2011 outlook: First half was good. Second half to be great! Experience is the future

Throughout our nation's history, the road to the "American Dream" has been lined with retail. Rugged retailers behind counters of the quintessentially American general store were the lifeline to explorers and pioneers, and share credit in America's westward expansion. Before kiosk hawkers and turn-of-the-century pushcart operators were persistent, independent peddlers made life bearable in every far-flung region across America's map. Many became principal links in America's retail industry, growing their bulging backpacks into bustling storefronts then multi-national retail conglomerates. Their entrepreneurship remains the blueprint for opportunity in the land of economic freedom. From colonial days forward, the main square in every village, town and city was the central location for communication and commerce. Changes in our nation's society, technology, and demography forced these squares to evolve into downtown retail districts then retail meccas we call suburban shopping centers and malls. Today's "lifestyle retail centers," built by entrepreneurial land developers steeped in modern day planning, continue to draw inspiration from that classic main street model. Due to a lukewarm national economy and booming Internet sales, the current evolutionary stage in retail real estate is uncertainty and high unemployment. Associates and friends often ask me where I think the industry is going. I say what I believe: the upheaval will continue as our industry struggles to find a new path. But the retail shopping center business will live, and I expect the second half of 2011 will be stronger than the first. From an economic standpoint, despite glum national headlines, Long Island retail showed signs of life at the end of last year. Factoring Long Island's unique retail advantage — despite high population density, Long Island, having half the per capita retail real estate square footage (24 s/f) than the national average (41.2 s/f), remains insulated from the catastrophic vacancy rates seen across the country — leasing was relatively strong in the first half of 2011, and I see these trends growing steadily into the third and fourth quarters. When the recession began, economists called Starbucks' sagging sales a reliable indicator of a worsening economy. Taking that cue, and knowing that Starbucks is already turning back to expansion, I was delighted this past week to hear Starbucks announce that it just broke its pre-recession record of quarterly store visitors. Stagnant retailers are stirring. With retail rents at decade lows, many are jumping at the opportunity and revving our region's real estate engines. So far, retailers' quarterly reports are trending above expectations, and many are feeding their growing appetite to expand with cautious confidence. The government is finally starting to help the SBA, and franchisors we've represented in the past, after years of waiting for financing, are calling with new franchisees and fresh capital. The Internet brings upheaval, but it's not the impossible nut to crack. As I stated above, retail is part of American history. This will not change. Americans are shoppers at heart, and for reasons deeper than needing certain products. Our national DNA requires immersing ourselves in the pursuit of what's new. We need to see, feel, taste and experience the newest and latest—whatever. Were it possible to purge this need, the Internet would not have had the chance to replace retail: Mail order or the telephone would have done the job generations ago. I don't discount the game-changing growth of online sales. As retailers and real estate marketers, we're always playing the game called evolving, adapting, and competing. This time, the name of the game is the "new norm." The "new norm" that will bring customers to the shopping center is a category evolution I call "experiential retail." Uses that drive customers to the shopping center will evolve into "touch, feel, and eat" categories that consumers must be present to experience. The "experience" is the experience that the Internet, by virtue of its "virtual-ness," simply cannot replicate. We're seeing an explosion of medical uses for retail locations. Dentists, pediatricians, and urgent care facilities are a growing factor in the tenant mix of shopping centers. Health and fitness facilities ranging from 100,000+ s/f big boxes to 2,000 s/f franchises are growing nationwide. Restaurant and entertainment oriented uses have been and continue to be a growing use in the shopping center. The standard supermarket is evolving from generic grocer to gourmet, health and specialty markets. In every case, it's the shopping "experience" itself that drives customers to the store. Of course, retail leasing is far below 2006 and 2007 heights. But we're already off the bottom and moving towards the American Dream of significant growth and prosperity in the coming years. Kenneth Schuckman is vice president at Schuckman Realty, Inc., Woodbury, N.Y.