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Page 10 — Retail Properties Quarterly — August 2017
State of Retail
Brinkmann Constructors is dedicated to adding the most
value to every step of the construction process by providing
guidance and creative solutions that allow us to build faster
and offer real cost-savings to our clients. We bring a sense
of accountability and ownership to every project, making
Brinkmann a trusted partner to our clients.
Brinkmann has constructed eight new DICK’S SPORTING
GOODS stores; each involved complete interior finish, and
most were completed on a five-month schedule. We recently
completed this 80,000 SF store in Broomfield, Colorado and
are currently fully renovating a store in Lakewood, Colorado.
We have a solid portfolio building retail stores and retail
development projects including site/infrastructure work
throughout the Midwest.
Let us become your trusted partner and build your next
retail project!
A TRUSTED PARTNER
TO OUR CLIENTS
ST. LOUIS │ DENVER │ KANSAS CITY
3855 Lewiston Street, Suite 100
Aurora, CO 80011
(303) 657-9700
D espite what you’ve been led
to believe, the internet actu-
ally is not the leading cause
of death for brick-and-mor-
tar retail. While the internet
certainly cannot be discounted in
the discussion of why retail seems
to be failing, its impact often is
massively inflated as the primary
source of retail’s recent woes. While
many look to the internet to ana-
lyze the issue at hand, an in-depth
analysis of the problem elucidates
more nuanced reasons.
The first is the frequent failure of
stores to reinvest capital into their
brands. Many companies sold to
private equity firms incurred large
amounts of debt and were left with-
out the proper capital to continu-
ously improve their stores, products
and consumer experience.
Another key reason is the decline
of the regional shopping mall as
a center of commerce and social
interaction. While historically the
mall was a place for people to shop
and congregate, the mall experi-
ence has come to lack a unique or
fresh feeling, leaving malls stagnant
and uninteresting to the modern
consumer. In addition to this, the
millennial generation trends toward
living near or within urban infill,
whereas typically most malls are
products of the suburbs.
Lastly, the abundance of retail
space has saturated the market to
the extent that there are simply
more stores than there are people
to shop.
In 2007, Apollo Global Manage-
ment acquired Claire’s in a lever-
aged buyout for $3.1 billion. While
Apollo’s intention
may have been to
work on the brand
in order to do an
initial public offer-
ing a few years
later, the reces-
sion unfortunately
changed these
plans. Now it’s
2017, and Claire’s
is operating at a
massive loss and
collapsing under
$2.35 billion of
long-term debt and colossal interest
expenses, according to business and
finance website Wolf Street.
Claire’s was an iconic brand that
dominated the highly profitable
accessory market for teenage girls.
Leading up to its buyout in 2007, it
always had been a fun and whimsi-
cal shopping experience that his-
torically drove business into retail
centers. Now saddled with so much
debt, it is questionable, at best, if
Claire’s will be able to survive the
coming years. Without the proper
capital, Claire’s essentially has been
unable to merchandise its stores to
attract new customers, drive sales
and continuously improve its busi-
ness model.
The decay of malls as the classic
American hub for interaction and
commerce derives largely from their
inability or refusal to incorporate
new, experiential-based retail to
draw in customers. The consumer
in the 21st century has consis-
tently demonstrated a tendency to
be more willing to spend money
on experiences, such as movies
and restaurants,
rather than on
materialistic com-
modities. Most
shopping malls
have experienced
great difficulties in
transitioning from
primarily soft-good
apparel sales to
food and enter-
tainment venues.
Locally, Little-
ton’s Southwest
Plaza recently
underwent a $75 million renova-
tion, but it remains to be seen how
effective this remodeling will be on
impacting sales and customer traf-
fic. While the owner did a wonder-
ful job updating the property, it is
unclear whether the capital invest-
ment will pay off.
Today’s shoppers are looking for
an increasingly authentic feeling,
gravitating toward places like River
North or the Highlands, where they
can discover chef-driven restaurants,
craft breweries, boutique shops and
a general sense of local presence. If
customers do decide to shop or eat
at a mall, they have shown strong
partiality only to those that are cer-
tifiably best in class, such as Cherry
Creek Shopping Center or Park
Meadows. In the retail market, malls
have yet to prove not only an acute
awareness of the new consumer
preferences, but also a willingness to
adapt and conform to it.
Looking forward, there is hope for
the future of America’s malls. Malls
aren’t dead, they’re simply being left
behind. To catch up to the future of
retail, it’s of paramount importance
that they focus on bringing in spe-
cific concepts such as Apple, Tesla
or Sephora, concepts through which
the product’s value is intrinsically
tied to the experience of venturing
into the store.
Furthermore, stores that maintain
a certain degree of inelasticity are
essential, as they require custom-
ers to show up for their services.
These are the types of businesses
that expand the trade area, drive
more traffic and help increase over-
all sales. When customers are in
search of a commodity such as a
coffee pot or a pair of socks, inevi-
tably the internet can prove to be
more efficient and cost effective.
However, retail shopping is a form
of entertainment, one meant to
imbue customers with a sense of
fun and satisfaction, thereby evoking
imagination that can lead to further
impulse purchases. As a result of
this, brick-and-mortar operations
must look beautiful, incorporating
the best lighting and nicest build-
outs to entice consumers into mak-
ing purchases.
In 2016, the United States reported
six times more retail square feet per
capita than the United Kingdom,
according to Seeking Alpha. Since
1995, the number of shopping cen-
ters has increased by 23 percent,
while the population has increased
by only 14 percent, according to
Forbes. The U.S has up to 50 sf per
capita of retail space, which con-
trasts starkly with Europe’s 2.5 sf per
capita.
Stuart Zall
President, Zall
Commercial Real
Estate, Denver
Seth Goldstein
Intern, Zall
Commercial Real
Estate, Denver