One of the questions frequently asked when you meet a new person is, ‘So what do you do for a living?’ I was asked this recently and when I responded with ‘I am a Property Manager,’ the person I was speaking to said, ‘Who can afford a property manager these days?’ I said ‘Who could afford NOT to.’

Lo barato sale caro is a spanish phrase for ‘The cheaper comes out more expensive.’ If you’ve ever watched People’s Court you’ve heard Judge Milian say this often.

There are obvious pros and cons to self-managing your rental property. One of the key reasons owners choose to self-manage rather than giving it to a professional property manager is to save money. I believe the main consideration should be whether one has the time, knowledge of relevant regulations and expertise to effectively self-manage. Some investors who have achieved a substantial portfolio may view their time cost as too valuable to forego and paying a professional manager is more cost effective and moreover, the expenses of the manager are tax deductible.

The DIY Landlord needs to keep up with market rates and know how future rates will impact their bottom line. In a market where rents are rising fast, charging more may not result in securing the right kind of tenant. Some tenants may be willing to pay slightly more if they have been refused tenancy elsewhere or have a less than favorable history. But charging $10 more might also push potential tenants to look elsewhere leading to longer periods of vacancy, in which no rent is being collected. A property manager has relationships and resources that will provide him/her with valuable knowledge of comparable properties and can make an educated recommendation on what your price point should be.

The Landlord-Tenant laws are designed to protect both the Landlord and the Tenant. A DIY Landlord would be required to stay on top of changes and updates to the laws. A misinterpretation could be costly.

Screening and qualifying tenants, repairs and maintenance, as well as record keeping, are all extremely time consuming tasks. A property manager or property management company would take care of these items, ensuring all laws, paperwork and maintenance are completed properly and in a timely manner. Property Managers and Property Management companies often have strong relationships with vendors, which can result in better pricing and availability on materials needed to maintain or upgrade your property or properties. Having a property manager also provides somewhat of a shared responsibility when dealing with tenant issues. Should a problem arise, the fault could fall upon the manager or management company and not you, the owner.

In the end, the decision to hire a property manager could depend on a number of factors. How much property you own, what your capabilities are to maintain your properties, and how far your resources will go. Weigh the financial factors, being sure to include a dollar amount for your time and a percentage in savings on materials and such. And if the difference is close enough, it might be worth hiring a property manager.

Next week I’ll discuss my opinion on what you should expect from your property manager and what kinds of questions and things to look for when conducting interviews.

Best Buy to Shutter 50 Stores

By Dees Stribling, Contributing Editor, and
Nicholas Ziegler, News Editor

Over the weekend, the giant electronics retailer Best Buy said that it will close about 50 stores out of its total of around 1,100. The announcement came not long after the sudden resignation of CEO Brian Dunn, for as-yet unclear but possibly scandalous reasons, though it seems unlikely that the two events are directly related.

In any case, Best Buy said the stores will be closed by May 12 of this year. More were in California than anywhere else (seven), though Illinois and Minnesota are both seeing six stores close. Closures will also occur in 18 other states and Puerto Rico. Despite the closings, the company says that it will continue to remodel other stores and roll out smaller-format stores called Best Buy Mobile — it plans to have approximately 100 stores using the format by the end of 2012.

The company notified the affected stores of their impending closing on Saturday morning. The initial announcement came on the heels of Best Buy’s year-end earnings report, which showed a loss of $4.89 per share for the fourth quarter alone. The retailer aims to trip $800 million in costs by 2015, partially by “decreasing overall square footage for increased flexibility,” according to the company’s press release.

One of the possible reasons for the retailer’s contraction plans is a general push for smaller store footprints, according to services firm Cushman & Wakefield Inc. The CRE firm noted in its 2012 outlook that the average size of big-box stores has been on the decline for some time. “Even before the recession, stores were shrinking in size,” Cushman wrote in its report. “In 2004, the average Best Buy generally occupied 45,000 square feet. In 2011, however, two-thirds of the 90 stores opened were smaller than 30,000 square feet.”

Additionally, with Best Buy’s announcement to further the Best Buy Mobile pop-up format mirrors another industry trend. Other retailers, such as Target, have experimented with smaller stores that don’t necessitate a full flagship investment. Target’s Missoni brand pop-up store — that appeared in Manhattan in the summer of 2011 — sold out of its inventory within hours and captured significant media attention.

Sears, once among the greats of big-box retailers, announced a similar move in December of last year, The chain, in the midst of heavy restructuring, moved to close between 100 and 120 Sears and Kmart locations. At the time, Bill Rose, the San Diego–based national director of Marcus & Millichap’s National Retail Group, told Commercial Property Executive that he foresees potential problems given the typical store footprints of about 100,000 square feet.

Rose noted that retailers that are currently expanding — and he mentioned Best Buy specifically, along with TJ Maxx and HHGregg — are typically looking for smaller spaces of approximately 30,000 square feet.

Source: Commercial Property Executive April 16, 2012

FAIR USE NOTICE: This media may contain copyrighted material. Such material is made available for criticism, comment, news reporting or educational purposes only. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law.

Russ Hirshik Comments: This is a continuation of the situation with big box retailers that I commented on a couple of weeks ago. I’m surprised that Best Buy is only closing 50 stores. That may just be a factor of when leases are ending. I think they will continue to downsize or close stores in most or all markets from now on. The shopping world has forever changed and with it so have the economics of brick and mortar store locations.

I recently read an article offering advice on hiring a landscaping contractor for commercial properties. I mulled over all of the nine tips offered, and realized that really there’s just one actual “tip” and lots of other formalities to consider when hiring a landscaper. This one tip though is so important – And that is to communicate! Let’s review the tips for hiring a landscaper:

1. Understand the different types of companies; residential or commercial
2. Decide if you want to go with a big company or a “mom & pop”
3. Ask for details – years in business, maintenance on equipment, distance to subject property, price
4. Know what you want and how much it should cost
5. See if they have experience with similar properties
6. Ask how they handle delays & emergencies
7. Ensure they know the unique requirements of your property
8. Consider the extra costs of going green
9. Determine the communication methods at the beginning

Here are my feelings about these tips:
1. Types – While residential is typically smaller in scale, landscaping doesn’t vary so much between the fields that a company can’t easily specialize in both.
2. Big or Small – You can have successes & failures with both mom & pops as well as multi-crew companies. If you communicate, either can be successful.
3. Details – New companies are more likely to give better pricing; anyone can say they maintain their equipment regularly; depending on how big your market is geographically, being far away is not relevant; and you get what you pay for.
4. Cost – This one is a no brainer – most properties operate on a budget anyway. If you clearly communicate what you want, they either can or can’t do it for what fits in your budget.
5. Experience – This is important, but would you really consider someone without experience?
6. Emergencies – I have yet to be inconvenienced by a landscaper cutting on Thursday versus a Tuesday. Emergencies happen; communicate when they happen.
7. Requirements – This is completely enveloped within the lines of communication.
8. Earth Friendly – See #4. If it’s not a requirement for the property or community, then it doesn’t matter.
9. Communication – BINGO! The most important tip for hiring a landscaper!

At the end of the day, there is a certain expectation of you from your owner. As the Property Manager, you pass on these expectations to all of your vendors. If you clearly communicate how things should be taken care of, it won’t matter if your vendor has been doing this for 2 years or 20 years; it won’t matter if they are a big company or a start-up. The difference between landscaping estimates should be close; and when they are, you can rely on the formalities that are important to the owner(s) of the properties you’re managing. Knowing what you expect of them and communicating it often is the key to a successful relationship. As I said before, any landscaper can sell you on their experience, equipment, price, quality and details, but if they don’t know what is expected of them, there’s no way they can meet or exceed your expectations and do a good job.

Balancing Act: Lack of New Commercial Space Overcomes Softening Demand
Though Pace of Recovery Slowed Over First Three Months of the Year, Absorption Remained Positive
By Mark Heschmeyer
April 11, 2012

Commercial real estate demand softened during the first quarter of 2012, but not enough to throw absorption off its pace of eight straight quarters of gains. The numbers were aided by little if any meaningful new construction coming online, resulting in declining vacancy rates.

Although rising energy prices and fiscal debt issues for both domestic and foreign governments remain as clouds on the horizon, the U.S. commercial real estate market remained firmly in recovery mode, led by the office and warehouse sectors, according to Walter Page, director of research for CoStar’s Property and Portfolio Research division.

CoStar’s national market research for the first quarter of 2012 showed that, while net absorption slowed slightly compared to the last half of 2011, rent trends generally improved from prior quarters, with the supply-demand balance supported by a lack of new space being added to the market.

“We may not be out of the woods just yet, but the data we’ve compiled for the first quarter certainly demonstrates an ongoing recovery and points towards future growth,” Page said. “While the retail recovery was less pronounced than in the office and warehouse sectors, we’re witnessing positive net absorption across the board.”

Office: Recovery Broadens

In the first quarter of 2012, office markets witnessed solid net absorption, with little new construction and near zero growth in asking rents.

“While the data shows near zero rent growth in the quarter, the national vacancy rate of 12.9%, combined with the prospect for future vacancy decline, suggests the scales are tipping toward generating office rent growth,” Page said.

Nationally, office net absorption was at 11.5 million square feet — down from 16 million square feet in the fourth quarter of 2011, but more than double the pace from the first quarter of last year. New construction deliveries were exceptionally low at just 5 million square feet, although construction activity is starting to rise with over 8 million square feet of new office starts in the quarter. Of the top markets, all but Washington, DC, achieved a year-over-year decline in vacancy, indicating the broad base for the office market recovery.

For the third quarter in a row, net absorption was very solid, with Houston and Chicago leading the nation at 1.6 million square feet each. Washington, DC, with negative 421,000 square feet of net absorption, recorded the lowest level among the top metros.

As a result, the national office vacancy rate dipped below 13% for the first time since 2008.

Industrial: Strong Absorption in Largest Markets

A sharp reduction in industrial vacancy, fueled by near zero net completions of space and positive net absorption, has supported steady to slightly rising asking rents.

In the first quarter, industrial vacancy fell to 9.4% nationally — down 0.7 percentage points from one year ago. The reduction in vacancy, which has supported a 1.5% annualized change in rent over the past quarter, was mainly driven by positive net absorption of 20.9 million square feet in the first quarter.

Of the largest U.S. warehouse markets, Chicago (2 million square feet), Los Angeles (1.8 million square feet), Inland Empire (1.8 million square feet) and Houston (1.2 million square feet) all exceeded 1 million square feet of net absorption. Together, these four metros accounted for a third of demand growth, which is 10% over the market share, as large box distribution markets continue to dominate new warehouse demand.

Indicating a broad-based recovery, nearly all top warehouse markets achieved occupancy gains compared to one year earlier, with the most significant being the Inland Empire’s 2.6%age point gain.

Retail Recovery Still Weak

While the retail recovery was less pronounced, the sector did achieve positive net absorption, a stable vacancy, and a near-stabilization of rent.

For the first quarter, vacancy nationally was unchanged at 7%, compared to 7.3% one year earlier. Net absorption of 9.4 million square feet was below the 16.2 million square feet of the fourth quarter. Retail completions were exceptionally low at just 4.3 million square feet, with a Salt Lake City urban retail project being one of the largest deliveries this quarter.

“We forecast completions of retail space to remain depressed for the year,” Page said. “In-process construction continues to fall compared to office and warehouse construction, which is rising slightly.”

At the metro level, retail performance was more of a mixed bag than other property types, with few standout markets. For example, market rent over the past year ranged in a narrow band with most markets showing a -5% to +2% change, as the impact of housing market distress and Internet retailing has curtailed demand growth. For the quarter, roughly one-third of the markets recorded negative net absorption, suggesting that the retail recovery is still weak. Market vacancy rates range from 2.8% in San Francisco to 12.1% in Phoenix.

Costar Group

FAIR USE NOTICE: This media may contain copyrighted material. Such material is made available for criticism, comment, news reporting or educational purposes only. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law.

Source: Costar Group: By Mark Heschmeyer April 11, 2012

Russ Hirshik Comments: It’s nice to see some positive signs in the Commercial Real Estate market after seeing nothing but negative for so long. It’s especially nice to see office and industrial growth, because that means more jobs are being created. Retail will pick up as jobs pick up. If this positive absorption continues (and banks start lending), development of new space should begin again.

Lately, as the sun has gone down, shadows have encroached on Ted Kubisek’s bicycle shop on a formerly sunny stretch of West University Avenue.

But Kubisek doesn’t mind the lost light because, after all, he sees a different sort of light at the end of a dim economic tunnel.

Across from Spin Cycle, the mid-rise Continuum has gone up at the former site of First Baptist Church. By August, the University of Florida and its contractors hope it will be home to hundreds of graduate and professional students and a number of commercial tenants.

A few blocks to the southwest, past recently built condominiums and apartment buildings, UF’s Innovation Square, which will be home to a “super incubator” for start-up companies along Southwest Second Avenue, is in the works.

Kubisek, other business owners, and city and university officials think they have the building blocks to create a true midtown between campus and downtown, where development had been slow-going until recently.

While property sales have lagged in midtown and east downtown — from 131 in 2006 down to 35 this year — the average property value has risen substantially, from about $189,000 in 2005 to nearly $285,000 this year, according to Alachua County Property Appraiser data.

But midtown — home to mostly small strip malls — has been a rather nebulous part of Gainesville, without much identity of its own.

Innovation Square, going up at the former Shands at Alachua General Hospital site, promises to change that.

UF officials are predicting Innovation Square — and the companies that move into it — will create some 3,000 jobs, something Mayor Craig Lowe recently called an “employment renaissance.”

Brian Beach, UF’s senior vice president for administration and business ventures, said while the project, which he described as a “24/7 live-work-play research park,” is expected to drive research output at the university, it will also benefit the surrounding area’s economy by putting a significant amount of space on the tax rolls and encouraging other developments, be they commercial, residential or a mix of the two.

While UF officials aren’t sure exactly how big that boost will be, Beach said Innovation Square will have a “significant impact on that periphery.”

“This is sort of a game-changer for Gainesville,” he said.

Beau Beery, a real estate agent with AMJ Inc. in Gainesville, predicted the projects will encourage further development in the area — just not for a few years.

“I think it will spur some stuff long term,” Beery said. “No question.”

Calling the midtown redevelopment a “great contribution to the city economically and culturally,” Lowe said it will provide a synergy with downtown projects like the Hampton Inn and Suites, which opened in August 2009, to “spur more economic development and a higher quality of urban life.”

Anthony Lyons, the manager of the Gainesville Community Redevelopment Agency, said everything is in place to build up midtown into a vibrant part of the city.

“You have in many ways a gargantuan opportunity. You have space, the Square itself, the former AGH and all the area around it. You have a great set of properties there,” Lyons said. “It’s a great city, and it will make it greater.”

The abandoned, half-built shell once envisioned as the Stadium Club luxury condo and retail project across from Ben Hill Griffin Stadium is up for sale at foreclosure auction Wednesday.

Vesta Equity LLC won a foreclosure judgment against the development’s owners in circuit court Sept. 13.

The property is one of seven up for foreclosure auction at 11 a.m. Wednesday in the lobby of the Alachua County civil courthouse, 201 E. University Ave.

The project at 1802 W. University Ave. was to rise eight stories and include 24 luxury condominiums for wealthy Gator fans, along with first-floor retail space. With the shell of four stories complete, construction halted around Christmas 2007 after owners Philip and Sharon Stock of North Redington Beach stopped making payments on their $12.8 million mortgage. Their former attorney said at the time that part of the project’s financing fell through but they were waiting for another loan to be approved.

The project had already been denied Community Redevelopment Agency funding after local developer Mike Warren of AMJ Inc. raised concerns with their application that they may have paid too much for the property and underestimated construction costs.

The Stocks, doing business as Stock Development #38 LLC, had paid $2.1 million for the former site of Papa John’s, Sloppy Gator and Smoothie King.

Over the next two years, project manager Irwin Contracting filed a $2.9 million lien and a dozen subcontractors and suppliers filed nearly $1 million worth of liens on unpaid bills.

Vesta Equity, a lending company based in Sarasota, bought the remaining loan in February 2009 as part of a package from the failed First Priority Bank of Bradenton and started foreclosure proceedings the next month.

Last month’s foreclosure judgment determined that Vesta is owed more than $2.6 million, including the remaining loan balance, interest, late fees, attorneys fees and a $200,000 payment to Irwin Contracting.

George Kruse, managing director of Vesta, would not say how much they might be willing to let the property go for at auction or who might show up to bid.

“Numerous people have inquired over the course of two years,” he said.

“Hopefully, someone will buy the land. It would be nice to get something going on in that area.”

Ron DeFilippo, owner of The Swamp Restaurant across the street, had expressed interest but said this week he didn’t think the project could be revived.

“Condos just aren’t selling, especially luxury condos for Bull Gators.”

Beau Beery of AMJ Inc. said he didn’t think it likely that anyone but Vesta would walk away with the property Wednesday.

He said Vesta contacted him for advice about the property and he told them office space doesn’t work above retail because office users have security concerns and don’t like restaurant smells.

Beery said he recommended student oriented quick-service retail on the first floor, such as shops for ice cream or yogurt, sandwiches, and copy services, with a one- or two-story bar and restaurant above.

However, the market is not back yet for residential on the top floors, he said.

He also said a developer may have to tear down the existing structure and start over.

“It’s a great location. I think it will end up being a successful project. It will just have to change hands a couple times,” Beery said.

Correspondent Sierra Mision contributed to this report.

Sooyeon Kwon said she has always enjoyed an urban style of living growing up in Seoul, South Korea. So, it was no surprise when she chose a condominium in the heart of downtown Gainesville for her new home.

“I’m used to a city-kind of life, but I didn’t look at condos per se,” said Kwon.

The 38-year-old pharmaceutical sciences researcher had graduated from the University of Florida in 2004 and, after accepting a faculty position at UF, began looking for a home. But after looking at three houses, she felt the upkeep would be too much for her to manage alone.

She said she took one look at Regents Park and knew she had found her home.

“My friends told me the first three years (in a house) are the ‘fixing-up’ period. The condo fits my needs and it was very convenient for me to (be close to) work,” said Kwon.

Regents Park, an AMJ Inc. of Gainesville venture, is a 46-unit development of one- and two-story townhomes and flats. Located in the Duck Pond neighborhood, the project combines townhome living with urban-center amenities. With the sell-out of Phase I, Phase II features 2- and 3-bedroom residences each with 2 1/2 baths and an attached single-car garage. Homes are priced from $355,000 to $429,000 and range from 819 sq. ft. to 1,021 sq. ft.

Homeowner Association fees are $118 per month and include building hazard insurance, pest control, trash removal and common ground maintenance.

The development’s three-story buildings include first floor flats and two-story townhomes. Insulated concrete form construction, brick facade and 11 inches of poured concrete between flats and townhomes combine to reduce noise while increasing insulation, said Craig Wilburn, vice president of Bosshardt Realty Services Inc.

The kitchens are equipped with a full-line of Whirlpool or KitchenAid appliances including side-by-side refrigerator, smooth-top range, under-cabinet hooded microwave and dishwasher in black or white. Kitchens also feature 42-inch maple cabinets with crown molding, cultured quartz countertops and undermounted stainless steel sinks. The dining room overlooks a spacious terrace or courtyard, depending on the model, and the adjacent family room features sliding-pocket doors opening onto a formal living room.

Models include two full baths with cabinetry and counter tops to match the kitchen and powder room with pedestal sink. Master baths include double, undermounted sinks, linen closet and a separate shower/toilet room. Floors, tub surrounds and shower walls are finished in coordinating ceramic tile.

Master bedrooms include private balcony with double French door access, adjacent sitting or dressing area and either two walk-in closets or one extra-large walk-in closet, depending on the plan.

Each condominium features 10-foot ceilings, 36-inch electric fireplace with a carved wood mantle and tile surround, full-size, front-loading washer and dryer, side-lit front entryway and tilt-out, double-paned Anderson windows. An interior decorating package includes about 12 color choices and all residences are pre-wired with security system, Internet and cable.

In addition, townhome models feature about 400 sq. ft. of finished attic space, including 8-foot ceilings, and an under-the-stairs cubby closet.

The builder is offering three levels of upgrades that include 18-by-18-inch ceramic tile, Berber carpeting or engineered hardwood flooring and stair risers. Other accessories include stainless steel appliances, crown molding, a jetted tub in the master bath and pendent lighting in the kitchen and fireplace.

While there is a lot of flexibility within the upgrade packages cosmetically, the near completion of the development precludes any structural changes, said Wilburn.

For Kwon, the concrete construction was the deciding factor for her purchase at Regents Park.

“I love my place. I feel safe now,” said Kwon.

The angel investors who brought us the Emergent Growth Fund are back with a sequel to help promising startup companies take their inventions to market.

Angel investors typically bridge the gap between a company’s initial funding from founders and personal contacts and the more advanced venture capital stage.

Emergent Growth was started by a handful of local entrepreneurs approached by the University of Florida Office of Technology Licensing and the Gainesville Area Chamber of Commerce to fund technologies to come out of UF research. Through their friends and professional contacts, the founders recruited 63 members to invest nearly $3 million.

Of 11 companies to receive funds, one has failed and 10 are “very healthy,” raising more than $32 million in additional funds, according to Lee May, chairman emeritus of the fund, a former real estate developer.

The Emergent Growth Fund II has 39 members, most of them local, with a goal of raising $7 million. Membership will close once the first investment decision is made, in three months at the earliest, May said. Individuals can invest between $50,000 and $250,000. The fund is also working with institutions that can invest up to $2 million. May said UF already has agreed to invest, and members are in talks with interested research companies and venture capital firms.

The fund relies on its own members’ expertise to vet applications.

All takers are welcome, May said, “but primarily our sweet spot would be in the biotech, medical devices and IT (information technology) areas, and it got to that point because of the expertise of our members.”

May said many members were once in the same position as the startups and enjoy mentoring them.

Mike Warren, president of the AMJ Inc. commercial real estate company, is involved in both funds and is this year’s chairman of Emergent II.

He said he can help with business management and is able to understand some of the technology as a former UF professor of electrical engineering.

May said Emergent gets an early look at many UF technologies.

It also has built a reputation through angel and venture capital networks and now gets applications from the University of North Carolina, the University of Georgia and from San Diego, which is a biotech hotbed.

In addition to being able to help startups, May said part of the motivation of investors is the difference inventions like medical devices can make in people’s lives.

“We’re hoping not only will we make a bundle of money, but we might have some significant part of changing something at the bedside as well,” she said.

One example is AxoGen, which makes nerve regeneration grafts.

“We were able to stand by them during that initial stage when they were trying to develop the product and now it’s being commercialized,” May said.

The Era of Big Box Retail Dominance Is Coming to an End

When Best Buy Co. on Thursday said it was closing 50 big stores and opening 100 smaller ones, the world’s largest electronics retailer was adjusting to reality: The era of big-box retail dominance is coming to an end.The new mantra is small box. While Best Buy, Wal-Mart Stores Inc. and Target Corp. are still opening large stores, all are putting increasing emphasis on smaller ones. Best Buy plans to double the number of its smaller Best Buy Mobile stores by 2016. Wal-Mart is building as many as 100 small-format stores this year, while Target is opening five City Target locations.

After 50 years of putting mom and pops out of business, big-box retail is having a mid-life crisis. A slow economy has hurt same-store sales, narrowing margins at big stores. Meanwhile, consumers, armed with price-comparison technology, are visiting more stores seeking deals or exclusive merchandise rather than making one-stop, fill-the-cart excursions.

“We’re undergoing a seismic shift,” said Natalie Berg, an analyst with Planet Retail in London. “People are still cutting back. People are buying more products online so there is a real case for downsizing stores.”

Big-box retailers essentially come in two flavors: so-called category killers such as Best Buy that focus on one type of merchandise and discounters like Wal-Mart and Target, which sell a broader range of goods.

Declining Sales

Since the recession, big-box retailers have struggled. Until its third fiscal quarter last year, Wal-Mart had posted eight consecutive quarters of declining sales at stores open more than 12 months. Best Buy posted five straight quarters of profit decline before reporting on Thursday a $2.6 billion loss, while analysts forecast declining same-store sales and profit for Target this year.

Since June 2009, when the recession officially ended, Wal-Mart shares have advanced 26 percent and Best Buy has dropped 26 percent, both trailing the 39 percent gain for the 32-company Standard & Poor’s 500 Retailing Index. Target shares gained 47 percent in that time.

Big-box retail was born in 1962. That’s the year that Wal-Mart, K-Mart and Target all opened their first large discount stores. As they grew, the new big boxes began offering broad selection and low prices to a growing population of suburbanites who had left the cities in their new cars, searching for their piece of the American Dream.

Big boxes boomed in the go-go 1990s. Fueled by an inflated stock market and loose credit, Americans expanded further into the suburbs and filled their new homes with appliances and consumer goods, said John Lupo, a retired Wal-Mart executive who now sits on the board of AB Electrolux. The housing boom propelled the big-box retailers into the new millennium. Then came the crash, and consumers pulled back.

Conspiring Forces

Other forces are conspiring against the big-box model. Baby Boomers no longer have kids at home and don’t need to stock up on food and packaged goods. Their kids are marrying later and delaying having their own children, meaning fewer are buying houses that need to be updated and furnished.

“Right now you have a trough in the need for big-box retail,” Gildenberg said.

Hence the rush to open smaller stores. By 2016, Richfield, Minnesota-based Best Buy plans to have as many as 800 Mobile Stores, up from 305 now. It’s part of chief executive officer Brian Dunn’s plan to generate revenue from warranties, accessories and connections between phones, tablets and other electronics.

The increasing emphasis on smaller stores still leaves room for big stores, according to Dunn.

Anytime, Anywhere

“We see those stores as an important part of a network in conjunction with our small-box stores, our online capabilities and our on-phone capabilities that allow customers to reach us anytime, anywhere, anyhow they choose,” he said in a telephone interview. “While I don’t see this as a decline of the big boxes, the multi-channel approach that we are taking will require less square footage.”

Wal-Mart, which is based in Bentonville, Arkansas, is also sticking with big stores. While the company aims to add at least three times as many Neighborhood Markets as in 2011, it plans to add up to 150 super centers, compared with 122 last year.

“The super center is still what works best for us,” said Deisha Galberth Barnett, a Wal-Mart spokeswoman. “We will continue to work to grow the presence of super centers.”

Shoppers’ stampede online is also hurting big-box chains. The biggest beneficiary of that shift is Amazon.com Inc., which is grabbing market share from Wal-Mart, Best Buy and Target.

Online Purchases

“The biggest challenge for big boxes is increasing consumer confidence in making online purchases,” said Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri, who rates Best Buy and Wal-Mart as buys. “Best Buy is arguably more exposed than the Wal-Marts of the world that are heavy in the food, apparel and consumables category. In the case of consumer electronics, it comes down to price.”

If Best Buy and its big-box ilk are to survive, they’ll have to evolve and do a better job of integrating their brick- and-mortar locations with their Web stores, Arnold said.

“While big-box retailers are struggling, they aren’t going away,” Arnold said in a telephone interview. “They are shifting to smaller formats and investing in online retailing.”

Bloomberg News

FAIR USE NOTICE: This media may contain copyrighted material. Such material is made available for criticism, comment, news reporting or educational purposes only. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law.

Source: Bloomberg.com, By David Welch, Chris Burritt and Lauren Coleman-Lochner – Mar 30, 2012 10:16 AM ET

Russ Hirshik Comments: It’s really no surprise to see big box retailers reducing their brick and mortar footprint. They have to compete with the internet, and, in the recession, consumers have less money and less households are being formed. All of these factors add up to the plain and simple fact that it’s not worth spending as much money on rent. However, there are some big box stores that still make sense such as grocery stores and Wal-Mart (which includes a grocery component in many cases). Consumers do not buy many perishable items on the internet (currently), and Wal-Mart is the world’s largest discount driven store. Since the vast majority of suburban shopping centers are big box anchored, we will likely see a change in the face of retail centers in the coming years.

The couple maintained a long-distance romance for the next two years, often traveling on the Greyhound bus to see one another.

“I remember actually riding the bus down NW 6th Street past the field that is now Oak Gate,” said Rightmyer.

That was six years ago and today, the young couple are planning a March wedding.

Beau relocated to Gainesville after graduation, and after apartment living in the northeast area for several years, the couple bought their first home at Oak Gate in February. The development is near Northeast Park where they play tennis and walk their two Yorkshire terriers, Mikey and Gheri.

“We just love the neighborhood. It’s very quiet and within a quarter mile we have four grocery (stores) and a couple of gems people don’t know about, like the 2nd Street Bakery and Tim’s Thai restaurant,” said Rightmyer.

Developed by Oak Gate Development LLC in collaboration with AMJ Inc., Oak Gate consists of 94 two-story attached condominium townhomes. This in-fill project is located off NW 6th Street in the heart of Gainesville. One of its selling points is its proximity to downtown, the University of Florida and Shands HealthCare.

Phase I opened in February with 32 units featuring 2 bedroom/1 bath and 3 bedroom/2 bath layouts, each with an attached one-car garage.

Square footage ranges from 1,242 to 1,450 and models are priced from $184,900 to $199,900.

Homeowner association fees are $151.40 per month and include all common ground maintenance and hazard insurance.

Its location and price make it an attravtive choice for young professionals and the first time homeowner, said Brooke Bass, broker-associate of Keller Williams Premier Properties and Development.

Police, fire, medical and educational professionals are elegible for the Florida Hero’s program, which offers down payment and closing cost assistance, said Yvette Weghorst, loan officer with Peoples First Community Bank.

Models include 9-foot ceilings on both first and second floors, ceramic tile in kitchen, baths and laundry area, spacious closets, 5 1/2-inch colonial baseboards, textured walls and covered front porch. Additional features include full-sized washer and dryer adjacent to the bedroom, computer niche and pre-wiring for cable in all living areas.

Selected models include a screened rear porch and bay window in the dining area.

The kitchens feature maple cabinetry with custom pull-out shelves, a Whirlpool appliance package including glass-top stove/range, microwave, dishwasher and refrigerator with ice maker in black or white, pantry, breakfast bar and laminate counter tops.

Oak Gate is the first multiple dwelling property in Gainesville to offer a fiber optic Internet connection. The billing for the fiber optic service can be bundled with resident’s monthly Gainesville Regional Utility bill and costs about $24.95 per month.

The “fiber-to-the-unit” service guarantees bandwidth on the Internet with a 6 MB upload and 512 kB download speeds, said Tammy Snyder, customer service supervisor for GRU.

“The response to the fiber optic has been phenomenal. The advantage we have is (that) we are local – local equipment and local customer service,” said Snyder.

Rightmyer, who often works from his home, says the fiber optic is much faster than his previous Internet provider, and the service allowed him to set up a wireless network for the entire house and yard area.

“It was 1-2-3 easy with a wireless router,” said Rightmyer.

The pre-construction residence upgrades include an electric fireplace with custom wood mantel, crown molding, hardwood flooring, stainless steel appliances and a front porch railing.

“The house was customized before we moved in, saving us valuable time and money,” said Rightmyer.

Oak Gate also features a children’s park and playground, car-care area, barbecue grills and picnic tables. Extensive landscaping of the property includes Southern magnolias, Chickasaw plum and tulip trees, garnering a city Beatification Board 2007 distinction. Oak Gate’s Phases II and III will feature an additional 62 units and are slated to open at a later date.

“Everything is within a quarter mile, so whether shopping or going to work, I experience zero traffic,” said Rightmyer.