Many retailers worth watching despite recession, experts say

Family Dollar is expected to open 200 new units in 2009, according to About.com.

Sure, the news has been bad for retail in general, with falling sales helping to push major retailers into numerous store closings and even into bankruptcy.

But some retailers are surviving and even thriving in the current recessionary environment, attracting the attention of commercial real estate professionals who have been tasked with keeping shopping centers full.

“There are always winners and losers,” said Patrick Berman, a retail property specialist with Cushman & Wakefield in Tampa. “The strong retailers are your value and discount retailers - namely Wal-Mart, Family Dollar, McDonald’s. McDonald’s is opening three stores a day worldwide. They’re not slowing down one bit, and they have 31,000 stores already.”

Indeed, the Top 10 list of retailer expansions for 2009 includes, McDonald’s, Dollar General, Family Dollar, GameStop, Wireless Zone, AFC Enterprises (Popeye’s), Panera Bread, Gymboree, Aldi Supermarkets and Darden Restaurants, according to retail analyst Barbara Farfan at About.com.

Berman said today’s strong retailers can be divided into three segments: discount, value and necessity.

“People still have to eat and take medications. Those retailers are holding up pretty well,” he said.

Berman added that Dollar General is launching a new concept - the Dollar General Market - that capitalizes on two strong trends by combining discount and necessity shopping.

“It fits the times very well,” he said.

John Crossman, president of Crossman & Company in Orlando, said he sees evidence of strong retail activity in the number of appointments he will keep at the upcoming RECon retail real estate convention in Las Vegas.

“I’ve had a lot of people say they’re not going to Vegas - or they are but they only have a few meetings set up. We have 30 meetings set up already. There are retailers out there doing deals and growing,” he said.

Fast-food purveyors, for instance, had been struggling during the boom as consumers sought healthier choices and land prices escalated, Crossman said. But now cheap and quick is the order of the day, and land prices are deflating, promoting expansion by such chains at Krystal, Chik-fil-A, McDonald’s and Wendy’s.

Discount apparel shops like TJ Maxx, Ross and Beall’s are seeing more market share as people turn away from high-end fashion retailers, he said.

Crossman added that service-oriented retailers who happen to also provide a good product or experience continue to win in this economy. He cited grocer Publix and Darden Restaurants as prime examples of those who have maintained high standards while the competition let service decline.

“When the economy goes down, the strongest companies grab more market share,” he said.

Gary Montour, a senior vice president with Colliers Dickinson in Jacksonville, said he has completed or is working on restaurant deals with IHOP, McAlister’s Deli, Whataburger, Sticky Fingers, Arby’s, Little Caesar’s, Pizza Hut, Taco Bell and local, private restaurants.

In addition, he said, pawn shops and check-cashing stores doing select deals in markets that they like.

Publix, Walgreens and CVS are still doing deals, Montour said, though not at the pace seen before the recession began.

“They’re still continuing their expansion programs, and they have targeted corners and customers,” he said.

Kane Morris-Webster, a retail and land specialist with Colliers Arnold in Orlando, said interest in leasing has picked up - but potential tenants are very selective.

“Everyone is looking for a location at the right price - making sure they’ll find something that doesn’t cost more than they can take in,” she said, adding that base rents in her market have dropped from about $30 psf to $18-$20 psf.

“For projects that have just come out of the ground, that’s going to be tough to pro forma. If you’re going to get your center occupied, you’re going to have to be creative,” she said.

Morris-Webster said successful retailers include “game and gadget” stores like EBGames and Blockbuster, where the game rental business is thriving. She added that specialty children’s clothing stores - such as carter’s, The Children’s Place, Buckle and Gymboree - are doing well, as are pet stores.

Soraya Tyriver, executive vice president for Woolbright Development in Boca Raton, said she is seeing the marketplace begin to adapt retail space for other uses such as medical clinics, adult daycare facilities and educational facilities. She said she expects the latter to thrive as state budgets continue to be squeezed and land prices hinder private educational providers from building new facilities.

Tyriver added that she expects to see growth in franchising as self-employment begins to look more attractive in a volatile job market.

“There’s going to be a lot of opportunity for that once the financing markets are running again,” she said.

Retailer performance notwithstanding, Berman said he expects consumer penny-pinching to continue well after a recovery takes hold - as it did for their grandparents who experienced the Great Depression. The shock of that, he said, never wore off.

“1930, for them, was two years ago,” he said.

2009 retailer expansions

The top 10 planned retailer expansions for 2009, as reported by retail analyst Barbara Farfan at About.com:

- McDonald’s: 1,000 units

- Dollar General: 400

- Family Dollar: 200

- GameStop: 200

- Wireless Zone: 102

- AFC Enterprises: 90

- Panera Bread: 80

- Gymboree: 75

- Aldi Supermarkets: 75

- Darden Restaurants: 70