Retail Regroups After Covid Wallop

HOUSTON – Ralph Bivins of Realty News Report: The latest edition of The Ralph Bivins Project podcast, features an interview with Jason Gaines with NAI Partners.

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RALPH BIVINS: Welcome, this is Ralph Bivins with the Ralph Bivins Project. Got a word for you today. BOPIS. That’s B as in boy, O-P-I-S. It stands for “buy online, pickup in store.” Online shopping has brought on a big revolution in shopping and retail centers. The retail sector was hit hard in some areas by COVID. Some stores have adapted, some have faltered. We are lucky today to have with us Jason Gaines, senior vice president of the retail division for NAI Partners. He has been selling and leasing shopping centers for a long time.

One question to start. What percentage of shoppers make their purchases online?

JASON GAINES: There is no doubt in my mind that if you were talking over a glass of Scotch with a person from Bed, Bath & Beyond, that person would say it’s not always that easy to answer that question. There are times when Mrs. Smith wants to see and touch and feel the product, and sometimes, for the sake of convenience, she will buy it online. Sometimes, you want to buy local or purchase a certain brand. At other times, if you need something in a hurry, you turn to Amazon because the item can be there by the next day. Sometimes the online convenience appeals; sometimes, the brick-and-mortar appeals.

RALPH BIVINS: Is there a glut of retail space?

JASON GAINES: The good news is, by and large, we are not overbuilding the market with retail properties especially large, tough to re-adapt big box space like we did 20 years ago. We are not painting ourselves into corners when these retailers begin to falter. Other uses can come in and backfill the space. We are not throwing out a lot of spec boxes all over Houston and expecting companies like Ross to grow like a phenomenal company forever. We know this is not totally sustainable. There are only so many boxes you can put out there.

RALPH BIVINS: There has not been as much retail construction taking place.

JASON GAINES: Correct. Retail is limited. You can only build on 25 percent of the land so there are limited coverage ratio problems. It is pretty fashionable just to sell off the large tract to the anchor store rather than dealing with their corporate nonsense and all the restrictions. It’s easier to just say: “Here’s your 20 acres. Knock yourself out.”

Chances are they’ll end up with 20,000 to 30,000 SF of spec space and a few pads out front.

You know, I think the best thing to do, in reality, is just mitigate risk. Start with the whole tract and wholesale smaller pieces of the property. My suggestion is to deal with small franchise strip retailers where I can deal with them and medical professional buyers. In the end, I’ll be 100 percent out of it, and we’ll all be rich.

RALPH BIVINS: What new brands have you seen circling the market?

JASON GAINES: It’s as much category as anything else. There’s an extreme discount/liquidation center business that’s a leading category killer. It’s called Ollie’s Bargain Outlet, a Midwestern publicly traded retailer. If you haven’t seen one of them, they are like the evolution of a Big Lots Store, with close-out, overstock and liquidation. A few groups are doing liquidation and extreme discounts. I’m finishing up a lease with Shoppers World, out of New York, a private company. It’s not a very creative name. It’s taking 35,000 SF at an old Target box at 1916 Jones Road that’s been vacant for about 15 years. What these places that have been vacant a long-time need are cash flow and occupancy. Groups come in and don’t pay a lot of rent. We are filling about 75,000 SF of what I call chronically historic vacancies that have been empty for at least 10 years. I’m working on a medical facility going into a 10,000 SF store that’s been vacant since I was in high school.

These are really rare times, with so much competitive capital and the population grown in Houston. It’s based on pretty simple math. When you have a wave of population the size of Waco coming here every year, and with many sources of more exotic and foreign capital coming in, sure enough, companies want to get all over it.

Jason Gaines’ biography

Jason Gaines has roughly 20 years of experience in the retail fee brokerage business, primarily in the Houston area market, and primarily in landlord representation leasing. Over that period, he has been consistently recognized as one of the leading retail producers in the Houston market. During these years, Jason has executed more than 800 retail leases, in total, more than 3,500,000 SF. In addition, Jason has sold a number of shopping centers and land tracts and has experience in asset management. Prior to joining NAI Partners, Jason was the director of retail leasing with Hunington Properties, heading a third-party leasing platform of more than 150 retail properties in the Houston market, totaling more than 3 million SF of total space. He is a graduate of the University of Texas at Austin.

NAI Partners is the commercial real estate services business of Houston-based Partners Real Estate Company.