In recent years, Walgreens has steadily pared down growth of their 14,000+/- SF stores in favor of the new 2,500 SF prototype. Many of these stores are relocations of older models with a long history of store sales, giving Walgreens the ability to shift those sales to a store format that is more conducive to current retail shopping patterns and sign new, long-term leases. A combination of store size, building layout, and favorable lease terms makes these relocation stores ideal for real estate investors. With a 2,500 SF building featuring drive-thru access and full vehicular circulation, these buildings are not only a fit for Walgreens but also for the plethora of quick service restaurants (QSR) that are rapidly expanding in the same markets. Investors acquiring these buildings can enjoy a 10-year, NNN, Walgreens-backed lease while having a prototype desirable to many other sought-after QSRs and small-format retailers, many times at a higher rental rate if the buildings were to become available after the initial 10-year lease term. This combination of a long-term, hands-off corporate lease along with a layout that is highly desirable to future users gives retail investors the best of both worlds — guaranteed long-term cash flow with upside in the future. 

For more information, please reach out to Kyle Hartung, Vice President and Director of Investment Sales at Goodman Real Estate Services Group, LLC.

Creativity flourished in 2022 as big retailers found new ways to grow with smaller formats and reduce existing square feet by subleasing space to other companies that benefit their businesses. The trend is likely to carry over to 2023 and beyond. According to commercial real estate and property investment firm Jones Lang LaSalle (JLL), in its “U.S. Retail Outlook Q4 2022” report, retailers will continue to explore new store formats, including mini-department stores, “shop-in-shop” formats, and even smaller digital concepts.

In Q4 2022, the average size of new leases dropped to 3,185 square feet (JLL). Macy's department store is one example of a retailer that is moving small to grow bigger. Macy's currently has eight small-format Market by Macy's stores and two Bloomie's stores. Compared to their larger-format mall stores, these shops have seen success across the board in customer approval with two and a half times higher foot traffic and significantly higher conversion rates. Macy's is likely to continue this strategy by exiting mall spaces to open new stores in open-air shopping centers where competitors such as Kohl’s, TJX companies, Nordstrom Rack, and others have found success. According to Macy's CEO Jeff Genette, the retailer plans to open four new Market by Macy's locations and one new Bloomie's store in 2023 (Retail Dive).

Similarly, Kohl's announced plans in May 2022 to open around 100 smaller footprint stores, reducing their size from 80,000 square feet to around 35,000 to 55,000 square feet, depending on the market, over the next four years. Additionally, about 850 of their locations will offer a Sephora shop in 2023 (Chain Store Age). Many retailers have expanded their footprint with the "shop-in-shop" strategy, by placing a smaller version of their store inside stores of other larger retailers. For instance, Ulta Beauty's partnership with Target in 2021 resulted in increased traffic, awareness, and loyalty for both brands. In 2023, Target plans to open about 20 new stores varying in size, and their goal to fuel growth and create a differentiated guest experience will be aided by opening more Ulta Beauty mini-shops, as well as mini-Apple stores that started in 2021, at Target shop-in-shop experiences (Target). The “shop-in-shop” partnership allows the featured retailer to pay much less than it would cost to rent and operate a full store location while getting immediate access to the foot traffic and consumer base of the larger retailer. On the other hand, the larger retailer mitigates operational costs by subleasing a portion of their space while broadening their own consumer base. Other retailers participating in this trend include Petco in Lowe's and Toys R Us in Macy's.

Further, consumer behavior has shifted since the pandemic, and stores have accelerated their adjustment to the demand for online shopping ease with instore pickup options, self-checkout options, and the overall desire for a frictionless experience. One retailer that is breaking the mold to follow these changes is Best Buy, who in July 2020 introduced a small-format digital QR code store that only carries the best-in-category products and uses QR codes to order other products online from inside the store. The QR codes are also used to scan the products that are available in-store as customers are browsing, and the scanned products are then placed at a pick-up counter for the customer to take on their way out for a more efficient shopping experience. The store also offers 24-hour outdoor pickup lockers for products that are not stocked in the store but are ordered from Best Buy online (Best Buy) The store is only 5,000 square feet in comparison to Best Buy's typical store size of anywhere from 35,000 to 60,000 square feet. 

Internet sales have pushed retailers to adjust their store sizes and formats to remain viable in their current markets. However, to continue to grow their business, many companies are reducing their size and overall cost structure so they can expand into smaller markets. For example, Ulta Beauty, Michael’s, Kohl’s, and Ross Stores have smaller format store models depending on the market they are entering, whereas in the past these retailers would typically open the same size in every market. These smaller-format stores are filling vacancies and creating new developments in small cities throughout the U.S., while also providing much needed new store and revenue growth for their companies.

While there are many retailers that have embraced smaller footprints, some retailers have not reduced their size at all and have actually increased their size in several markets. Target is one example of a company that is experimenting with both smaller and larger store formats. In 2022, Target opened its first larger-format store at 150,000 square feet, which is about 20% larger than the current chain average (ChainStore Age). The new store is able to accommodate online orders and same-day services through a backroom fulfilment area that is five times bigger than other stores. Further, the Target Drive Up service allows customers to place their order online and pick it up or drop off a return, all from the comfort of their car. Target expects nearly all store locations will offer Drive Up Returns by the end of the 2023 summer season (Target).

As more retailers explore options to lease smaller spaces, sublease to other retailers for a “shop-in-shop" experience, experiment with more digital-friendly formats, and push the boundaries of where they will locate, it will be interesting to see which direction retailers go in the future to grow their businesses.

Cousins Randy Goodman, President and Managing Principal, and Richard Edelman, Senior Vice President and Principal, started Goodman Real Estate Services Group LLC 25 years ago this April with only a few eager employees and some passion for success. Through diligence and a team that strives to reach company and client goals, Goodman Real Estate has become a frontrunner in the commercial real estate industry in Ohio and surrounding states.

In 1998, Randy and Richard left The Hausman Companies, where they had been working together, with an ambition to build a commercial real estate brokerage company in their own vision. They saw the demand for dedicated real estate professionals and sought out a team with the same mentality. Beginning with just around 20 properties, a team of two that quickly became three with the addition of Zack Sogoloff, a newly licensed recent college graduate, and one support person, the cousins worked incredibly hard to develop their business.

Goodman Real Estate Services Group LLC has continued this mentality over the years and now has 24 employees, many of whom have been part of Goodman Real Estate since the early years. Adhering to fundamentals based on Creativity, Market Knowledge, Relationships, Loyalty, and a Corporate Services approach, Goodman Real Estate now represents over 100 tenants and buyers, markets over 11.5 million square feet of property for landlords and sellers, offers national investment brokerage and advisory services, and has a long list of clients that have stayed with them throughout the years. 

Richard Edelman

Senior Vice President/Principal and Co-Founder

Richard Edelman has been in the commercial real estate business for over 30 years and is a founder of Goodman Real Estate Services Group LLC. He specializes in restaurant and tenant representation, retail site selection and analysis, retail leasing and sales, site acquisition, expansion, and reposition planning.

Richard's extensive experience in the industry, along with his commitment to hard work and diligence to succeed, has given him a vast understanding of all aspects of the retail real estate process. He represents national and regional retailers, including Chipotle, Chick-fil-A, Five Guys, Bloomin' Brands, BJ's Wholesale Club, Barnes & Noble, Choolaah Indian BBQ, Mission BBQ, Northstar Café, Brassica Sandwiches & Salads, and more.

Q: Richard, which accomplishments in your career are you most proud of?

A: Representing Chipotle and Chick-fil-A for 25+ years each. 

Q: What do you think are the most important skills that a successful professional needs to have?

A: Hard work, creativity, honesty, and understanding the client's business and how it does or doesn't mesh with a landlord or seller’s needs.

Q: What has been one of the most important lessons you’ve learned throughout your career?

A: Don’t get too high or too low, figure out how to solve the problem in front of you.

Q: What do you love most about your job?

A: Coming to work "unemployed" every day to challenge myself to find deals for each client and make them work for all involved. Plus, the lifelong friends I’ve made with the people I have worked with!

In the beginning, there were hair salons for women and barber shops for men. The traditional idea of a one-stop beauty or barber shop has shifted over the years but has recently been deconstructed into many other businesses.

For a service that is considered essential for many, the beauty industry has been steadily changing over the years. One transition within the industry has been the use of "salon suites," such as Salon Lofts, My Salon Suites, and Sola Salon Studios. In this environment, stylists have their own space or "suite" to conduct their services, where they are free to set their own hours and run their own business. Stylists rent their own individual space, clients stay separated, and the interaction occurs in a private setting. While this trend has been on the rise for about a decade, as many beauty professionals decided they would rather rent a suite than be staffed at a hair salon, the shift to suites accelerated following the 2020 pandemic, as customers preferred less human contact. In the same stroke, many salon owners have stopped requiring stylists to be on staff and actually prefer to rent out salon chairs due to the uncertainty of staffing longevity in a post-pandemic world.

Further, the hair salon has splintered off into several separate businesses, creating a sort of deconstructed hair salon. While nail salons split off from hair salons decades ago, other components of the beauty salon such as waxing, threading, and laser hair removal have opened as separate businesses in recent years as well. For example, European Wax, Milan Laser, skin care concepts such as Allure MedSpa, hair blow out concepts such as Drybar (which focuses solely on washing, blow drying, and hair styling), and other typical spa services such as massage and tanning all represent concepts that used to be exclusively offered in a traditional beauty salon or spa, but are now entirely separate businesses. The success of these individual concepts has hurt traditional salons, as many clients opt for a specialized professional they can visit in a separate trip verses going to the same business for all salon and spa services.

The shift from traditional salon services has also put pressure on discount hair salons, such as Great Clips and Supercuts. These locations have typically attracted men and children rather than women. Now, salon concepts designed specifically for children have entered the scene, such as Cuts N Curls for Boys & Girls, Rock Paper Scissors Kids Hair Salon, and Sharkey’s Cuts for Kids. Many men have also made the transition from discount hair salons to more of a classic men’s salon, like a traditional barber shop with a modern spin. These concepts, such as Sport Clips, Hammer & Nails, and Lady Jane’s Haircuts for Men, cater to the beauty grooming needs of men and provide more of an experience. These concepts also resemble a reconstructed version of the classic barbershop that discount hair salons pushed away in the first place, but now with more services. 

While the demand for more beauty services has played a role in the creation of these individual businesses, the deconstruction of the traditional salon has also been accelerated by the rise in independent suite businesses. This idea of individuals leasing a small space on their own, coupled with the many individual businesses that have spawned from many services commonly found in the classic hair salon and spa “all-services-in-one-location” approach, has certainly reduced sales in traditional hair salon establishments. The newer, personalized concepts may not replace the typical hair salon completely, but they have surely limited their growth going forward.