Strolling the Agora for the March 2, 2009 issue of SHOPPING CENTER DIGEST
One of the fastest-growing trends in real estate – aside from foreclosures, bankruptcies, and acquisitions by rejuvenated or newly founded vulture funds – is the two-pronged effort to reduce operating costs and to demonstrate concern for the environment. The last time we discussed the “green” movement was 1½ years ago (See SCD, Agora, P. I 891); then the shopping center/retail chain industry was lagging behind other niches such as residential, offices, etc., but was moving quickly to close the gap.
And that it has. The big question, however, is what impact, if any, it is having on leasing and development.
First a quick glance at some recent landmark moves:
Simon Property Group has announced its solar panel installation at 1.1 million sq. ft. Shops at Mission Viejo in Mission Viejo, CA, which could be the biggest such project in a US mall, and is expected “to be a cost-effective component of our [SPG] sustainable strategy.”
Developers Diversified Realty is launching a rooftop photovoltaic system at its shopping centers in California, Colorado, New Jersey and Puerto Rico, and will expand the program to others in its 700-shopping center portfolio.
Wal Mart Stores' new CEO, Mike Duke, says he will expand efforts to reduce waste, use renewable energy in its stores, urge its vendors to comply with these new standards, and is investing to develop new technology, such as wind and solar power. It is also testing two types of trucks, hybrids and those using alternative fuels, and will expand them to its entire fleet to double its fleet efficiency by 2015.
Westfield Group's Old Orchard Shopping Center in Skokie, IL, will receive $100,000 from ComEd for its $400,000 conservation and lighting retrofitting program that will save it $300,000 annually.
The food industry is embracing new guidelines advanced by the Green Restaurant Association. According to the National Restaurant Association, four of every 10 full-service operators and almost three of every 10 quick-service operators are devoting more of their budgets to green inititatives.
ShoreBank Pacific is joining others to provide financing with its Green Building Loan Program targeting “truly committed” developers meetings its sustainability guidelines or that of LEED or Earth Advantage Energy Star.
Green-oriented units that conserve energy have been opened by Target, Office Depot, Staples, McDonald's, Subway, etc. Some retailers have installed energy-producing wind turbines, high-efficiency appliances, systems to conserve and filter rainwater, and some pizza operators are re-using the draft from ovens to heat water.
President Obama has ordered the Energy Department to draft new standards to make appliances and light bulbs more energy efficient, all part of a major effort to reduce energy use and emissions from heat-trapping gases blamed for global warning. Some estimate savings to businesses and households could tally $67 billion over the next 30 years.
“I don't think,” said one retailer, “anyone can find fault with this trend (referring to actions being taken by shopping center developers, managers and retailers), especially in this economic crisis. However, I don't think it will have much bearing on whether or not I'm gonna make a commitment to a specific shopping center location on this alone.”
One landlord pointed to results from a recent survey of construction and property managers stating that sustainable commercial buildings are in high demand and are generating higher returns due to premium rents. “Granted,” he said, “that's mainly for offices and other commercial uses, but it has some bearing on shopping centers also.”
Another developer said “You're missing the point. We're going into this not as a device to help with our leasing, but to reduce immediate and long-term costs. If it also scores well with the shoppers or tenants, then it's an added plus.”
A national tenant said that the move is welcome and long coming. “When our CAM [common area maintenance] costs could be a third or more of our total rent, anything that will help reduce these expenses is a blessing. And with the way costs for air-conditioning, lighting, and heating and the like soared, reductions are needed.”
One retailer recalled some years back when some shopping center operators installed package plants to generate electrical power to service their tenants, supposedly at the same rate charged by local utilities. “In some instances,” he continued, “they became a profit center for the landlord. If the cost savings are not shared with the tenants, what's the bottom-line advantage, aside from the feel good environmental issues?”
To cut to the chase – a nice clichÃ© – dealmakers welcome any efforts being made to reduce operating costs, and to plug in to their customers' concerns regarding protecting the environment and reducing their carbon footprint. But as an important part of helping to decide on a lease or location, it's a very minor point.
This column of Strolling the Agora is from the March 2, 2009 edition of Shopping Center Digest. A sample copy of this issue of our twice-monthly newsletter may be obtained by contacting us directly. Further information on Shopping Center Digest and our associate publication, Directory of Major Malls may be obtained from our website, www.shoppingcenters.com.
Strolling the Agora was a twice-monthly column discussing trends, issues of importance, and commentary on the leasing/development aspects of the shopping center/retail chain industry in the US and Canada. Called Strolling the Agora, it was a part of Shopping Center Digest, a newsletter founded in 1973 published until September 2010. The column provided expert insight into various retail focused topics. It was primarily authored by Murray Shor, Editor & Publisher as well as industry and veteran retail experts. A smattering of archived columns are presented here for your reading “pleasure”. It's an interesting “look back” at what were current hot topics at the time with regard to shopping center/retail industry focus, development and leasing expansions and processes, retail mix, opinions and more.