Cushman’s Matt Winn on the Wide World of Retail and the Death of Mass Luxury
Billy Gray May 28, 2013, 9 a.m.
As a senior managing director and head of retail services in the Americas at Cushman & Wakefield, Matt Winn oversees 325 brokers making deals from Canada to Brazil. In previous roles at C&W, the Atlanta-based Mr. Winn handled the expansion efforts of tenants including Nike, Abercrombie & Fitch and Ann Taylor. The Commercial Observer caught up with Mr. Winn at his company’s booth on Monday morning at the International Council of Shopping Centers’ RECon real estate summit in Las Vegas to discuss the return of “true luxury” and strategies for walking the convention floor.
The Commercial Observer: How would you sum up the current outlook for retail in America?
Mr. Winn: We describe it in general as the following: a couple of years ago we created a graphic. If you can imagine this—it’s taller on the ends in terms of growth, which would be luxury or discount, and then flat or dropping in the middle. We call it the barbell of prosperity. And the reason we say that is the middle class has to push in order to eliminate the sagging middle. The economy has to be lifted up to see the growth in all sectors.
So you’re seeing this outperformance at either end of the system. That’s the most macro view of the United States market. What does that mean for property? Fortress malls and downtown high streets that have the luxury tenants are doing better. And so are the outlet malls. Then that power center is not doing so well. Groceries you sort of have to exclude from that, because food is a staple. People obviously will always need that.
And then it’s the same thing within the investment markets. All the cap rates are coming in the same way.
The things that are really affecting that are: one, globalization; two, urbanization; and three, the fracturing of retail by technology. So tenants from all over the world are now looking, since the recession, for new customers. So if you look at Gap—and they’re doing O.K. on same-store sales growth—but where they’re really doing well is China, Turkey, all of these new markets. Abercrombie & Fitch, Tiffany, they’re all looking and expanding. And similarly, all the retailers from those environments are coming here.
In New York it seems like a new international retailer opens every week.
Right. H&M, for example.
You also have retailers expanding within the Americas, like Joe Fresh from Canada.
In terms of the fracturing of retail by technology, is the luxury sector less affected than others? It seems to me that the luxury clothing customer, for example, would want to try on their expensive clothes before purchasing them.
Well, the ones from a property standpoint that are probably most affected are any stores that sell commodities. Record stores are gone. Bookstores are on their way to being gone, right? But every sector will be affected in different ways. And to think that it won’t happen is a little bit naïve.
Even within the apparel segment, if you look at it, it’s affected in different ways. So, Burberry had no Facebook presence in 2010. Now they have 15 million fans on Facebook. And they have more fans than the New York Times or the New York Yankees combined. And what that allows them to do is crowdsource what’s popular.
They can see how many likes they get.
Right. If they do an online fashion show, they can see how many likes they get for green versus blue. Now you can manage your inventory and increase your profits at [the] most basic level.
There was an article in Women’s Wear Daily last week that said we’d entered the “single-digit era” of luxury retail. Now, the economy seems to be tentatively on the rebound, and you could think that would lead to a luxury boom. What’s causing this slow-down to a forecasted 4 or 5 percent growth this year compared to 11 or 12 percent in the past couple of years?
Well, I think what luxury’s doing is going from an era of mass luxury—catching as many customers as possible—to true luxury, which is making a product specifically for a luxury market. So that may mean slower growth but higher profit. A lot of the luxury houses have raised prices lately, which is part of the trend of getting back to true luxury. You can’t straddle the middle anymore.
You mentioned commodities earlier. What’s a quintessential example of the middle market retail that’s neither discount nor luxury and that’s getting hit hard right now?
There are so many different ways to look at that. Penney’s is a good one.
What do you think will happen there? Where will J.C. Penney be in a year?
Because of some of the things we’re doing, I can’t comment on that.
Moving on from retail to RECon. Aside from Cushman & Wakefield, what are the booths you’re most excited to check out?
I think that you gain value from every meeting you have. I’ll be in our booth because that’s what I do [laughs]. But it’s not just the booths. There’s a whole separate group over at Caesars—[the mall developers] Simon, Westfield—who have pulled off the floor and effectively defined their identity in a different way.
I was having lunch with Gregg Goodman, the president of The Mills [a Simon subsidiary], the other day. And at first we looked at that as a real negative. There are some disadvantages to not having them right here.
And when did they pull off?
That was 2009.
It was part of the recession. And what it did was make us really be effective in our meetings. So our brokers who work with the mall owners plan a day at Caesars and a day on the floor.
You really have to get the most out of each meeting.
That’s right. Look, there are lots of great projects going on. Jamestown with Ponce City East in my hometown, Atlanta. Then some of the things they’re doing in New York. General Growth has a lot going on. You just have to make your way between the booths.
Another project near your hometown is Avalon, North American Properties’ $600 million mixed-use development in Alpharetta, Georgia. I saw that Bocado Burger Bar is opening there. The CO is curious about restaurant chains that might be coming to New York. Do you know of any from the southeast? I for one would love to see The Varsity in Manhattan.
[Laughs] The Varsity is a great Atlanta landmark. But I’m not sure it’s the right thing for New York, as much fun as it is to go and get your oil changed. You can look at Mellow Mushroom, a pizza chain that has been expanding. Then I think healthy fast food is something you have to look at—VeggieGrill, LYFE Kitchen. LYFE Kitchen is by two McDonald’s executives.
And then obviously you have the celebrity chefs. Richard Blais, the Top Chef All Stars winner, just went from Atlanta to San Diego. He may be poised for a run. And then this guy Ford Fry has some private equity money behind him. He did JCT and The Optimist.
What has been your biggest deal or accomplishment since the last RECon?
I’m lucky. I’ve got 325 talented people all over the hemisphere. Unfortunately, I’m at a phase in my career where I don’t get to do the deals anymore. But I can highlight a couple, from north to south. One is the RONA portfolio, a hardware chain in Canada. Then, in New York, the H&M lease in Times Square really is an incredible achievement for us. And then our senior brokers in New York and San Francisco being promoted to vice chairmen was tremendous and exciting.
Also, in South America, we’ve been working on a variety of people—restaurants and retailers—on their expansion strategies.
Is South America the next hotspot?
Well, China’s so big that it will continue to dominate our conversations for a while. But, yes, equally important will be some of the South American countries: Colombia, Peru, and then, of course, Brazil in and of itself is a huge story, with the World Cup and the Olympics coming up.