Starwood Retail Partners recognizes that its centers are not only places that need to engage their communities, they’re also proving grounds for the retail trends of tomorrow. So through various channels, and increased investment in its specialty leasing teams and tools, the company is building off of successful programs to find inventive new tenants.
Starwood Retail Partners, backed by parent company Starwood Capital Group, manages 30 malls and lifestyle centers in large and medium-sized MSAs. They acquire properties in promising markets and improve their performance through capital physical upgrades and management turnarounds. Specialty leasing is a big part of that mission.
“Our core objective is to foster innovation,” says Catherine Loy, head of business
Catherine Loy, head of business development, Starwood Retail Partners.
development, Starwood Retail Partners. The company connects with a diverse mix of short-term tenants. Loy and her team might be assisting in developing a business plan for a local mom-and-pop entrepreneur one day while working with an international brand testing a new market the next.
“Specialty leasing and pop-ups bring exciting complementary pieces to our properties, says Laurie Paquette, senior vice president of property management at Starwood Retail. “It’s a key part of our approach to serve a community by testing emerging concepts, reducing barriers in the clicks-to-bricks movement, and allowing nationals to locals to pop up with us.”
Lululemon, for example, is a brand most people know with successful long-term stores. But before a new store opens, the company usually tests a location to carefully gauge response. In 2018, Lululemon leased three pop-up locations with Starwood Retail and is currently working out two long-term agreements as a result of those pop-ups.
“In today’s marketplace, it’s an effective strategy for a lot of savvy brands to use pop-up in place of focused studies,” says Loy. “In the past, if you wanted to test a product, most brands would pull together a focus group to test a market, a location or product viability. Now people are using real-life experiences for testing. Results aren’t hypothetical like in a focus group. At the same time, they generate some revenue. This is a major shift for us.”
Starwood Retail is also honing its approach to elevating local, regional and national upstart concepts. BootyQueen, for instance, at The Shops at Willow Bend, is a pop-up tenant that rose to prominence by receiving funding on “Shark Tank.” The store, owned by a bodybuilding husband-and-wife team, sells athleisure wear that covers women’s curves. It opened January 19. Loy liked the retailers because of their understanding of marrying experience with shopping.
HFLynn was the winner of the first Battle of the Pop-Ups at Gateway Mall in Lincoln, Nebraska.
“They realized in their business plan that opening up a store with athleisure wear is not enough anymore, so they run consistent programming.” On opening day, the store hosted a “Yoga Flow and Booty Grow” class along with events and giveaways throughout the day. The retailer continues to host yoga classes and stretching sessions. “Concepts like BootyQueen can succeed in today’s brick and mortar environment with consistent engagement, making it more than just about buying products.”
Starwood Retail has worked with the higher tiers of national brands and the middle tiers of emerging brands, but it also seeks the next great idea on the final frontier of new local makers and artisans who have yet to ever sell their items in a traditional retail environment. Finding these fledgling tenants is a process, so Starwood has embarked upon a few programs that lead to great results. The most well-known is Battle of the Pop Ups. This program started in 2017 in a three-center pilot program and has grown to 24 centers. Entries have included everything from a science experiment store to curated collections from local artists, in spaces from kiosks to in-line.
A winner of the contest at each center receives free rent for six months as well as a merchandising package that includes interior signage, table-printed displays and graphic design services. Each mall vets its own entries then recommends finalists to the corporate management team in Chicago. The contestants are evaluated on business strategy, concept creativity and likelihood of profitability, among other criteria. Winners have included merchants launching customizable hoodies, and all-natural skin care and beauty products.
“We want the big national brands and brands that are part of the clicks-to-bricks movement,” says Loy, “but we also want to bring in businesses that are fresh and that offer great products and services. Now more than ever, the challenge is finding the right people, the right concepts and the right timing.”
As most in the specialty leasing arena know, incubating young businesses is not a set-it-and-forget-it practice. Loy reports the challenge of, first and foremost, making sure new retailers understand the basics of what it means to operate a business successfully in a mall environment.
“If someone is interested, we don’t just jump in and say, ‘here’s the agreement. Sign here.’ We ask a lot of questions. Have you done this somewhere else? Do you have a business plan? Who’s going to work in your location? How many hours? What is your capital plan? What is your margin? Where are your products coming from? How do you plan to merchandise it? Do you have a store design in place? It’s not about grilling or testing them, it’s finding out how we can work together, really understand their business and ensure success.”
In some cases, Starwood Retail puts together a template for a business plan for local entrepreneurs and local makers. Another challenge tenants, both seasoned and brand new, face is promotion. Established retailers oftentimes are not utilizing marketing programs already set in place by their landlords that they could be using to drive business. So Loy says management staff is proactive about making sure all brands understand what’s available to them and how important it is to hop on such channels, particularly social media and other platforms with measurable outcomes. “Our goal is to find innovative ideas, but our other goal is to ensure their success post-launch because their success is our success. It’s mutually beneficial for them to succeed.”
Starwood Retail aims to do business differently. As the website says, it’s not your father’s – or grandfather’s – landlord. According to the company, retail is fun and shouldn’t be static, especially in an environment where people are beginning to move past predictable brands and experiences. Loy says it is rewarding for her to see how passionate, creative and determined today’s young retail businesses are. Starting a business based on a unique idea or turning a personal hobby into a career is no easy task.
“It’s part of our strategy to have national brands, but at the end of the day, I’m always so impressed by the entrepreneurs who come in here and say, “I’ll try it,” Loy says. “That balance is special to what this type of leasing can provide.”
—Lynn Peisner. This article originally ran in the May/June 2019 issue of our sister publication, Ancillary Retail. For more on this magazine, click here.