Zach’s Corner
Zach’s Commercial Realestate Corner. Features news, thoughts on Florida’s Commercial Real Estate and more.
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Big News: Shake Shack Announces Ambitious 2025 Growth Strategy
Shake Shack, the beloved burger chain known for its premium ingredients and iconic crinkle-cut fries, has unveiled a bold growth strategy for 2025. With a current footprint of around 329 stores, the company plans to expand that number to an impressive 1,500 locations. This ambitious move comes with a focus on innovating store formats and breaking into untapped global markets. Scaling Up: The 1,500 Store Vision The leap from 329 to 1,500 locations signals a significant commitment to growth, though Shake Shack has yet to disclose a specific timeline for achieving this milestone. CEO Randy Garutti has emphasized the importance of strategic scaling, which will include experimenting with smaller store footprints and introducing drive-thru components. These adaptations align with shifting consumer preferences for convenience and accessibility in dining experiences. Smaller stores can potentially make Shake Shack more cost-effective to operate, while drive-thrus open doors to a broader customer base, including suburban and car-dependent markets. Global Ambitions: Eyeing New Markets Shake Shack isn’t just focusing on North America for its expansion. The company has expressed a clear interest in entering new markets across Europe, South America, and Australia. This marks a pivotal moment in its international growth trajectory. Currently, Shake Shack…
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After Filing for Bankruptcy, Big Lots Shuts Down Its Doors for Good
A Sign of Shifting Retail Realities In September, Big Lots filed for Chapter 11 Bankruptcy Protection and has since officially announced plans to liquidate its assets and close its remaining 1,300 stores across 48 states (Smith, 2024). This development follows Party City’s similar fate, as the retailer is shutting down its 800 stores due to insurmountable debt and complications arising from a helium shortage that severely impacted its popular balloon business (Johnson, 2024). For Big Lots, the announcement comes as no surprise. A proposed $620 million buyout by Nexus Capital Management collapsed, dashing hopes of preserving even its best-performing stores. The deal was regarded as a last-ditch effort to keep the company afloat (Reuters, 2024). The Downfall: Market Dynamics and Competitive Pressures Both Big Lots and Party City struggled to compete in a rapidly evolving retail landscape dominated by Walmart, the nation’s largest retailer. While Walmart offers similar low-priced products, its broader range and operational efficiencies left specialized retailers like Big Lots and Party City at a disadvantage. As consumer habits shifted, particularly with reduced demand for party supplies, Party City’s niche market eroded further (Bloomberg, 2024). Big Lots’ failure, however, is more nuanced. At first glance, it might seem…
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Kroger and Albertson’s Planned Merger, A Threat to Consumers Ruling States
A merger that’s been in planning since 2022 between Kroger and Albertson’s was officially struck down earlier this week by a U.S. District Court in Oregon ruled that the merger, which would have been the largest between two supermarkets, would diminish competition in the free market and fail to protect consumers. At the announcement of the failed merger, Kroger ultimately decided to pull out of the deal entirely, stating that “it is no longer in its best interests to pursue the merger.” For consumers, this means that the next food giant to truly rival Walmart will have to wait. Walmart controls roughly 22% of the consumer market, while the merger between Albertson’s and Kroger would have pushed their market to approximately 13%. Additionally, with the rise of Aldi nationwide and Walmart and Costco’s continued growth, Kroger and Albertson’s merger seemed to make sense for both parties. According to the National Retail Federation, Kroger and Albertson’s failed to open any new stores in 2022 and 2023, while Publix and Costco opened 2.3% more stores in that same period. This suggests that this merger was perhaps more motivated by fear than strategic interest. Upon learning of the court’s decision to block the…
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Black Friday Sales Reach New Heights with Sales Approaching $11B
Black Friday Sales have once again crossed into uncharted territory with new sales figures of $10.8B, an increase of 10% from last year. Most notably, roughly 55% of these sales, around $5.9B, came directly from mobile devices, which was also an increase of over 12% compared to last year. Additionally, Cyber Monday produced record sales results as well with sales over $13B, an increase of 6.1%. According to USA Today, the total online sales from Thanksgiving, Black Friday, and Cyber Monday will total $40.6B, an increase of 7% compared to last year. While this is great for online retailers nationwide, what does this mean for in-person shopping? Surprisingly, data from the National Retail Federation, in-person sales slightly outpaced online sales with 81.7 million shoppers hitting the stores on Black Friday. This number was up 76.2 million last year and was the highest number of in-person shoppers since the pandemic. Additionally, of the 197M shoppers that shopped during Black Friday weekend, 126 million shopped in person. So, what does this mean for landlords throughout the country? While the shopping mall might not be making a comeback soon, big box retailers in power centers or large shopping centers continue to maintain their…
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Tampa Bay’s Retail Real Estate Market Set to Lead Florida
It’s been another busy year in the Tampa Bay area’s retail real estate space. According to a recent report published by CoStar, Tampa Bay is set to surpass the $1B mark in retail sales for the fourth consecutive year. With sales projected to hit $1.1B, Tampa Bay is expected to outpace Miami, which is forecasted to reach $1B for the year. The largest sale was a Home Depot in Pinellas County, which sold for $23M. In the face of high interest rates, the market has proven its resiliency, just as it did in 2023 when transaction volumes slowed due to rising interest rates. High sales volumes can also be attributed to an influx of out-of-state investors looking to move their money from various markets in the Northeast and West Coast. The relatively low cost of purchasing retail real estate in Tampa Bay makes these investments feel like a good bargain. Looking ahead, retail real estate asset prices are likely to increase due to low vacancy rates and a construction pipeline at a decade-low. With construction costs still looming large, expect an increase in credit tenants looking to enter the market and willing to pay the costs associated with ground-up construction.…
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US Retail Closures Increase Amid Bankruptcies
This past year has been especially difficult for retailers throughout the nation, with 6,481 store closures, with furniture retailer American Freight, the most recent retailer to file for bankruptcy and shutter its 329 stores nationwide. This announcement also comes on the heels of Big Lots announcing their plans to shut down stores throughout the nation as well. The closure of these big box stores has been linked to the broader macroeconomic climate, with customers spending less and less at the counter, contributing to a lack of store sales. High labor costs have also been cited as a reason for the nationwide closure of big box stores, which have contributed to shrinking margins. Losing an anchor or junior anchor tenant can be a worst-case scenario for landlords at both the private and institutional levels who are worried about preserving cash flow. Losing any tenant can place an additional strain on paying off debt obligations, maintaining returns for investors, having the cash flow to pay for capital improvements, and more. Going forward, I think this will provide an excellent opportunity for out-of-market tenants to bring their businesses to various Sun Belt markets throughout the nation. With increased demand to find new locations,…
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