Cap Rates Rise in the Net Lease Dollar Store Sector

The supply of single-tenant dollar store properties increased by 34 percent in Q2–2017 when compared to Q2–2016 with cap rates rising from 6.65 percent to 6.75 percent during this period, according to Commercial Property Executive. The significant increase in supply is attributed in part to new construction properties (properties up to 12 months old) which comprised more than 57 percent of the supply of net lease dollar stores in the second quarter of this year. Dollar store properties priced at a 52 basis point discount compared to the overall net lease retail market in the second quarter of this year.

Starbucks Shutters Teavana Stores

Starbucks will close all 379 Teavana stores citing underperformance, according to MarketWatch.  The coffee company purchased the primarily mall-based Teavana chain in 2012 for about $620 million. Starbucks will continue to sell Teavana-branded products in its stores and elsewhere, capturing a share of the $1.1 billion premium ready-to-drink bottled tea market. The company’s tea business has grown about 40 percent in the past five years. Starbucks has over 23,000 locations worldwide.

Teavana – Photo: Taubman Centers

L.A. Leads U.S. CRE Market in H1–2017

In the first half of this year, Los Angeles outpaced New York in commercial property sales, according to Dow Jones Newswires (citing data from Real Capital Analytics). Investment into Los Angeles property totaled $12.6 billion compared to $10.6 billion in Manhattan, which is typically the national leader in terms of volume. Nationwide, $209.4 billion in commercial property traded hands during the first half of 2017, a nine percent decline from the same period last year.

Amazon’s Market Dominance

Amazon is growing at 30 percent per year, according to Business Insider (citing analysis from Needham & Company). The online retailer’s market share is expected to grow from its current 34 percent to about 50 percent in 2020. Third-party selling makes up 49 percent of the company’s sales and is growing at a higher rate than first-party sales. Over 100,000 sellers do more than $100,000/year in business on Amazon, according to the report. Amazon also has the most popular e-commerce app with about 76 percent of consumers using the app compared to 33 percent for the Walmart app (the next most popular app).

Whole Foods Market, Amazon’s recent $13.7 billion acquisition reported total sales of $8.7 billion for the 28-week period ending April 9, 2017. Average weekly sales per store were $663,000 ($880/sf) which is one of the highest in the industry and net income was $194 million (2.2 percent of sales).

Mexico City Abolishes Minimum Parking Requirements

Mexico City has eliminated minimum parking requirements and will instead cap the number of parking spaces allowed in new developments, according to Streetsblog. The cap number will depend on the type and size of the building with some of the former minimum requirements now becoming the maximum number of spaces allowed. The new regulations require new developments to have space for bicycles and include a provision to assess a fee to developers who build more than 50 percent of the parking cap in the city center area. Mexico City has the second largest metro system in North America (after New York) with the ninth highest ridership in the world, according to Wikipedia. About 30 percent of city’s residents own cars. With a population of 21.2 million, Greater Mexico City is second-largest metropolitan area in the Western Hemisphere (after Metropolitan New York) and the largest Spanish-speaking city in the world.

Mexico City – Photo: Andres Balcazar/Getty Images

Retailers Increase Lobbying Activity

Retail sector lobbying expenditures increased by 31 percent in Q1–2017 compared with the same period last year, according to OpenSecrets.org. Better technology and the resulting shift in shopping culture has let to economic distress for the retail sector, especially for bricks-and-mortar retailers. Since January, over 50,000 retail jobs have been cut and in June Moody’s listed 22 U.S. retailers as being at risk of bankruptcy (rated Caa or lower). The border adjustment tax, proposed by the House Republican leadership, is causing particular angst among many retailers and is one of the reasons for the increase in lobbying expenditures. Target, which has so far spent over $1.3 million in lobbying, estimates that a border adjustment tax would increase its tax rate by 40 percent which would ultimately be passed on to consumers. Other reasons for the increased lobbying activity include the digital sales tax (the Marketplace Fairness Act bill) and general uncertainty surrounding the new administration.

West Coast Coffee Continues DC Invasion

Oakland-based Blue Bottle Coffee Company has opened its first DC location at 1046 Potomac Street NW in Georgetown. Founded in 2002 by James Freeman, the gourmet coffee chain also has stores in California, New York and Tokyo. In addition to the Georgetown location, Blue Bottle is planning to open in Union Market and at The Wharf complex in SW DC. The coffee shops typically don’t have WiFi or power outlets to encourage people to talk to each other.

San Francisco-based Peet’s Coffee is planning to open two new locations in NoMa and the Atlas District before the end of this year, according to Eater. The stores will be strategically located near grocery stores (in NoMa at 1275 First Street NE and in the Atlas District next to Whole Foods at 528 H Street NE), according to the report. Peet’s currently has 22 locations in the DC area. In the course of four years, Peet’s sales doubled from $400 million to about $800 million in 2016.

Blue Bottle headquarters in Oakland, California – Photo: Blue Bottle Coffee Company

easyHotel Plans to Expand Further into Asia

UK-based easyHotel plans to expand into Iran and Sri Lanka with 500 rooms and 200 rooms respectively, according to Business Insider. The super-budget hotel chain was incorporated in 2004 and opened its first hotel in 2005. Parent organization EasyGroup Holdings Ltd holds a 34.6 percent stake in easyHotel. There are currently 15 easyHotel locations in the UK, 11 in Europe and one in Dubai.

Puerto Rico’s Foreclosure Crisis

Puerto Rico’s population has dropped by about two percent per year for the past three years, according to Bloomberg. The U.S. territory, which is grappling with a $74 billion debt and an unemployment rate over 12 percent has also seen a spike in foreclosures. According to the report, which cites data from the Office of the Commissioner of Financial Institutions (OCIF), there were a record 5,424 completed foreclosures in 2016. This number excludes most mortgages held by outside investors who are able to conduct foreclosure proceedings in federal courts. The mortgage delinquency rate is about 12 percent and as of March, about 4.4 percent of the 388,709 mortgages tracked by OCIF were in foreclosure. As a benchmark, in 2010, 2.23 percent of all U.S. housing units received at least one foreclosure filing, according to RealtyTrac.