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What You Need To Know About Outlets

In ICSC/VRN’s webinar, “15 Things You Really Need to Know About Outlet Retailing,” a group of seasoned outlet execs batted around topics ranging from site selection to predatory leasing to outdated research. The webinar, held June 19, was one of ICSC’s most successful to date, with more than 150 viewers, including the program’s highest number of international participants. Here is a recap of the points that were covered:

1. A hands-on business

David Ober, president of Global Outlet Management, got straight to the point: “Outlet retailing is one of the most difficult real estate sectors to manage purely as an asset. In the 1999 to 2008 period we had lots of failures as community and neighborhood center developers tried their hands at the outlet business. Given the breadth of activities occurring on outlet properties, you have to be deeply involved to be successful. From marketing to management, you need to focus on the daily business and recognize that outlets have a different financial model, and that’s a challenge for asset managers.”

2. Only the best dirt

Jeff Montang, VP of Real Estate for the AM Retail Group, addressed how parameters of site choice have changed. “We have to continually refine the site-selection process as outlets move from rural locations to more densely populated areas,” he said. “And the design of the centers must really be able to handle customer flow and traffic.”

Dan Cochran, partner and head of new tenant representation at EWB Development, drew on his 25 years of experience as an outlet retailer. “Outlets need the best dirt,” he said. “When outlet development took off in the mid-to-late ‘80s, outlet centers located as far from regional malls as possible because of our wholesale sensitivities. Today as competition grows and sensitivities diminish, what’s more important is proximity to main interstate roads, on and off ramps that feed into your center, and food and gas amenities right there. Quite frankly the dirt has to be better than what Walmart picks.”

Barry Sturm has been the director of leasing for Guess Factory Stores for six years, but he also has years of experience in outlet development. Bringing both perspectives to bear, Sturm pointed out the differences between shopping at traditional malls and shopping at outlet centers. “People come to shop the outlets,” he said. “Shopping is the only reason to come to an outlet center. Mall visitors might come to eat, visit the game room or just loiter. Outlets need to be convenient to a local population, near a major artery. The site has to be the right spot and as easy as possible to reach. Outlet centers really need the best dirt in the best location or they will fail. In the past 30 years many outlets have failed because shoppers think, ‘why travel to a cornfield?’”

Sturm posited that close-in locations are the wise choice for today’s outlet centers. He reasons that working parents are time-poor and not eager to spend money on gas just to go shopping. “If you’re going to outlets to save money,” he said, “the last thing you want is to spend $25 round-trip on gas.”

See all of the points covered in my write up for Value Retail News.


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