follow-up e-mail included a link to the original survey, with the opportunity to enter a drawing for one of three $100 American Express Gift Checks as incentive to respond.
Sample Statistics
| A. | Total invitations e-mailed | 10,106 |
| B. | Undeliverable e-mails | 2,403 |
| C. | Effective mailing (A-B) | 7,703 |
| D. | Returned surveys | 282* |
| E. | Usable surveys | 208 |
| F. | Effective response rate (E÷C) | 3% |
| *Of the 282 surveys received, 74 were determined to be unusable due to the firm type of the respondent. | ||
Region by region
PREDICTIONS FOR STRENGTH OF RETAIL CLIMATE ON A REGIONAL BASIS.
Respondents have the most positive outlook for the Southwest in 2002.
Among the regions studied, the Southwest is the only one to have more respondents predicting a stronger retail climate in 2002 (24%) than those predicting a weaker retail climate (18%).
| Stronger than 2001 | ||
|---|---|---|
| • | New England | 5% |
| • | Northeast | 6% |
| • | Midwest | 8% |
| • | Southeast | 21% |
| • | Southwest | 24% |
| • | West Coast | 12% |
| The same as 2001 | ||
| • | New England | 26% |
| • | Northeast | 23% |
| • | Midwest | 36% |
| • | Southeast | 28% |
| • | Southwest | 28% |
| • | West Coast | 29% |
| Weaker than 2001 | ||
| • | New England | 33% |
| • | Northeast | 37% |
| • | Midwest | 26% |
| • | Southeast | 24% |
| • | Southwest | 18% |
| • | West Coast | 27% |
| Base: all respondents. | ||
Projection for revenue growth from rents & plans for 2002
PROJECTION FOR REVENUE GROWTH FROM RENTS
The outlook for revenue growth from rents is not as positive as in previous years.
In the 2001 study, 49% of respondents expect strong to moderate revenue growth from rents, compared to 81% in 2000.
| 2001 | Strong growth | 1% |
| 2000 | Strong growth | 4% |
| 2001 | Moderate growth | 48% |
| 2000 | Moderate growth | 77% |
| 2001 | No change | 24% |
| 2000 | No change | 13% |
| 2001 | Moderate decline | 11% |
| 2000 | Moderate decline | 3% |
| 2001 | Sharp decline | 1% |
| 2000 | Sharp decline | 0% |
| 2001 | Do not currently own or manage centers | 5% |
| 2000 | Do not currently own or manage centers | 1% |
| 2001 | No answer | 12% |
| 2000 | No answer | 3% |
| Base: all 2001 (208) and 2000 (276) respondents. | ||
PLANS FOR 2002
Despite economic concerns, respondents plan to continue in their business of renovating, developing and acquiring centers.
Nearly half of respondents plan to renovate aging centers or finance the renovation of aging centers. A mere 17% plan to maintain their portfolio with little or no change.
| • | Renovate aging centers/finance renovation of aging centers | 48% |
| • | Develop new centers/finance development of new centers | 38% |
| • | Acquire centers/finance acquisition of centers | 33% |
| • | Sell properties | 25% |
| • | Develop joint ventures with other developers | 22% |
| • | Maintain portfolio with little or no change | 17% |
| • | No answer | 13% |
| Base: all respondents, or 208; multiple answers. | ||