Life, Liberty and the Pursuit of Retail Space

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Retailing USAThe U.S. market has six times more retail square feet per person that the United Kingdom, with 2,375 square feet per 100 inhabitants. That’s more space than France, Denmark, Finland, Portugal, Spain, Italy and Germany combined, making it an increasingly attractive locale for European retailers that have reached maturity in their home markets. Gateway cities continue to be the focal point for retailers testing the waters, and while New York is the obvious landing point for most, JLL’s Retailing U.S.A. report indicates that retailers should cast their nets wider to succeed in the United States.

“The U.S. is a difficult but worthy market for international retailers. It’s made up of a handful of international cities, and hundreds more large and small markets,” added David Zoba, Chairman of JLL Retail’s Global Leasing Board. “The common currency, language and rule of law make the U.S. an appealing and scalable market. If a concept works in the United States, the vast landscape for potential store locations across well-developed and diverse retail assets is tremendous.”

Retailing Across America’s Assets

Many European retailers have operated in the United States through franchises, but company-owned stores are growing in appeal because they offer retailers a better opportunity to represent and grow their brands themselves. To expand effectively, retailers need to understand that unlike Europe, the U.S. retail market is low density with nine percent of space within malls and 83 percent spread out across suburban shopping centers and freestanding buildings.

Major retailers generally begin domestic entry in one of the top 13 American markets, but that can be difficult and expensive, and it’s not always instructive or representative of the broader market. The top eight markets only make up 33 percent of United States retail space; there is an additional 12.8 billion square feet of space spread across 137 markets.

“Effective retail expansion is all about understanding who your customer is, how they spend and where they live,” added Naveen Jaggi, President of Retail Brokerage, JLL. “German grocer Aldi penetrated the U.S. in 1976, in Iowa of all places, but that was where the right consumers were to support it. Now 40 years later, Aldi has 1,400 stores in 32 eastern states and the brand is heading West. Expansion takes time. Retailers can’t expect an overnight boom.”

Unique U.S. Consumer Traits

U.S. shoppers preferences vary widely, and retailers expanding into the market need to understand the unique set of shopping habits and purchasing power. Four key emerging trends in consumer spending include:

  1. Animal Obsession: Pet expenditures in the U.S. will grow to $67.6 billion by 2018.
  2. Athleisure Explosion: Active wear and athletic performance footwear has driven the U.S. apparel spend with a $2 billion bump in 2014.
  3. Foodie Nation and Healthy Habits: Approximately 60% of Americans do one-stop shopping for groceries, and are choosing higher-end fast casual dining options.
  4. Drivers Delight: The U.S. trade areas are often defined by drive time. The average U.S. commute is 100 km, which is more than Europeans typically drive for a purchase.

“European retailers will find that in the U.S. there is a hunger among landlords to add exciting new concepts to their assets, and non-domestic brands offer just that,” added Michael Hirschfeld, Executive Vice-President, National Retail Tenant Services, JLL. “In the coming year expect to see even more European retailers expand into the U.S., doubling down on the food-based concepts and apparel.”

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