Long called the cultural melting pot, the United States of America (the US) is the world’s largest economy and remains at the forefront of retail market trends. US retailers and shopping center owners are now global companies setting the standard for consumer business worldwide. The high streets of New York, Chicago, San Francisco, and Los Angeles are shopping destinations for local residents and international visitors alike.
With access to a mature and diverse range of retail property types, from luxury high streets like Fifth Avenue (NY) and Rodeo Drive (LA), to enclosed shopping malls, to open air centers, U.S. markets offer a variety of retail schemes.
The U.S. is home to many of the world’s best known brands such as Abercrombie & Fitch, Nike, GAP and Apple started in malls and high streets of the United States. And while the US may be best known for the burger, it continues to produce great restaurants whose diversity of cuisines matches the country’s multi-cultural population.
With annual retail sales greater than US$5.3 trillion, the opportunities of the US market will continue to produce homegrown brands and attract foreign concepts looking for new consumers.
|Retail Sales Growth||-7.2||5.4||7.3||4.9||3.8||4.1||2.3|
|Unemployment rate (%)||9.3||9.6||8.9||8.1||7.4||6.2||5.3|
|Interest rates 3-month (%)||0.15||0.14||0.05||0.09||0.06||0.03||0.05|
|Interest rates 10-year (%)||3.26||3.22||2.78||1.80||2.35||2.54||2.14|
|Consumer Confidence Index||45.2||54.5||58.1||67.1||73.2||86.9||98.0|
Note: *annual % growth rate unless otherwise indicated.
Source: Moody’s Analytics
|Population||321.8 million (2015)|
|GDP||$16.4 trillion (2015)|
|Political Breakdown||Two-Party Democratic-Republican coalition|
|Executive Branch||President/Vice President Barack Obama/Joseph Biden (Dem)|
|Legislative Branch||Congress: Senate/House (Dem/Rep)|
|Judiciary Branch||Supreme Court (Appointed Non Partisan)|
|LARGEST METRO AREAS (2015)|
|New York MSA||19,567,410|
|Los Angeles MSA||12,828,837|
Major USA Food Retailers
Walmart, Kroger, Costco, Target, Safeway, Supervalu, Albertsons, Publix, Whole Foods, Trader Joe’s, Giant Eagle, Winn-Dixie, Wegmans, A&P, Harris Teeter, Bi-Lo
Major USA Non-Food Retailers
Walmart, Target, Home Depot, Costco, Lowe’s, Best Buy, Sears, Macy’s, Kohl’s, JC Penney, TJX, Dollar General, Gap, Nordstrom, Abercrombie & Fitch, Staples, Bed Bath & Beyond, Limited Brands, Office Depot
International Retailers in the USA (a selection)
IKEA, Zara, H&M, Uniqlo, Louis Vuitton, Cartier, Burberry, Gucci, Diesel, Mango, Sephora, Lululemon
Food & Beverage Operators
McDonald’s, Subway, Burger King, Einstein Bros. Bagels, Wendy’s, Starbucks, Applebee’s, Caribou Coffee, California Pizza Kitchen, Chili’s, Red Lobster
|MONDAY - SATURDAY||SUNDAY|
|9:00/10:00AM-9:00/10:00PM (non-food) 7:00AM-11:00PM/12:00AM (Supermarkets & Drugstores up to 24 Hrs)||12:00PM-6:00PM (non-food) 11:00AM-10:00/11:00PM (Supermarkets & Drugstores up to 24 Hrs)|
The United States is the world’s largest retail market with personal consumption expenditures of 11.2 trillion annually roughly $34,848 per person for its 321.8 million citizens.
The U.S. is a relatively mature and competitive retail market where consumers have traditionally been very receptive to new concepts and formats.
The U.S. leads the world in shopping center Gross Leasable Area (GLA) per capita at nearly 23 square feet per person, well ahead of other countries.
Retail space in the U.S. totals 13.0 billion square feet, including nearly 95,000 shopping centers with an aggregate GLA of 4.3 billion square feet, accounting for roughly 33% of the U.S. total retail space. (Source: CoStar Group, Inc.)
The U.S. has some of the most expensive street retail space in the world. New York’s Upper 5th Avenue holds the top spot as the world’s most expensive retail location with rental rates reaching $3,500 per square foot on an annual basis (as of 2015). New York’s Times Square Bowtie and East 57th Corridor also remain among the most expensive, with rents as high as $2,300 and $1,425 per square foot per year, respectively.
Technology continues to influence consumer purchasing behavior and online purchases continue to grow. In 2015, online retail captured 7.4% share of total retail sales.
Due in part to technological advances in retailing, traditional Big Box retailers are shrinking store sizes and footprints to enhance profitability.
Retailers continue to experiment with formats of every size and shape as they look to better compete. This even goes for formerly online-only retailers that are increasingly going omni-channel as well and opening physical stores to serve as embassies of their brands.
Retail expansion in the U.S. is currently being driven by concepts that don’t compete with online retailers, such as food (grocery or restaurant) and service-related retail.
New Entrants to the Market
|KEY FEATURES OF LEASE|
|Lease Terms||Lease terms in the United States typically range between 5-10 years, with fair market options extending the term for an additional 5 or 15 years. Average terms for anchor-type tenants (100,000+ sf) can average around 20 years. Rents are quoted in US $ on a per square foot (psf) per year or per month basis. Rent is quoted exclusive of property taxes and common area maintenance (service charge) which are charged separately. There are several options to renew the lease after the first term. The rent for these option periods can be agreed on at lease commencement or based on benchmark adjustments such as the Consumer Price Index (CPI). Concessions in the form of tenant improvement allowances and free rent may be offered depending on the size and credit quality of the tenant.|
|Rental Payment||Rents are payable monthly. Percentage rent deals are common only in restaurant transactions, and then typically only when a landlord has contributed meaningfully to a tenant’s initial build-out. A security deposit is not required if the tenant signing the lease is a credit worthy entity, but it is common to see shell corporations or single-purpose entities signing the lease to limit exposure, in which case a substantial security deposit would be required, in the amount of up to a year’s rent. Personal guarantees and/or letters of credit may also be required, especially for higher risk tenants.|
|Rent Review||Rental escalations are common practice, ranging anywhere from an average of 2% - 3% per annum. They can be fixed or tied to inflation. Those increases can be annualized or every three or five years. Escalations are based on contracts between the landlord and tenant. There is no judicial review of the increases.|
|Service Charges, Repairs and Insurance (Leases are triple net NNN)||Tenants are typically responsible for all expenses in addition to base rental payments and taxes (see below). This generally includes the cost of CAM (common area maintenance), taxes and insurance. CAM typically covers management fees, security, cleaning, landscaping, internal maintenance of common thoroughfares, external maintenance and insurance, servicing of elevators, water, heating, and air conditioning. Retail tenants are generally responsible for their own direct operating expenses, including HVAC, electric and water, and typically are metered for those utilities directly. Alterations to the shop's interior/exterior usually require the landlord's consent which can generally not be withheld. The terms of the lease will detail these provisions.|
|Property Taxes and other costs||Retail tenants typically pay a pro-rata share of real estate taxes, with the pro-rata share being determined by the tenant’s share of square footage in the building. Retailers who occupy an entire building usually are responsible for all taxes.|
|Disposal of a Lease||Sub-letting and lease assignments are usually possible under the terms of the lease, subject to landlord’s approval. Early termination is only by break clause, to be negotiated at outset of lease. For an early termination of a lease, the fee is approximately equal to the unamortized cost of the tenant improvements. At the end of the lease, tenant is required to leave the space in "broom clean" condition with all personal property removed. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease.|
|Valuation Methods||Stores are not valued using a government index, but rather in a more subjective way, using recent comparable transactions as a guide, but without specific guidelines as to valuation.|
|Legislation||A memorandum of lease is required in some jurisdictions. Tenants are required to submit to building inspections during construction and to obtain a Certificate of Occupancy prior to opening.|