Insights

A-List Joints: Exploring Celebrity Cannabis Retail
A-List Joints: Exploring Celebrity Cannabis Retail 1440 428 ASG

The best cannabis dispensaries are designed to be memorable spaces—both aesthetically pleasing and functional. And when they are owned by a celebrity, well, you expect to see their famous persona interjected into the space. With nearly half of Americans living in a legal cannabis state, marijuana has gone mainstream—and plenty of famous cannabis users are betting on the burgeoning industry with cannabis retail endeavors of their own, creating innovative retail spaces and experiences.

Elevating Cannabis Retail Experience

Every shopper, regardless of the product, wants to move seamlessly through the funnel while feeling both familiar with the process and intrigued by innovation. Shoppers want to be entertained, find what they are looking for, and ensure all their questions and concerns are addressed. Today’s consumers are sophisticated, and they will increasingly shop for an experience over a product. When you can purchase the same product from a variety of retailers, where are you going to spend your time and money? The retailer offering the experience that most aligns to your expectations and desires.

“Cannabis brands of all sizes, from multistate operators to mom-and-pop shops, have stepped up to the challenge of rising consumer expectations,” said Kathee Brewer, editorial director at trade journal mg Magazine. “Whether online or in-person, contemporary dispensaries are pushing the boundaries of the retail experience, opening new avenues for consumer exploration and washing away the negative connotations of the past. With experiential activities, futuristic design, whiz-bang technology, and more, the cannabis retail environment is forging ahead into a new era.”

The Woods

Last year a new kind of cannabis retailer, The Woods, opened with a dispensary and consumption lounge in West Hollywood, focusing on organic, sun-grown, California strains. There you can find everything from smoking apparatuses to flower and edibles all in a gorgeous space that feels like you’ve been transported out of busy LA into a tranquil oasis. The Ganja Giggle Garden offers state-of-the-art air filters, climate control, and luxurious views of the luscious gardens and koi pond. You can even rent a private cabana and chill in the consumption lounge.

Celeb Connection:

Cannabis legalization activist Woody Harrelson and political commentator Bill Maher are among the owners.

Houseplant

Harrelson is not the only celebrity who focuses on every detail. Actor, Comedian, and Filmmaker Seth Rogen, owner of Houseplant, hand picks and personally tests each cannabis strain his lifestyle brand sells online and through retail partners. He sells his hand-picked strains in pre-rolled artisan-crafted joints available at select California dispensaries. Houseplant offers ashtrays, lighters, and lifestyle products for sale online—including the “By Seth” line of products that “draw inspiration from original designs or items from Seth’s personal collection, while others embody his profound admiration for ashtrays.”

Celeb Connection:

Besties actor Seth Rogen and comedian and filmmaker Evan Goldberg.

Cookies

Cookies co-founder and rapper Berner “built the brand from humble beginnings in the Bay Area to a worldwide lifestyle brand.” Considered “America’s first legal weed empire,” the Cookies brand is thought to be worth at least $1 billion; the Cookies clothing line alone did over $50 million in sales in 2021. The brand is continuing its expansion path; between 2018 and 2022, Cookies grew from zero to 49 retail marijuana dispensaries. The company also added two flagship clothing stores, in San Francisco and Los Angeles. Its two-story Las Vegas retail flagship is being redesigned to emphasize experiential elements like a vortex entry, hologram booth, craps table, and rap station.

Celeb Connection:

Rapper and entrepreneur Berner’s brand boomed when friend rapper Wiz Khalifa began rapping about Cookies.

Josephine & Billie’s

The first dispensary by and for women of color, Josephine & Billie’s in south Los Angeles transports visitors to a speakeasy in the Harlem Renaissance. Named for the Jazz-era icons Josephine Baker and Billie Holiday who were once persecuted for their cannabis use, the vibe is cool and contemporary while harking back to the Harlem speakeasies and tea pads of the 1920s and 30s where Black thinkers, musicians, artists and activists would gather and discuss social issues over a joint and jazz. With events like Tea and Terpenes and regular board game nights and record release parties, the aim is to build community among women within the predominantly Black and brown neighborhood they serve. If you’re there, drop the not-so-secret passphrase, “Billie sent me,” for access to the backroom lounge filled with books about history and social justice.

Celeb Connection:

Josephine & Billie’s received The Parent Company’s first social equity corporate venture fund investment, which billionaire rapper/mogul Jay-Z oversees. The Parent Company houses 17 brands, including Jay-Z’s cannabis brand Monogram.

Planet13

You can’t talk about cannabis experiences without mentioning Planet 13. Co-CEO Larry Scheffler knows people visit Las Vegas for spectacle, so he created the world’s largest cannabis dispensary—an elaborate, jaw-dropping retail destination. Picture this: you walk through the doors and are greeted by vibrant psychedelic lights dancing across the walls, illuminating an expansive space that feels more like a futuristic theme park than a dispensary. Interactive elements include 15-foot tall giant interactive lotus flowers, an outdoor water feature with LED lights and fog, and a glowing aerial orb show high above the dispensary floor. Its Santa Ana dispensary features an 89-foor digital waterfall, a computerized interactive beach, and a 16-foot octopus sculpture. If you are headed to Vegas in 2024, visit Cannabition, a 12,000 square-foot “whimsical and visually breathtaking environment, tailor-made for cannabis enthusiasts seeking an awe-inspiring and Instagrammable experience.”

Celeb Connection:

Planet 13 Holdings is run by co-CEOs Bob Groesbeck and Larry Scheffler, both former politicians.

Dr. Greenthumb’s

With a handful of California locations and one coming soon to Michigan, Dr. Greenthumb’s have been open in California since the early years of recreational legalization. The vibe reflects their anti-establishment roots as a champion of legacy culture. Dr. Greenthumb’s may have retro vibes, but they are at the forefront when it comes to immersive, tech-driven retail experiences that help drive the brand story. For example, when you pick up a package in their stores, a screen activates and educates you about the strain and allows you to add it to your digital shopping cart. Focusing on omnichannel storytelling and high-touch service is an incredible differentiator, but in-store tech is only one way the brand is exploring innovative ways to show their connection to the culture.

Celeb Connection:

Cypress Hill frontman and 30-year cannabis advocate B-Real owns the dispensaries, as well as the cannabis brands Insane and Dr. Greenthumb.

Today the market is ripe for innovative new retail experiences and cannabis is greenfield for exploring how to use brand story, unique spaces, and star power to elevate retail. What can other retailers learn from these high-profile, celeb-connected cannabis experiences? Will they find inspiration in or motivation from the way cannabis brands are reimagining the in-store experience?

See how ASG helped Grassroots scale a cost-effective cannabis retail fleet >

The Nuances of Retail Store Planning and Construction
The Nuances of Retail Store Planning and Construction 1440 428 ASG


The Nuances of Retail Store Planning & Construction

With ASG Experts Elizabeth Seitz + Jennifer Crawford

Ask ASG’s Elizabeth Seitz to describe what store planning and construction is like these days and she will tell you, “It’s kind of like horse racing, but with bulldogs who all scatter and move around. We veer between lanes to make the shortest and best path.” she says. “We all start off in our own lanes, but if you really want to be efficient, you must cross lanes and work together to get to the finish line.”

Seitz, ASG partner, construction, says working in store planning and construction is ever-changing, and to succeed, you must be adaptable. With over a century worth of combined experience, our Store Planning and Construction team has been navigating the rough industry waters for quite some time. We sat down with Seitz as well as Senior Project Manager Jennifer Crawford about the years they’ve spent becoming masters of the trade and what the current landscape for retail planning and construction looks like.

Q: What led you to a career in store planning and construction?

Elizabeth: I went to school for interior design and the first several years were the same as an architecture student. They wanted me to transfer to architecture after getting good grades in structures/environmental sciences, but I didn’t want to only stamp drawings. That’s how I ended up in design where I got my first internships— at RTKL, Genzler, and I. Magnin stores— which paved my way into retail design.

I found that I was evolving by being in in-house retail design, where you tend to do a little bit of everything from procurement to construction. I was very involved through the whole process of my projects, from concept through execution.

Jennifer: When I was little, I was always rearranging my bedroom every month; I was always into interior design. Over the summers, instead of getting a job, I’d redo the basement, build a deck, and take on other home improvement projects around my family’s home.

After high school, I went to The Ohio State University for interior design to get both an architecture and an interior design education. I ended up falling in love with interior design. I did one internship during school at The Limited. Post-grad, I started working at an architecture firm, and then to dELiA*s to do store design and construction (SD&C). I came over to ASG when dELiA*s decided to outsource their SD&C functions because they were already handling their real estate and I’ve been here for 12 years!

“Store Planning + Construction is all about being reactive all the time and twisting that into being proactive to get ahead of the game. You always want to make sure to keep the horse in front of the cart, even when it gets reversed.” -Elizabeth Seitz

Q: What are the challenges in planning and constructing retail stores?

Jennifer: Right now it’s permitting and construction manpower. Permitting changes from city to city, and the requirements are different every time. Everyone everywhere is facing understaffing, which can really clog things up in a project. There’s nothing you can do about either of those things, except to completely adapt, pull it together, and get things done as timely as possible. Adapting to all the different client programs and how they do things differently is a big hurdle as well, but a lot of the time they’re coming to us because of our knowledge to listen and partner with us.

Q: Is it always the same process between projects?

Elizabeth: There is a good general overarching process you need to know that you can carry between projects, and by knowing the overall process you can tweak the steps. It’s like planning a wedding— it’s all the same whether there are 5 or 500 guests. You can start to tweak based on the goal volume of stores to be built. At a wedding, you can go more over the top if you have 5 people vs. 500, but it’s kind of the opposite when designing stores.

When a smaller volume of stores needs to be designed, it typically comes with a smaller budget than a huge rollout program. You must think logically and use your partners to pivot intentionally. If you can partner better, then you can work faster and cut time out of the schedule to take shortcuts and save resources.

Q: What are the biggest differences when working on a prototype design, as opposed to a roll-out program?  

Elizabeth: Budget. budget. budget. The prototype is a different budget than the roll-out program. Revealing the brand image is the key focus when building a prototype all while knowing that when you go to volume, you’ll need to bring the original budget down to make it scalable.

Timing and schedules can’t be forgotten either. Prototypes are always bumpier— you’re in discovery mode regarding brand image. You always have multiple meetings with the client’s brand team to take inventory of what’s working. Once you get into rollout it’s a whole different group of levers you have to push and pull. It becomes all about timing: permitting time, scheduling time, and the number of stores they want to open that year so that they meet their sales goals and projections.

The prototype is where you really get to be explorative to the point where you’re looking at a million different options. In rollout, you home in to get the best price and best quality of materials. I try to use value engineer finishes— it’s just a look! The custom finishes do not always hold up nor have longevity. I love working different angles of the custom, brand-ownable layers to bring down costs with vendors and installations because as we all know, time is money.

Q: What is the most rewarding aspect of working in this field?

Elizabeth: Retail is fast-paced and that means you get to design a store, and within the year, it comes to life. You get a strong sense of accomplishment in being a part of the entire process— from dealmaking through opening the doors for sales. Planning and construction require expert-level problem-solving. Planning is like a giant game of Jenga; we make sure everything is perfectly coordinated and fits. It’s a fun challenge to think about building in any type of environment—an external street location, interior mall location, you name it. How do you translate the brand and execute that brand in multiple different avenues?

The other fun thing is that by the time it gets to us, the design concept is figured out; we’re just executing. When it gets into construction and planning, it’s all around the timeline. Get documents, permit, landlord approval, then construction. It’s a finite time we have based off possession date and rent commencement.

Inevitably something will always go wrong. You always must plan for that “oh sh*t!” moment. Having the ability to pivot quickly and bring in partners to solve issues in the moment provides a sense of accomplishment without delay.

Jennifer: I have a passion for value engineering. I’m cheap at heart, so I’m always eager to see what we can do to make things work better for less cost. There are tons of other options that will work just as great as the original that your everyday retail customer will never notice the difference. I love finding the needle in the haystack that fits the solution perfectly.

Q: What is your favorite project you’ve completed over the years?

Jennifer: Tonal 5th Avenue because it was a flagship. It was a fun challenge—a flagship on a budget. Your typical flagship in NYC is going to be millions, but I think we were at $500k at the end of the day here and it turned out amazing. It was super fast too! Our first time looking at the space was at the end of March, and it was finished by Labor Day. Collaborating with their small team— with one creative director— really gave us the opportunity to get into the details and work seamlessly together. We were able to interpret and implement everything from infinity mirrors, edge-lit backlit panels, etc all while reusing the shell as much as possible.

Store Planning and Construction

Q: What advice do you have for brands looking to build their stores and go into brick-and-mortar right now?

Elizabeth: Be thoughtful and planful. When it comes to store planning and construction, think about it not only from space planning but also brand image and store operational perspectives. In theory I can build anything or make anything work, if you give me the time and the money, but that doesn’t always work with the brand and their business projections. If it takes 1.5 weeks to build vs. 2 days, there’s materials and costs you can save. Often operations are not thought of until customers and employees enter the space.

Jennifer: Don’t go too quickly. Take it slow. You don’t need to go from 0 to 20 stores in a year—especially if you’re just starting out. You don’t have to commit to rolling something out across the entire fleet. Give yourself the chance to evaluate what works and what doesn’t. How does it work for the staff? Customers? What if we can’t duplicate it? Or if you must change it for every single store? Someone needs to be the keeper of the standards and organization, and that’s where we step in.

The Micro-Experience Experience
The Micro-Experience Experience 1440 428 ASG

“Micro-experiences are the next big thing in customer engagement,” proclaims an article on the US Chamber website. That’s a bold statement, considering more robust customer engagement is something that every retailer on the planet is after. How can micro experiences through retail brand collaborations bring customers back for more?

By micro experience, we’re talking about a small-scale, physical activation that brings a branded experience to multiple locations, generating revenue and excitement. It goes beyond the flagship store, reaching every consumer and creating a memorable, intimate interaction with the brand. It offers a novel and immersive experience for those willing to engage on a deeper level.

Micro Experience, Massive Impact

Micro-experiences, unfortunately, took a hit during the pandemic, but their potential impact cannot be overlooked. In 2019, American Girl Doll and L’Occitane exemplified this trend by introducing a joint experience that fostered personal connections with customers.

However, today’s micro experiences go beyond product interactions. They involve creative collaborations like Capital One transforming bank lobbies into cozy cafes in partnership with Peet’s Coffee, or the immersive “cold room” at Canada Goose, where customers can try on parkas. It could even be a local liquor store teaming up with a nearby winery for Friday night tastings. The goal is to deliver a distinctive and lasting impression that enhances brand awareness and loyalty, offering an intimate and exclusive encounter with the brand and its partners.

Answering the Call of Consumers

These integrated, often hands-on experiences can have a significant impact. In fact, more than 20% of consumers told Raydient that they would shop more if retailers offered unique experiences, and a staggering 68.9% of consumers emphasized the importance of a positive in-store experience.

“Brands should invest heavily in ways to recognize and leverage these moments, finding the right time to send a personalized offer that will help solve whatever problem is facing the potential customer at that time. This is about being able to reach the right customer at the right time — a cutting-edge marketing challenge but one that’s increasingly solvable thanks to the technology solutions available today.” KPMG

Integrating Micro Experiences

As retailers consider how to deliver micro experiences to their customers, it’s crucial to think about how the experience can be authentic to the brand. It makes sense that a company that sells parkas would have an ice room. Here are some ways retailers can integrate micro experiences into their stores:

  • Thoughtful Store Layout – Design stores with designated spaces for micro experiences. Areas can be dedicated to interactive displays, product demonstrations, or immersive installations that engage customers and create a memory.
  • Interactive Displays – Incorporate interactive displays that allow customers to touch, feel, and interact with products. This hands-on approach enhances customer engagement and encourages exploration.
  • Personalized Service – While many of these experiences can be unattended, it’s essential that staff are trained to provide personalized and attentive service to customers during those experiences. This tailored approach adds an extra layer of memorability by making customers feel valued and attended to.
  • Sensory Elements – Incorporate multi-sensory elements into the store environment, including ambient music, appealing scents, or visually captivating displays that immerse customers in a brand’s ethos.
  • Pop-Up Events – Create temporary pop-up installations or events in-store that offer unique and limited-time experiences. Think workshops, demonstrations, and unique collaborations that excite consumers and drive foot traffic.

Some retailers are at the forefront of the micro experience. Let’s take a closer look at who is getting it right.

Personalization and Customization
Customers want to feel like their shopping experience is not the same as every other customer, that it’s uniquely designed for them. With technology and consumer data at the fingertips of most retailers, it’s easier to create micro experiences that play on that desire to be catered to.

Who is getting it right? Look to Sephora, a brand that consistently garners high levels of loyalty by offering exclusive in-store events and makeovers.

Augmented Reality and Virtual Reality
The use of augmented reality (AR) and virtual reality (VR) can allow customers to experience products in a more immersive way.

Who is getting it right? Check out Burberry, who used a pop-up AR experience in Harrods to coincide with the launch of its new Olympia bag.

Learning and Doing
One of the most popular micro experiences involves hands-on learning in unexpected places, like cooking classes in a grocery store or a painting session in a liquor store.

Who is getting it right? Whole Foods invites guest chefs to specific retail locations to conduct cooking classes with shoppers.

“Micro-experiences really are going to become table stakes for retailers, particularly when today’s consumers have so many choices.” – Sarah Hoffman, chief marketing officer at Drybar.

Micro experiences are physical experiences that are meaningful and engaging. When done right, they encourage a deeper connection with the brand and provide something unique and memorable to the customer.

Emerging Market Trends in Retail
Emerging Market Trends in Retail 1440 428 ASG

“Location, location, location” may be a cliché, but “what is the ideal location for my brand?” is the burning question behind every retail strategy. The “right” location is not always where you think it is. Opening a retail location in the right spot can increase foot traffic, boost sales, and give the brand the exposure it needs. Conversely, a poor location can slow sales and even result in bankruptcy.

Where is retail happening right now and why? What markets are thriving? In this emerging market report, we’ll look at how some retailers are making a big splash outside the typical retail hot spots and why it might be beneficial to consider opening a retail location in these areas.

“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive,” says Carrie Barclay, president and CEO of ASG.

Data, Data, and More Data

Data analytics is crucial to understanding retail location strategy. The most critical factor in choosing a retail location is understanding your target consumer. Insight into consumer behavior is essential. And that’s the rub, because consumers have dramatically changed their behavior post-pandemic. Anything retailers knew about their shopper from before the pandemic no longer is relevant.

Finding the right location in this shifting landscape requires access and understanding, says Doug Tilson, head of tenant representation for ASG. “It’s critical to understand how markets develop and how they’re changing. That can only happen when you have access to up-to-date, comprehensive data,” he says. “Using accurate data to drive decision-making and working with a trusted tenant rep partner can help you determine what’s possible in a retail real estate landscape that is constantly evolving.”

The Big Location Shift

Consumers are shopping closer to home, and they are seeking unique and memorable experiences when shopping in person. These factors are shifting location strategies for retailers, leading to store openings outside of the typical launch areas.

“While virtual and digital experiences still matter, the in-store experience is returning to prominence, and 94% of retailers are focused on enhancing it for their business overall.” –SquareUp

New location opportunities can lead to different format opportunities. Because consumers are sticking closer to home to shop, retailers—both big brands and a resurgence of mom-and-pop retailers—are opening smaller stores that allow them to fit more locations into neighborhoods and suburbs. Some retailers are even opening strategic locations on college campuses.

“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive,” says Carrie Barclay, president and CEO of ASG.

Meeting customers where they are and where they want to be is part of a smart retail strategy. And that means an opportunity for retailers—both big brands and mom-and-pop retailers—who can’t afford big-city lease prices and large-format shopping environments.

“Retailers can tailor these small-format stores to target a specific demographic, create a personalized shopping experience, or experiment with a new brand direction. Small-format stores can also serve as fulfillment centers for click-and-pay shopping and as a location for returns, all while fostering brand awareness and customer engagement. And thanks to their smaller size, these stores can help companies expand their reach in urban centers and other highly-priced real estate markets while lowering overhead costs.” – Placer.ai

Using data to determine where and how retailers can best position themselves to attract consumers is essential to future success in today’s retail industry.

“Right-sizing helps in the long run: less labor, less inventory (“showroom” stores), less build-out costs, less energy spend, better online fulfillment and return options, as well as the big one since 2020—better accessibility.” – RetailWire

“For the first time in a long time, retail growth is outside of the top 20 cities. You’re looking at tier two or tier three cities, which suggests that the redistribution post-Covid is shifting. We know that it will shift again as people move past the Covid experience.”

-Carrie Barclay, CEO ASG

Emerging Markets

According to PWC, almost all of this year’s survey of top-ranked real estate markets are in faster-growing southern and western regions and away from the coasts.

• Nashville was once again the top-rated metro area
• The Dallas/Fort Worth area jumped five spots from a year ago to become the number two-ranked market
• The Atlanta metro area scored higher in this year’s survey, jumping to the number three-ranked spot from number eight last year

In addition to Nashville, Dallas-Fort Worth, and Atlanta, ASG is seeing opportunity in Seattle,
Austin, Charlotte, and Louisville.

3 Reasons to Consider Retail Development in Nashville

1. Nashville has been focused on economic development coming out of the pandemic and offers a variety of opportunities in mixed-use spaces that are reasonably priced compared to larger cities.
2. Nashville is an international tourist destination, bringing in people from around the world every year.
3. The city is investing in infrastructure, including public transportation, to support the growth.

For more, see these seven reasons why retailers should consider Nashville.

Nashville shops offer something for everyone: records by local musicians, rare musical instruments, vintage items, artisanal sweets and drinks, and items crafted by local makers and fashion designers. Music City is home to several shopping districts including 12South, East Nashville, Hillsboro Village, Green Hills, and Downtown.

The Nashville region is defined by a diverse economy, a low cost of living and doing business, a creative culture, and a well-educated population. Nashville’s growth is spurring a wide variety of new businesses, making it attractive for retailers. Nashville is a strategic location for retailers, but as more brands discover the opportunity, prices will rise. Retailers whose consumers will respond to a Nashville location should be planning now.

3 Reasons to Consider Retail Development in Dallas-Fort Worth

1. Dallas/Fort Worth is experiencing significant population, attracting people to the area with promising job opportunities and affordable housing in comparison to other areas of the country.
2. DFW and Texas in general have business-friendly tax policies, including dedicated support for small business owners, incentives to locate or launch businesses in the area, and has a 0% local tax rate as well as low property tax rates.
3. The region has made substantial investments in infrastructure development, including transportation, commercial real estate, and retail spaces.

According to the Q1 2023 Dallas-Fort Worth Retail Report, the Dallas-Fort Worth retail market continues to exhibit robust growth “characterized by robust leasing activity, sustained tenant demand, and redevelopment initiatives.” These conditions make the DFW area favorable for retail growth. Areas to watch in Dallas-Fort Worth include Lakeside and development near the Deep Ellum Rail Station at Swiss Avenue and Good-Latimer Expressway.

3 Reasons to Consider Retail Development in Atlanta

1. Like DFW, Atlanta is experiencing a rapid population growth, offering retailers a large consumer base supported by a strong economy with multiple industries including finance, tech, and logistics.
2. Atlanta is the home base of several Fortune 500s and is also a cultural and entertainment hub, providing a rich and diverse local and visiting customer base for retailers to attract.
3. Atlanta has invested in significant real estate development, including the construction of new shopping centers, mixed-use developments, and revitalized neighborhoods, including Centennial Yards and Medley.

“With the growth of jobs in the city, Atlanta and its 21-county surrounding region has seen a population boom, with more growth on the way. As of April 2023, the surrounding metro has an estimated population of 6.1 million people, and the Atlanta Regional Commission expects this number to grow to 8.6 million by 2050. The current annual household income growth is also outpacing the U.S. average, as well. This extra income growth is to the benefit of retailers.” –REBusiness Online

3 Reasons to Consider Retail Development in Seattle

1. Seattle is consistently rated among the top 10 cities to live in the United States. It boasts an above average median income for its residents with companies like Amazon.com, Boeing Commercial Airplanes, Microsoft Corporation, Starbucks Coffee Company, Costco, Weyerhaeuser, Nordstrom, REI, Alaska Airlines, and The Bill & Melinda Gates Foundation. In the 2022 America’s Best Cities report, Seattle ranked #12, and household income was found to be the sixth highest nationally.
2. Seattle’s transportation infrastructure is impressive. The city has two airports, bus, light rail, and ferries providing extensive public transportation offerings.
3. Seattle start-ups accumulated over $3.2 billion in venture capital in 2020 and have a roster of 25 start-up accelerators and incubators.

While Seattle has seen a slight downturn from the tech industry decline, the city still offers an enormous opportunity for retail, especially for retailers seeking to add small stores in some of the exceptional neighborhood’s Seattle features. In 2022, Nike opened an 8,800-square-foot space in Seattle’s eastside Bellevue neighborhood. Bloomingdale’s is making its entry into Seattle retail with their new small format stores in 2023.

3 Reasons to Consider Retail Development in Austin

1. Austin is one of the fastest-growing regions in the country, attracting high-end talent to the area that makes it ideal for growing retail brands.
2. The Opportunity Austin initiative has helped to create 637,400 jobs that contribute to a diverse economy where talent is abundant.
3. Austin was named the No. 2 best-performing city by the Milken Institute in economic growth and access to opportunities, crediting its strength to its high-tech sector driving rapid job and wage growth.

Retail opportunities abound in Austin. In 2023, the seven-building East Riverside Gateway complex mixed-use development was announced and will provide two million sf of office, retail, and residential space that will emphasize the pedestrian experience. The Domain complex, opened in 2023, includes 20 full-service and fast-casual dining options, 100+ retail stores and around 5,000 residential units in the area.

3 Reasons to Consider Retail Development in Charlotte

1. One of the biggest advantages for retailers in Charlotte is the low taxes. It was named a “Top 10 State for Best Business Tax Climate” by U.S. News and World Report in 2020.
2. Charlotte was named one of the best places to live in the U.S. in 2023-2024 by U.S News & World Report.
3. North Carolina is ranked No. 1 in America’s top states for business with the nation’s strongest economy.

Charlotte has many development and retail opportunities. In 2023, developers announced plans to turn the Mallard Pointe Shopping Center on North Tryon Street into a student gathering place with businesses tailored to the University of North Carolina Charlotte. Food and fitness retail are the fastest growth areas, and while vacancies are nearing record lows, new mixed-use development opportunities continue to evolve.

3 Reasons to Consider Retail Development in Louisville

1. Louisville has worked to increase infrastructure, including adding direct flights to LA and Boston as well as 35 other cities.
2. Louisville attracts talent in a variety of industries, including healthcare, high-tech, and manufacturing, building a population of higher-than-average income workers who are ready to shop.
3. Louisville was named a Top 5 U.S. Metro for economic development by Site Selection Magazine.

The opportunities in Louisville are limitless, with both downtown and the suburbs seeing a huge spurt of new development. Oxmoor Center has become a tourist attraction with retailers vying for the location. Nike recently opened a store there. Shelby Park is also seeing a rise in development, and Wawa recently announced plans to open in the east end.

Location as Retail Strategy

Meeting customers where they are and where they want to be is smart retail strategy. And that means opportunity for retailers—both big brands and mom and pop retailers—who can’t afford big-city lease prices and large-format shopping environments. These emerging markets represent some of the hottest areas in the country for retailers, whether a brand is launching a flagship store or wants to engage customers close to home with a small footprint neighborhood shop.

Retail Location Data

Make the Right Move with Retail Location Data
Make the Right Move with Retail Location Data 1440 428 ASG

In the retail industry, where competition is cutthroat and every move matters, the right location can be the ultimate arbiter of success. Yet, astonishingly, many ambitious retailers fail to recognize the untapped potential and invaluable insights that retail location data offers. 

We get it. It’s easy to get wooed by a vacant retail space in a trendy neighborhood or an open location that has high foot traffic at first glance. But ignoring valuable insights before making a decision can lead to missed opportunities and potential pitfalls.

Empowered with retail store location analysis, retailers can strategically select a site that provides the best opportunities to achieve objectives and maximize profit potential. 

But what kind of information is useful in determining the right location for your retail business so that you can make the best decision for long-term success?

A Data-Driven Approach to Evaluating Retail Locations

In a dynamic marketplace, retailers must stay ahead of the curve before they ever even open. Harnessing the power of data and leveraging it to make informed decisions about where to invest in real estate is critical in today’s competitive retail landscape. 

But what exactly is location data, and how can it help your business? On a macro level, location data refers to information that indicates the geographic position of places, people or objects. While location data can provide details like latitude and longitude coordinates or direction of movement, this information can also provide valuable details like patterns, trends and even historical information that can help businesses make important decisions. 

For example, this type of data is widely used in targeted advertising. By analyzing location data, businesses can understand the behavior and preferences of their target audience in different locations, enabling them to tailor their marketing campaigns accordingly. 

Location data can also be utilized in supply chain management, helping businesses optimize logistics, track shipments and improve overall operational efficiency. By analyzing historical location data, businesses can identify patterns and trends, optimize routes and reduce delivery times, ultimately saving costs and enhancing customer satisfaction.

When evaluating retail spaces, location data is a specialized type of intelligence that can unveil hidden secrets and untapped potential of each possible storefront. The data isn’t only about roads, buildings and traffic patterns. Location data can unveil who lives in an area, their average incomes, the types of homes they live in and more demographic details. 

Thanks to advances in location data, retailers can now explore potential locations by leveraging sophisticated analytics and predictive modeling that analyzes a wide range of factors like competitor proximity, demographic information, and consumer behavior.

Retail Location Data

Key Data Points when Evaluating Locations

A retail store location analysis involves examining several data key points that include:

  • Demographics: Beyond population size and income levels, savvy retailers now delve into the nuanced intricacies of the community. They unravel the aspirations, values, and lifestyles of potential customers, tapping into the emotional connections that drive purchasing decisions.
  • Competition: Competition is no longer just a hurdle to overcome. It’s an opportunity for collaboration and differentiation. Retailers armed with this new mindset embrace the strengths and weaknesses of their counterparts, crafting innovative strategies that set them apart. By harnessing the power of partnerships and symbiotic relationships, they create unique experiences that resonate with customers on a deeper level.
  • Foot traffic: Foot traffic analysis evolves into an art form, a delicate dance between prediction and anticipation. Retailers move beyond static numbers and tap into real-time data, understanding the ebb and flow of customer movements. By embracing the patterns of time and space, they strategically position themselves to intercept the ever-changing currents of consumer traffic.
  • Accessibility: Accessibility encompasses more than physical proximity. Retailers now navigate a complex landscape of convenience and connectivity. They reimagine the concept of accessibility, exploring parking availability, public transportation integration, and the interplay of digital and physical realms. By seamlessly blending the virtual and brick-and-mortar experiences, they become beacons for modern consumers.
  • Cost: Many retailers struggle with achieving a delicate balance between investment and potential returns. It’s no longer a straightforward calculation. Visionary retailers consider the intangible assets and the value they bring to their chosen location. They weigh the cost of leasing or purchasing against the transformative power of their unique offerings, creating a new formula for success.

In this era of retail reinvention, the evaluation of retail locations transcends the mundane checklists of the past. It requires a fresh perspective that relies on a retail store location analysis, embracing collaboration, and tapping into the pulse of the community. 

Retail Location Data

Consumer Migration Trends to Keep an Eye On

Another essential piece of data retailers should consider are the latest consumer migration trends. Consumer migration trends in the context of retail locations refer to the patterns and movements of consumers in terms of their residential locations and preferences for shopping destinations. 

These trends can provide valuable insights into where consumers are moving, how their preferences are changing, and how retailers can adapt their strategies to align with these shifts.

Consumer migration trends can be influenced by a variety of factors, including changes in population demographics, economic conditions, urban development, and lifestyle preferences. 

For example, a neighborhood or city may experience an influx of young professionals, leading to a rise in demand for trendy boutiques and upscale dining options. On the other hand, suburban areas may witness an increase in family-oriented retail establishments as more people move to these areas for a quieter lifestyle.

In our hometown of Columbus, Ohio, community leaders and businesses are leaning into the concept of developing mixed-use spaces in the East Franklinton neighborhood, which is adjacent to downtown, and experiencing a rebirth into a trendy, more progressive area. This area is seeing more young professionals move in just as the business district is developing Gravity – a mixed-use space that caters to entrepreneurs, artists, and other social innovators. 

By analyzing consumer migration trends, which can evolve over time, retailers can identify emerging markets and potential growth opportunities. They can adjust their expansion plans, allocate resources effectively, and tailor their product offerings to meet the needs and preferences of the target consumer base in specific locations.

The Right Location for Long-Term Success

Whether you’re a retailer looking for the right location to jump-start or expand your business, you can significantly benefit from using data to inform the decision-making process. 

Yet knowing how to obtain this data and then use it to make an informed decision can be challenging. Retail location analytics technology platforms can offer a tailored approach to generating real estate data with the goal of empowering clients so they can make confident decisions. 

When choosing analytics technology platforms, look for qualities like:

  • A user-friendly interface that is designed to simplify the analysis and visualization of data
  • Modeling capabilities that leverage historical data and market trends to forecast the potential success of a retail location
  • Integration capabilities that allow seamless data integration from multiple sources, such as demographics, foot traffic, and competitor analysis
  • Advanced geospatial analysis tools that enable businesses to understand the spatial relationships between different retail locations, competitor proximity, and customer density
  • Real-time data updates and monitoring features that provide up-to-date insights into consumer behavior
  • Data security and privacy measures that ensure the protection of sensitive information
  • Customization options that allow businesses to tailor the platform to their specific needs or metrics

By leveraging advanced analytics and artificial intelligence, businesses can make strategic decisions that align with their target market, mitigate risks and capitalize on growth opportunities. 

To learn more about how a retail data platform can help businesses, check out ASGEdge.

Asset Strategies Group Acquires The Robin Report
Asset Strategies Group Acquires The Robin Report 1440 428 ASG

Asset Strategies Group (ASG) is pleased to announce its latest move in the retail services sector: the acquisition of The Robin Report, a well-respected source of in-depth, strategic insights in the retail industry.

As with our acquisition of Chute Gerdeman in 2020, this transaction is another significant step in ASG’s ongoing commitment to broaden and enhance our scope of retail services. The Robin Report, published daily, along with its weekly Retail Unwrapped podcast, has established itself as a highly regarded retail industry knowledge platform and is the latest addition to ASG’s growing portfolio. The acquisition is a clear demonstration of ASG’s dedication to providing its clients with the best possible resources for understanding and navigating the ever-evolving retail landscape.

“The acquisition of The Robin Report is in perfect alignment with our long-term growth strategy. We are thrilled to welcome The Robin Report to the ASG family.”

– Carrie Barclay, President & CEO, ASG

Read the Full Press Release

The Importance of Lease Management for Business Continuity
The Importance of Lease Management for Business Continuity 1440 428 ASG

Lease management is critical for your retail business. Effective lease management can ensure that your retail business can withstand the volatility of economic downturns, supply chain disruptions, and unexpected challenges to your operations. Many retailers are unaware of the profound financial impact the right lease management team can have on your business, but a smart business continuity plan should include working with a tenant representation professional and outsourcing lease management to experts.

What Is Lease Management?

Lease management is the practice of ensuring that the terms of the lease are properly met. When a retailer receives an invoice from the landlord, the goal is not to balance to the landlord’s invoice but to ensure that the invoice matches the terms of the agreement, doesn’t overcharge, and doesn’t include costs that should not be included. While often a thankless and behind-the-scenes area of our work, ASG saved $12.6 million for clients last year through our effective lease management.

How Does Lease Management Impact Business Continuity?

Lease management, or lease administration, is crucial in ensuring business continuity by protecting the retailer. A well-constructed lease will guarantee that the retailer continues to have access to essential assets. The lease also reduces operational risk, helping the retailer avoid unexpected and unwarranted expenses. Effective lease management involves several key factors, including regular monitoring and tracking of lease agreements, timely renewal of leases, negotiation of favorable lease terms, and proper documentation and record-keeping. Outsourcing lease management can be beneficial because the lease management team are experts in the industry and have the ability to quickly recognize risk areas, negotiate better terms, and help preserve the tenant-landlord relationship.

Best Practices for Successful Retail Lease Management

Effective lease management is crucial for any organization to maintain healthy relationships with its stakeholders. Contracts serve as the backbone of these relationships, and it is essential to manage them efficiently. A robust lease management system can ensure business continuity during unforeseen disruptions or when physical access to the office is not possible. By streamlining the contract management process, organizations can minimize risks and maximize opportunities for growth and success.

The more comprehensively your lease management practices, the stronger your business continuity planning will be. This should include:

Understanding Lease Terms
The first step in retail lease management is to thoroughly understand the terms of your lease agreement. This includes the length of the lease, rent payments, maintenance responsibilities, and any clauses related to business continuity or termination.Regular monitoring and review of lease agreements

Regular Monitoring and Review of Lease Agreements
Retail leaders without experience in lease negotiations and management may find themselves overpaying, which can add risk to business continuity. It’s critical to monitor the lease, review the agreement, and be proactive about addressing issues that may arise, whether the retailer is being overcharged or not received agreed-upon accommodations.

Proactive Negotiation of Lease Terms
Whether the retailer has an existing lease that is being renewed or they are securing a new location, the lease agreement is an opportunity for mitigating risk to the business based on unexpected events, unanticipated costs, or changes to the space, location, or other tenants. It’s important to negotiate a renewal that aligns with your business goals and objectives including rent payments, lease terms, or other provisions that can help ensure business continuity.

Effective Communication with Landlords
The lease may serve as the backbone to the contract between landlord and tenant, but communication is what allows the relationship to flourish to the benefit of both parties. Maintaining open communication between tenant and landlord is key to ensuring business continuity.

Professional Tenant Representation
A tenant representative is an essential partner in assessing location needs, negotiating lease terms, and facilitating the communication and relationship between tenant and landlord. They are also the people who fight for the retailers they represent when terms are not honored or costs are not being controlled as contracted.

Plan for the Unexpected
It’s essential to have a plan in place for unexpected events that could disrupt your business, such as natural disasters, economic downturns, or changes in consumer behavior. This plan should include contingencies for rent payments, staffing, and inventory management.

Options That Protect the Retailer
Business continuity planning is often a game of what if. And building those what ifs into the lease agreement is essential for retail business continuity. Options for subleasing, sharing space, adjusting the size of the space, and delaying rent payments for certain circumstances are all examples of how the retail lease is essential for comprehensive retail business continuity.

Retail Business Continuity Planning Is Not Complete without Lease Considerations
Retailers and their lease management and tenant rep partners must have a clear understanding of the retail space and resource needs, any cyclical nature of the business, and have clear insight into the risks and liabilities contained within the lease. A lease management system like ASGEdge can be instrumental in not only ensuring retailers implement a strong strategy for choosing locations but for managing every location’s lease in a streamlined and efficient manner.

7 Common Myths in Tenant Representation
7 Common Myths in Tenant Representation 1440 428 ASG

Tenant representation or tenant rep can be complex, but the misconceptions some retailers have about it can prevent them from taking advantage of the opportunities it offers.

What is Tenant Representation?

Tenant representation is a service that brings experts with decades of experience to the table to help locate the best locations and negotiate the best possible outcomes on lease agreements. Tenant representation is essential – tenants need someone capable of understanding the market, using unparalleled market intelligence and geo-analytical tools to help retailers find the right locations, and employing that expertise to help ensure navigating, negotiating, and changing lease terms and fostering a tenant-landlord relationship into a partnership that benefits everyone in the industry.

Here we address the top seven misconceptions about tenant representation and why retailers choose the service.

  1. Tenant representation is only for big businesses.

While larger retailers may have more complex needs, more locations to manage, and bigger budgets, tenant representation can benefit retailers of all sizes. In fact, smaller retailers may benefit even more from tenant representation as they may not have the internal resources or expertise to navigate the commercial real estate market on their own. Tenant representation can help retailers of all sizes find the perfect space for their needs and negotiate favorable lease terms.

  1. Tenant representation is too expensive.

While there are costs associated with hiring a tenant rep, the benefits far outweigh the expenses. Tenant representatives help retailers save money by negotiating favorable lease terms, advocating for tenants, and steering tenants away from costly terms. Last year, ASG negotiated $13.5M in savings across 135 locations.

  1. Landlords won’t work with tenant representatives.

Most landlords are willing to work with tenant reps and many prefer it because they know they’re working with someone who has deep understanding of the market and can effectively negotiate on behalf of their client. Additionally, tenant representatives can help landlords fill vacancies quickly and efficiently, which can be beneficial for both parties.

  1. Tenant representatives only focus on finding the cheapest rent.

While finding affordable rent is important, tenant representatives also focus on finding the best overall deal for their clients. This includes negotiating lease terms, securing tenant improvements, and ensuring that the space meets the client’s needs. Tenant representatives work to balance cost with other important factors, such as location, amenities, and accessibility.

  1. We don’t need a tenant rep because we already have a lease.

Having a lease in place does not preclude retailers from being able to renegotiate terms based on changes in situation, ensure covenants are being met, and ensure flexibility. Even when a retailer has an existing lease, a tenant rep can provide insight into ways the lease can be enforced to save money.

  1. Tenant reps work for landlords.

Retail tenant reps work for the retailer they represent. Their goal is solely to ensure that you get the best possible lease. While many tenant reps have established relationships with landlords, this serves as a credibility factor, not a conflict of interest.

  1. We’re renegotiating an existing lease, so it’s not the right time.

Renegotiation may be one of the best times to enlist a tenant representative. The depth of expertise a tenant rep brings to the table can ensure that the terms of the lease are as beneficial as possible to the retailer, that there are no surprises included in the lease, and that there are adequate pathways for changing or ending the lease should there be significant changes in the situation.

tenant rep

Benefits of Tenant Representation

Retailers aren’t just seeking the lowest expense; it’s a combination of location, terms, and total occupancy cost that matters. A retailer might think they are negotiating a great deal on lease cost only to discover that the lease cost is lower than expected because the landlord takes a hefty percentage of sales or the retailer has no flexibility with regard to the space. Tenant representation helps the retailer in the negotiations. Here are some more benefits of tenant representation:

  • Tenant Reps Work for the Retailer

A tenant rep is there solely to represent the retailer in securing locations and negotiating the best possible deal for the retailer. There is no conflict of interest.

  • Tenant Reps Are Experts at Lease Negotiation

From quoted rents to exit strategies, tenant reps ensure that the retailer has protections in place that give them leverage if things change.

  • Tenant Reps Save Retailers Time and Money

Tenant reps excel at saving money on things like attaining lower rent costs, higher improvement dollars, and other quantitative measures, but they also negotiate for the things that retailers may not consider, like better renewal options, capped expense costs, kick-outs, and sublease options.

  • Tenant Reps Negotiate More than Just the Rent

Tenant reps analyze retail leases based on more than just the monthly rent, considering charges for real estate taxes, utility costs, construction costs, property insurance costs, CAM costs, and improvement allowances.

Tenant Reps Make the Difference

Entering your first negotiations with a landlord can be overwhelming and challenging. Without understanding the industry, the location, and the average lease costs for that area, many retailers end up signing on to deals that leave them with less profitability and more obligations. Tenant representation brings insight and expertise to the negotiation process.

See it in action: learn how we help Vineyard Vines problem solve & save money >

Sustainability: What Does it Take?
Sustainability: What Does it Take? 1440 428 ASG

Sustainability is mission-critical for retailers. Consumers demand it. Shareholders want it. The earth needs it. So why is it so hard to walk the walk?

There’s a common misperception among retailers that investing in sustainable building will be too costly to achieve any kind of ROI. Yet efforts to reduce carbon footprint, while perhaps more costly upfront, can be beneficial for retailers in the long run. While it takes effort to source products that are sustainable, using eco-friendly designs and recycled materials in retail locations are just two examples of ways brands are getting closer to sustainability goals.

As we’ve explained before, improving sustainability requires a willingness to do business differently. We’ll explore sustainable building in retail and what the future holds for this approach.

The Importance of Sustainable Building Practices in Retail

According to Microsoft, sustainability is a growing priority in retail and consumer packaged goods. Industry leaders, employees, investors, partners, and consumers who buy the goods care about sustainability.

  • 93% of CPG leaders spend more time on sustainability issues today than five years ago
  • 73% of Millennials prioritize sustainability over pricing
  • 55% of recent CPG market growth came from sustainability-marketed products

By implementing sustainable practices, retailers not only gain a competitive advantage with eco-conscious consumers but also reduce their carbon footprint.

Virtue Signaling vs. Environmental Commitment

Retailers who talk sustainability without verifiable actions raise doubts about their commitment. Virtue signaling – talking the talk without walking the walk – can instantly destroy a brand’s credibility. And even though there is a gap between what consumers say they expect and what they purchase, the intent for better sustainability is a growing trend among consumers and stakeholders. And with more legislation requiring specific commitments to sustainable practices, getting ahead of the curve can be cost-effective.

Sustainability Begins Before Building

As retailers refine their sustainability efforts, the first consideration is location. More than ever, sustainability includes answering the question, “How far do I expect my customers to travel to shop in my store?” The answer is often not as far as they used to. Smaller stores embedded in neighborhoods are a more sustainable alternative to larger stores that use more energy and require a longer trip to access.

What Steps Are Retailers Taking to Be More Sustainable?

There are a number of ways retailers can incorporate sustainability into buildings and materials—some might be easier and more cost-effective than you think.

Energy-Efficient Lighting
Energy-efficient lighting is one of the key components of sustainable building. It’s more than just LED lights, although that is an important component. LED lighting uses much less energy than traditional lighting and can last decades longer. However, other considerations can help with more sustainable lighting as well. Choosing to construct buildings in ways that take advantage of natural lighting can help save even more.

Efficient HVAC
Energy-efficient HVAC systems help significantly reduce energy consumption. While lower utility bills are the most obvious benefit of an efficient HVAC system, other benefits include better air quality and reduced health risks for employees and consumers.

Eco-Friendly Materials
IMM-Cologne explores the use of sustainable materials in retail design in great depth. They suggest solutions from the circular economy:

  • Terazzo floor slabs, bricks, and recycled concrete produced from construction waste.
  • Recycled PVC or vinyl floor coverings.
  • Recycled clothing made into curtains, shelving, counters, and more.
  • Alternative construction materials such as hemp, rapidly regrowing bamboo, or recycled plastic.

IMM-Cologne makes the argument for the importance of pursuing sustainability:
“Rising energy costs, shortages of raw materials, the new awareness in society and the increasingly visible consequences of climate change call for a new way of thinking. This should ultimately benefit everybody: companies, people and, above all, the environment.”

Eco-Friendly Retail Design
Sustainable building can also include using eco-friendly designs like green roofs and walls. Green buildings reduce heating costs by adding insulation while also reducing the urban heat island effect. According to the University Corporation for Scientific Research on urban heat islands,

“Heat islands form as vegetation that is replaced by asphalt and concrete for roads, buildings, and other structures necessary to accommodate growing populations. These surfaces absorb—rather than reflect—the sun’s heat, causing surface temperatures and overall ambient temperatures to rise.”

When retailers incorporate green roofs and walls into their structures, they help reduce this effect.

The Benefits of Sustainable Retail for Businesses and Consumers
Sustainable retail practices are good for the environment, but they also provide measurable advantages for businesses that implement these practices and the consumers who support them. Sustainable building can save retailers money on energy and water bills while also allowing them to connect with consumers on a deeper level, earning more customer loyalty. Plus, consumers benefit from a healthier shopping experience in buildings with improved ventilation and natural lighting.

“Some people will say sustainability is an additional cost, but once they’re doing it, it becomes second nature and integrated into how they do business,” said Sabine Schlorke, global manager for manufacturing at the International Finance Corporation, a member of the World Bank Group, in an interview with PWC. “If you see it as part of your business, it’s not a cost; it’s an opportunity.”

A Consumer Shift

“I hope when the industry slows down (in a good way), we will be able to focus more on using the sustainable products of the future—fixtures, building materials, flooring, and even playing around with 3D printing to make small tables and stuff,” he says. “It’s the future. I hope we can use it to think bigger.”
– Andrew Miller, ASG procurement and materials manager.

Consumers are becoming more environmentally conscious, choosing products with sustainable packaging and shopping brands whose values match their own with regard to sustainable efforts. Retailers have been rushing to get ahead of pandemic-related supply chain struggles, but making efforts to implement sustainable building practices where feasible demonstrates that they are listening to their customers. The effort and transparency go a long way in building a strong brand reputation and earning customer loyalty.

Are You Ready for the ‘Escrow Surprise?’
Are You Ready for the ‘Escrow Surprise?’ 1440 428 ASG

Every year at this time, we wait with bated breath for the spring renewal of all things beautiful, and somewhere in the middle, everyone scrambles to ensure their regular dance with the IRS is complete, and funds are exchanged. This same dance happens in retail at a much larger scale, in an episode that I now call the “Escrow Surprise!” It’s almost like an Easter egg hunt but not quite as full of childlike joy.

Every year, retailers’ leases require them to place funds in escrow (a prepaid an estimated expense, typically divided equally between twelve months) toward their portion of the Landlords’ annual tax billings. At the end of every year, Tenants receive a reconciliation of their share of the tax obligation, less what they have already paid toward that obligation, with a balance or credit due based on the actual assessments.

This year, as opposed to prior years, we are seeing wide variances in these estimated tax payments (escrows) and the final reconciliation. These variances often create large outstanding balances for retailers, sometimes in the tens of thousands of dollars. Whether this is a product of the government’s late-to-update property assessments, or owners/Landlords being behind in recognizing the increased obligations to retailers, the Escrow Surprise can cause angst for a Tenant with this new, unaccrued, and hefty financial obligation, particularly in an industry that has hit a wall.

We have some thoughts about protecting yourself. When it comes to commercial real estate tax escrows for retailers, both Landlords and government agencies play a crucial role in ensuring that these payments are made timely and accurately. In order to avoid missed escrows, it’s important for both parties to take proactive measures to stay on top of their responsibilities.

For Landlords, this means regularly reviewing their property tax bills and ensuring they are paid promptly. In jurisdictions where they are given discounts for early payments, they should seize these opportunities unless they plan to appeal. They should also keep accurate records of these payments and provide copies to their tenants as proof of payment. Additionally, landlords should communicate with their tenants regarding any anticipated changes in property taxes, new levies, or other fees that may impact their lease agreements.

Government agencies also play a critical role in preventing missed escrows. They should provide clear and concise information about property taxes, including due dates and payment options. They should also have accessible systems to track payments and ensure they have been properly credited to the appropriate accounts. Finally, government agencies should be responsive to inquiries and concerns from Landlords and provide assistance when needed to ensure that tax payments are made on-time.

Overall, the key to avoiding missed escrows in commercial real estate is clear communication, careful record-keeping, and proactive measures on the part of both landlords and government agencies. By working together, they can help ensure that Landlords are not burdened with unnecessary penalties or fees that cannot be passed on to the retailers.

How Retailers Can Protect Themselves

Most leases contain protection for the Tenant to avoid overpaying on expenses that are ultimately passed on to the Tenant (a pro-rata obligation). These come in the form of exceptions wherein Tenants are not responsible for fees assessed to the Landlord, or that Tenants are not responsible for paying at a rate they would otherwise pay, if they were paying these directly to the agency, county, or provider, especially with utilities.
Certainly over the past few years, what first seemed to be anomalous weather events that brought increases in Tenant-related expense for electrical, gas, HVAC, trash, insurance, snow and ice removal costs; appear to have quickly become the basis for escrow increases to these expenses passed on as an anticipated cost for the Landlord. Whether or not the logic holds, cost increases have propelled Landlords to bill at higher rates with the understanding that these “one-off” weather events are now a part of their anticipated costs, ultimately burdening retail Tenants with more upfront cost, and with the hope that they do their due diligence in reconciling these expenses correctly at the end of their periods, crediting any overpayments back to the Tenant.

For newer retailers, or retailers who are looking to renegotiate their leases, moving toward fixed-rate expenses (as often as possible) simplifies their portfolio and helps them to account for these expenses over the lifetime of their leases (read: ASC842, rent accounting). These fixed expenses, often with fixed increases each year, are easier to maintain and prevent any surprise costs from being passed through to the Tenant. A great example of this was the case with the Texas power outages of 2021.

Communication Is Key

Typically Landlords and Tenants have some form of process in place that is standardized for them. Landlord’s lease agreements, while potentially standardized for the larger national and international management companies, still have unique-to-Tenant language that must be reviewed and challenged by Tenant’s teams.
What we’ve learned over a period of time is that for many Landlords, utility expenses, additional Insurances, and overall increases to operating costs have been rarely communicated in a way that is justifiable to the Tenant or their leasing teams. Even when they are justified, clear communication is the best way to ensure trust in the Landlord-Tenant relationship, either by providing budgets in advance when Landlords anticipate escrow increases, or by more quickly making escrow adjustments on expenses when a reconciliation has been done and Tenant has any kind of credit or additional obligation (i.e., have been sent a Year End Adjustment).

Outsourcing Lease Management Can Help Protect Tenants

The onus is, unfortunately, on the shoulder of the Tenant at most times to push back on the Landlords when caps, fixed increases, and unallowable expenses are billed through on real estate taxes. However, it is the responsibility of the Landlord to, when appropriate, respond quickly when these discrepancies and disputes are presented, rather than tread water when a Tenant presents evidence of disparities. Preservation of the Landlord-Tenant relationship here is crucial when Tenants go to reevaluate their terms and any future lease agreements, and ultimately will impact the entire retail sector if- or when- Tenants evaluate their footprint in the physical retail marketplace.

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