CREJ

August 2021 — Retail Properties Quarterly — Page 27 www.crej.com their dreams. Some of Colorado’s most success- ful food halls, such as Avanti F&B in Denver and Boulder, serve as incuba- tors, intentionally selecting vendors with aspirations of opening their own brick-and-mortar restaurants. For these entrepreneurs, starting within a food hall has several advantages beyond lower startup costs. Food hall margins for restaurateurs tend to be more favorable than stand-alone res- taurants, often 15% to 20% of sales. This allows the vendors to save funds that they can invest in their future brick-and-mortar restaurant. Restau- ranteurs within food halls also gener- ate an operating history, making them better candidates for future loans. With limited kitchen space, food hall menus are much smaller, allowing vendors to pick their best four to six dishes to serve, increasing sales per item and reducing waste. In addition, restauranteurs can test their culinary concept, receive customer feedback and iterate that concept over time to make it stronger while simultane- ously building a loyal customer base. Finally, food hall owners often take on many costs and services that res- taurateurs would be responsible for in stand-alone restaurants, such as marketing, paying sales tax and bus- ing tables. This allows restaurateurs to focus more on their product and customer service, giving them an opportunity to dial in those aspects of their business before moving to a stand-alone location. While initially concentrated in downtown Denver, in recent years food halls have proliferated through- out the Denver metro area and the state of Colorado. This development should pay dividends in democra- tizing restaurant ownership and incubating a new generation of res- tauranteurs who will make positive contributions to the food and bever- age industry in Colorado for years to come. s nstern@broadstreetrealty.com Continued from Page 1 and curbside pickup, which many restaurants and grocers alike are seeking. One of the later segments to recover has been the theater and entertainment venues. After being quarantined and social distanced for more than a year, consumers are ready to return to theaters in search of blockbusters that were postponed or canceled. While streaming ser- vices gained a record number of subscribers, private screenings grew. Many theaters will continue mak- ing strides in the near term as more blockbuster movies are released. Those theaters that offer newer amenities, such as larger reclining seats, the latest audio and video enhancements, as well as food and alcohol will attract the most atten- tion. n Which retail trends will continue? Certainly, the e-commerce seg- ment plays a growing part in retail, although most consumers still visit stores to test, try on and understand products before making purchase. The pandemic served to acceler- ate the need for many retailers to sharpen their online presence. While e-commerce grew significantly in 2020, the warehousing and trans- portation costs as a percentage of purchase price are twice as high for e-tailers versus brick-and-mortar players. Home delivery and returns erode profit margins and the reverse logistics account for a large part of industrial absorption. As a result, many retailers are fulfilling orders directly from the store. As retail con- tinues to rebound, we expect to see retail store space continue to shift to fulfillment space, and an ampli- fied presence of pickup areas and curbside delivery. As an example, it was reported that 66% of Best Buy’s online revenue was picked up in store or curbside. Additionally, while Target reported a substantial increase in its e-commerce side of business, more than 95% of its fourth-quarter sales were fulfilled by its stores. Other trends include some retail- ers seeking to move out of tradition- al mall settings to open-air centers, as they are seeking traffic and curbs. Some retail brands are focusing on partnerships with other stores, such as Sephora’s recent announcement to test opening in several Kohl’s depart- ment stores, while Ulta will launch in selected Target locations. This will help promote more in-store traffic. In the first half of 2021, retail took major steps toward recovery from the pandemic. Pending limited resur- gence of COVID-19 cases, the second half of 2021 will see more people returning to the office, improved domestic travel and a declining unemployment rate – all crucial drivers for the local retail market to recover. s jon.weisiger@cbre.com Weisiger Continued from Page 6 Food Halls the pandemic, distressed asset sales have been relatively few in number, with notable high-profile exceptions such as Belmar and Foothills Mall. There are still a significant number of potentially distressed retail loans cur- rently on watchlists and it is possible we might see a spike in distressed asset sales. However, it is clear that government programs designed to assist small businesses and lender willingness to work with tenants and landlords extended much needed life- lines that appear to have prevented a wave of distressed assets sales for now. As we look forward into the remain- der of 2021 and into 2022, market fundamentals appear to be aligned for strong growth and an attractive envi- ronment for investments in income- producing retail properties. However, there are several known risk factors that could lead to hurdles and bumps in the recovery. Inflation is an obvious one, though the Fed assures us the current inflation spikes are transitory and not likely to lead to sustained inflation and corresponding spikes in interest rates. Legislatively there has been much written about proposed changes to the 1031 exchange, stepped-up basis and capital gains tax laws. Elimination of the 1031 exchange would have a chill- ing impact on transaction velocity, but it is clearly a net negative with respect to tax revenue generation. These pro- posed changes are leading many own- ers to reconsider their holding strat- egy, in particular those who already were considering a disposition within the next few years. This could lead to an increase in inventory in the sec- ond half of the year and better buying opportunities for investors who have been largely on the sidelines thus far into the recovery. s ryan.bowlby@marcusmillichap.com Bowlby Continued from Page 10 and the breadth of commercial uses, thereby optimizing real estate well positioned for redevelopment while protecting established neighborhoods. With these new mixed-use zoning districts as a foundation, Arvada is hopeful to encourage shopping cen- ter owners and developers to explore reprogramming and repositioning of retail real estate assets to accommo- date the evolving industry. Addition- ally, the use-by-right zoning within the new land development code is anticipated to create more certainty and lower investment risks, allowing owners and developers to implement programming that meets the needs of retailers and consumers while integrating nicely into surrounding neighborhoods. Cities will continue to invest in retail revenue generation and sustainability post-pandemic, so it’s imperative to approach the chal- lenge with a land development policy lens. While it may feel counterin- tuitive, rethinking the way retail real estate is used will help fortify and enhance retail spending, protecting the critical sales tax revenue Colo- rado cities depend on. s Ryley Continued from Page 16 tree canopy, which creates a host of issues in a community; but from a retail perspective, long stretches of hot, shadeless street disincentivize people from exploring a neighbor- hood on foot. We aim to create places where the community can spend time, and a connection to nature is essential. This bears out in retail sta- tistics: In multiple studies, consumers demonstrated a willingness to pay 11% more for goods in shaded and landscaped business districts, and they were willing to stay longer and shop more. So, rather than wait for someone else to address the issue, our retailers took on the greening of their neigh- borhood themselves. Local Denver business False Ego teamed up with the Denver Botanic Gardens, National Wildlife Federation, University Colo- rado Denver, Patagonia, Quantum 3 Construction and Edens to launch a beautification project onWalnut Street, replacing concrete and aging brick with Colorado-native plants and trees, transforming the pedestrian experience while incorporating green space to the increasingly well-traveled street. They are even finalists in the Salazar Center Thriving Cities Chal- lenge, aimed at developing ideas that advance climate resilience and racial equity through nature-based solutions in their own communities. We have brought this same focus to the heart and soul of this district: the artist community. River North is where art is made, and promoting the talent and creativity of the artists here is essential to maintaining what makes this district within Five Points so different from any other in Denver. Earlier this year, in a moment of ser- endipity, we welcomed the Museum for Black Girls into one of our spaces. This interactive art installation, led by local artist Charlie Billingsley, cel- ebrated and educated visitors on the history, culture and contributions of Black women. Five Points historically has been the center of Black culture in Denver, and this museum served as a way to highlight the experiences and achievements of Black women while creating space and exposure for 10 artists and creative women of color. As a sponsor of the RiNo Art Dis- trict’s Mural Program, we’re humbled by the power of the arts in this com- munity and inspired by the leadership of local artist and community leader Alex Pangburn. The mural program each month highlights a unique group of artists, and the second half of the year kicked off in July with a spot- light on youth and women artists, followed by graffiti crews, artists with disabilities, indigenous artists and mentors with emerging artists. Marking the latest installation, Bur- ton recently unveiled a new mural by artist Jessa Gilbert as part of its Chill Foundation youth development program in partnership with Third Way Center. Establishing true community like this begins with continuous lis- tening and then requires action. Through efforts like these and our retailers’ dedication to invigorating the neighborhood as they grow their businesses, we can build a stronger and more resilient community than before, while giving Denverites a place to gather, connect and share, no matter what comes next. s tkiler@edens.com McLean Continued from Page 18