CREJ

August 2018 — Retail Properties Quarterly — Page 27 www.crej.com and nationally, have continued to pay a scarcity premium for best-in-class STNL product throughout Colorado. Similarly, small-format strip cen- ters have continued to attract inter- est from both private capital discre- tionary and 1031 exchange investors. These assets often feature a mix of franchisee and credit tenants on triple-net leases. While requiring greater investor oversight than STNL product, these properties generally offer investors stability of cash flow, low-maintenance management and low capital improvement risk. Today, these assets are trading at cap rates anywhere between 5.75 and 6.75 per- cent, but it’s important to note that pricing is heavily dependent on the tenant credit profile. There is no doubt that properties in the Denver metropolitan statisti- cal area continue to attract the most aggressive capital in today’s mar- ketplace. Given quality retail invest- ment product in the Denver market continues to be highly sought after, investors have increasingly pursued opportunity in Colorado’s secondary markets such as Colorado Springs, Fort Collins and Pueblo. This trend has served as a net positive for both investors and sellers, allowing inves- tors to capture a stronger yield than they otherwise might while providing sellers an opportunity to capitalize on the favorable metrics driving pric- ing along the Front Range. The second half of 2018 should provide viable market conditions for continued transaction velocity across the Colorado Front Range. While movement in the debt mar- kets remains the greatest potential impediment to sustained investment sale velocity, limited supply of invest- ment properties paired with ready and willing capital will continue to drive a competitive marketplace in Colorado in 2018. ▲ Brown Continued from Page 4 Finally, rightsizing is another trend identified within Denver’s retail scene. Rightsizing is a proactive way for retailers to optimize their physi- cal store portfolio and adapt to cur- rent market needs or technologies by expanding or decreasing their footprint. Examples include Macy’s Backstage in Broomfield and the new Target location downtown on the 16th Street Mall – both smaller formats compared to those retailers’ traditional model. On a national scale, Denver is rec- ognized as a bit of a maverick. We are not afraid to take risks, and our pop- ulation – many of whom are trans- plants – welcomes new concepts and experiences. This is part of what has attracted so many new retailers to our market, including in just the past year: Shake Shack, Peloton, Vineyard Vines, Chuze Fitness, CVS, Marcella’s, Shinola, Vasa, Billy Sims, Altar’d State, Crunch, Vasa and Even Stevens Sand- wiches. Retailers also are attracted to our positive demographic fundamentals. Denver ranked second among the peer markets in CBRE’s report for population growth, income growth, education and median household income. Overall, the combination of a swell- ing consumer base and savvy retail- ers and property owners who are embracing new strategies designed to create unique experiences positions Denver extremely well for continued retail success in the years ahead. ▲ Kliewer Continued from Page 10 increases impact construction, secu- rity, landscaping, sweeping, snow removal and other large-cost com- ponents of operating shopping cen- ters, putting pressure on common area costs. So, what’s a shopping center owner to do? Skilled operators will focus on operational fundamentals that make our merchants successful, as their sales are the wind behind their sails. Of course, we must be aggressive about managing every line item in our common area pool while main- taining the quality amenities our patrons have come to expect. We can challenge commercial property valuations at the county level and lobby state legislators to change the way property values are assessed. Being politically reflexive is no lon- ger an option. We need to support our trade organization’s efforts to change valuation methods. Embracing new technology is a key operational distinctive that will separate retail winners and losers in the future. We created technology that monitors our customer counts, so we can show prospective and existing merchants traffic patterns within our centers, net new custom- er attraction, time-of-day patterns and the impact of our marketing activities. At our Village at the Peaks center in Longmont, we have earned a four-star Facebook ranking by achieving over 150 five-star reviews in the last year and cultivated over 10,000 Facebook followers who attend our dozens of yearly events and participate in our merchant pro- motions. We collect tenant sales data reli- giously and aggregate social media reviews from Google, Yelp and Face- book, so our marketing professionals can provide real-time feedback to merchants about ways to improve their top line. Someday soon, I expect our retailers to integrate their point- of-sale data with our site-specific technology to help us attract new customers and more carefully target promotions and on-site events. It’s time to follow David Bowie’s advice about change and “turn and face the strange” by operating our centers in innovative ways, engaging our local governments and embrac- ing technology. ▲ Ginsborg Continued from Page 14 ers have shared their prescriptions and preferences, they can order new glasses online or return to the store to try on the latest styles. Birdcall – with locations in Union Station, the University of Denver area and Five Points – is a new fast- food concept with healthy, locally sourced foods at reasonable prices, that provides no real interaction between customers and servers. Diners enter their own orders and pay on terminals. Food is made to order and delivered to private bays. While ordering is decidedly high- tech, the stores have a rustic-urban vibe with works by local artists dis- played on the walls. The District Shops, with a loca- tion at the former Bed Bath & Beyond building in Cherry Creek, is a new concept in retailing. The company takes empty retail boxes and curates the spaces with unique goods from local artisans, food ven- dors, craft beer makers, wineries and services. Combining the popu- larity of pop-up retailers and bou- tique stores, the expansive Denver store is a shopping destination with up to 300 vendors. Bricks-and-mortar retail is not dying, but instead is transform- ing. To adapt, stores must provide a unique experience, exceptional service and in-person efficiencies that can’t be duplicated on a smart- phone or the web. Humans still need to interact with other humans in person. Measuring for a custom fit, preparing good food, consult- ing, providing personal style advice, showcasing handcrafted goods and gathering with friends are all activi- ties that always will benefit from the human touch. ▲ Zall Continued from Page 16 ground-floor grocery that’s paired with upstairs apartments is marked- ly different than what’s standard in single-use buildings. By their nature and function, mixed-use develop- ments demand creativity in financ- ing, design, integrated frameworks and more. • Putting the retail mix in mixed-use. The right mix of retailers can make or break a mixed-use project. Who can anchor the project without overwhelming it? Which daily con- venience services have the most allure? After the workday is done, how will the space remain active? Our takeaway from neighborhood focus groups has provided a long list of possibilities, ranging from groceries, coffee shops and chef- driven restaurants to an outdoors retailer or a food hall with a distinc- tive local flavor. On the community activation front, a gym or healthy living center has appeal, as do co- working spaces and a performance or theatrical venue. A central, green space encompassing walkability and social gathering potential also seems essential. Paired with a busi- ness view, the goal is to join mixed- use livability with an assessment of the overall trade area and determine where a prospective customer base might be coming from beyond in- development residents. Convention- al formulas yield to site and market specifics. • Measure twice, cut once. The necessity of getting a mixed-use project done the right way, the first time, is essential. Abraham Lincoln said, “If (he) had six hours to chop down a tree, (he) would spend the first four hours sharpening the axe.” As we look toward Denver’s future, relative to mixed-use developments, we clearly see the importance of planning new urban projects with a 360-degree view toward joining community and commerce to cre- ate vibrant, attractive and appealing places for people not only to live, work and shop, but also to thrive. ▲ Balafas Continued from Page 18 it is important to program the space to drive a 15- to 18-hour environment. Again, the retail component is the core of the mixed-use development that will spur this activity, and, in turn, sup- port an enhanced environment for all other users. For example, employees may work from the office space during the day and opt to join co-workers for dinner in the same development. For mixed- use projects with residential popula- tions nearby, customers may run an errand or grab a coffee. By creating an environment that is operating for more than eight hours per day, the space is established as a destination for cus- tomers as they have multiple needs conveniently met in the same place. Again, selecting the right retail tenants can be enhanced by strong partnerships, as each team will have its own set of relationships that can be mixed to create an experience unparalleled from any other in the market. ▲ Tanner Continued from Page 20 Denver's lease rates are competitive compared to similar markets