Brick-and-mortar retailers in Texas that have found creative ways to develop new income streams and to leverage technology to directly engage their customer bases have proven most resilient in battling the financial headwinds the sector faces as a result of the COVID-19 outbreak.
A panel of retail real estate professionals in Dallas and Austin spoke to this trend and others during the Texas Retail Reboot webinar, which was held on Thursday, May 7. Shopping Center Business and Texas Real Estate Business, two magazines published by Atlanta-based France Media Inc., hosted the event, which drew more than 600 registrants.
The panelists’ insights, which touched on both past successes and future opportunities, were delivered roughly a week after Texas Gov. Greg Abbott approved a Phase I plan to reopen retail and restaurant establishments at reduced occupancies and with heightened sanitation guidelines. The webinar was also held less than 24 hours before the governor allowed service retailers like hair and nail salons to reopen. Tanya Hart Little, CEO of Dallas-based Hart Advisors Group, moderated the discussion. Hart Advisors Group also sponsored the event.
Jennifer Pierson, co-owner of Dallas-based investment brokerage firm STRIVE, was the first panelist to identify this commonality among retailers that had weathered the pandemic and its economic fallout well. Pierson contended that retailers that had embraced innovation and technology prior to the outbreak held a clear advantage, even though all retail and restaurant users possess different financial profiles and need different forms of aid from their landlords.
“Especially for retailers of soft goods, if you weren’t maximizing your capability on technology over the last couple years, if you weren’t interested in geofencing and understanding algorithms and how to drive information to people on their phones and bring them into the stores — if you weren’t doing that, unfortunately you’re suffering more right now more than most,” she said.
When paired with raw creativity and ingenuity, a thorough understanding of how to control the consumption of content via technology and social media can foster new income streams. The panelists gave examples of tenants in their centers that have found unique ways to expand their offerings and maintain engagement with their customer bases.
“Unsurprisingly, we’ve seen many of our tenants in Austin, many of whom are independent entrepreneurs, get really creative because they’re in survival mode,” said Billy Osherow, principal at Austin-based Endeavor Real Estate Group. “We have a great pizza restaurant in one of our centers. While his in-store dining was shut down, he established a wine club that now has a waiting list. He’s curating certain labels and hard-to-get bottles for people at various price points, and in doing so has established a new income stream that didn’t exist 60 days ago.”
Osherow also pointed to a jeweler at The Domain, Endeavor’s 300-acre flagship development in Austin, as a success story that occurs when innovation collides with competent use of technology. This tenant, which fell into the category of nonessential services, created an Earth Day-themed jewelry package with a compostable box that could be planted to sprout flowers several days later. She then used her extensive social media following — grown via endorsements of her jewelry from pop culture icons such as Beyoncé and Lizzo — to promote the Earth Day package and bring in some fresh revenue.
“We’re seeing some really cool ideas like this that really move the needle for these individual business owners,” Osherow said.
The real estate career of Herb Weitzman, founder and executive chairman of Dallas-based development and management firm Weitzman, has encompassed five different cycles and economic downturns. As a speaker on the panel, Weitzman explained what has made the COVID-19 crisis so different and why it has necessitated such immediate innovation and resourcefulness from retailers.
Weitzman has been using social media to help many tenants at its center, particularly restaurants. Pictured is West Plano Village, a particularly restaurant-heavy retail center.
“With this particular downturn, it happened so fast that nobody was quite ready,” he said. “Before this hit, we’d seen historical highs in terms of what the economy was producing and the jobs that were being created. To go from that straight off a cliff caught everybody by surprise. An for some owners, that means that they may need help from our lenders.”
Weitzman added that past cycles had revealed to developers the importance of not becoming overleveraged, but also acknowledged that borrowing to the hilt was and is simply part of the development game. To that end, he said, forbearance may be a foregone conclusion for some owners.
Panelist Ward Kampf, president of Dallas-based development and brokerage firm Northwood Retail, concurred with Weitzman’s belief that the vast amount of uncertainty that has rattled the market so quickly makes this crisis a different beast from past slumps. Kampf supported his assertion anecdotally, recounting a recent conversation with the CEO of a retailer that leases space at one of Northwood’s centers in North Carolina.
“On March 17, I got a call from this CEO in New York City saying that in the last seven days, he’d lost 90 percent of his employees and 85 percent of his businesses,” Kampf said. “To lose that type of volume in a week — nobody can prepare for falling that hard for the very top of the cycle. It was like one huge margin call across all assets.”
Click here to listen to the full webinar.
— Taylor Williams