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Commercial Real Estate News Roundup For May 22, 2014

Talent competitions break out at brokerage firms, Amazon’s newest same-day-delivery warehousing strategy, the mighty Silicon Valley stumbles at its retail task, and what value is lurking in your office’s kitchen?  It’s all here in this week’s Commercial Real Estate News Roundup for May 22, 2014.







(Photo credit: Wonderlane)


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Borders Ann Arbor HQ Books $10.5 Million Refinance

borders-hqNew York-based real estate investment banking firm Chesterfield Faring has announced a refinance of the Wickfield Center of Ann Arbor, MI, former corporate headquarters of the bankrupt and liquidated national bookseller chain Borders.

The refinance is in support of a bustling market in the former HQ’s space. The two-building complex, sporting a total of 330,000 square feet of rentable space, was sold to Hughes Properties earlier this year by Colliers International, who has been retained to list the available rental space.  The South Ann Arbor property has major tenants in Gold Star Mortgage, who is renting 68,000 sq. ft.  Colliers itself also rented 16,000 sq. ft to Prime Research, a strategic communication research firm.

The Prime Research lease appears to be part an parcel of a technology trend that some say felled Borders, a once mighty-bookseller.  In the Ann Arbor News, Brendan Cavender of Colliers International Ann Arbor who listed the building and represented PRIME in the deal said the new office’s footprint will cover about 85 percent of the second floor and Cavender said that another tenant is in final negotiations for the remaining office space.

“This is really a great development for the whole area,” Cavender said.

“The technology companies here are fueling growth in the retail and restaurant spaces as the new young employees move into the space. With Barracuda, Menlo, Google, and now Prime Research, you have a real density here of tech companies.”

Another Technology Vs. Traditional Retail Story?

The store closings of Borders in 2011 caused pain among fans of the bookstore business, a low-margin gentleman’s game that depends utterly on customer experience and a near-irrational expressions of customer loyalty.  The emotional investment of customers into Borders in its earliest days in Ann Arbor was the store-floor half of a love story that went all the way to the top management.  How did technology figure in its arc?

Technological innovation at Borders  – albeit of a decidedly pre-internet type – was strong.  Its inventory control system, developed in the 1970s and based on 3″ square cards was innovative and powerful enough to produce a spin-off business (Book Inventory Systems) that sold to independent bookstores around the world until 1994.

But it was a fateful decision about technology and internet retail in specific, some say, that sealed the fate of the global chain.

Most brick-and-mortar retailers had to make a decision in the very earliest part of the 21st century: was internet a distraction or was it a synergy?  Borders, like so many retail businesses faced a struggle with their own online presence, and in 2001 made the decision to outsource their online retail to  That surrender to its most dangerous competitor was a disaster for Borders and a huge coup for Amazon. The highly personalized customer experience Amazon could deliver appealed to Borders customers far more than Borders expected.  The program would end in 2007 with Borders scrambling to reclaim their online heritage, but by then, industry observers say, it was too late.


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Retail Space: Less About Products, More About Brand Experience

Image representing Amazon as depicted in Crunc...

We’ve written on the various impacts the e-commerce wave has had on the retail space industry. Usually, the trends point to a general future decline in demand for brick-and-mortar as the growth in  e-commerce shows no signs of slowing.

But not every trend and development is bad news for traditional retail. It’s possible that internet retail’s growth does not always come at the expense of traditional retail., whose revenues have been rising an incredible 30-40% per year are a huge part of the internet retail picture, a $200 billion market expected to reach a 9% share of total retail by 2016. With numbers like these, it might be surprising to learn that Amazon is planning to open brick-and-mortar retail anywhere. But they are.

Industry analysts say Amazon’s planned Seattle retail store could be inspired by the runaway real estate success of another technology giant, Apple Computer.

There’s a lot to be inspired by. Apple’s business model relies heavily on commercial real estate, sporting more than 300 retail stores in 11 countries. 13% of Apple’s overall sales were due to retail in 2011, and that includes 21% of its flagship laptop products. It’s Retail division claims 30,000 “full time equivalent” employees, and most eye-popping to retail experts, Apple claimed in 2009 that its stores brought in $4,300 per square foot.

Apple’s singular success in meshing technology and bricks might be leading Amazon into a wisdom about retail that is often overlooked: the customer is there for goods, to be sure, but not only goods. Brand experience draws people into retail too – the entirety of their experience, from personal customer service, to amenities, trying out items, to all the intangible expectations that come with that brand.

Finding the right balance between brand experience and goods availability is the trick. Will a customer base brave traffic, parking, crowds and lines for a radically reduced set of on-the-shelf items? Amazon might be put into the position to try to prove that the brand experience can trump physical offerings if their strategy will rely on Amazon’s flagship gadget, the Kindle Fire.

Amazon’s impact on national commercial real estate is growing far beyond its retail test: the company sports 69 enormous warehouses, 17 of which came online in 2011. That kind of growth could encourage experimentation and might give the giant the conceptual space it needs to tinker with a retail formula to rival Apple’s. If they get it right, it can only be good news for shopping centers across the country.


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