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The Rise of Formula Retail

October 20, 2015 | By John Cumbelich

Travel the state, travel the country or travel the world and plan to shop or dine at your favorite place.

California Pizza Kitchen is in China. GAP is in Saudi Arabia. Papa John’s is in Malaysia. Tiffany & Co. is in Argentina. It’s not just about McDonald’s anymore.

When I’m in the car some place thousands of miles from home, my kids ask if we can stop at Starbucks, or Jamba Juice. The answer is almost always yes. I try to explain…”Kids, it wasn’t always like this.”  They roll their eyes, ready for one of my stories about the “old days”. Really? Am I that old? Or did things really change, really fast? I explain how, not that long ago, every place used to have its own unique offering. It was unpredictable, but fun. We had to develop sharp skills in evaluating prospective restaurants in a new towns. How busy were they? Did they post reviews in the window? Did the staff look like they had been there a long time? If the relentless expansion of retail and restaurant brands didn’t entirely eliminate these skills, Yelp did. Travelling with a little adventure is a lot harder than it used to be.

Dunkin Donuts, Levi’s, Taco Bell, Apple, Sephora, KFC, Tory Burch, Subway and hundreds other brands that are just down the street from where you work or live, are also just down the street from everywhere else. In America, we like to say “all politics is local”. That once was true in retail too. But now, not so much. Notably, the cross border movement of retail brands is not some one-way street in which American culture is being exported abroad. Uniqlo, Aldi, Trader Joes, Tesco and H&M are but a few of the international brands that have successfully built a brand presence in the US that hundreds of others are certain to follow.

Moving in lockstep with these retailers and restaurants, retail real estate (Shopping Centers) has evolved into a critical growth platform upon which brands and the merchandise that they carry extend their reach into every corner of the globe. Concurrent with the growing importance of retail shopping centers as a medium for corporate expansion, a more sophisticated, institutional and global cadre of developers and owners have emerged in the past quarter century. Like their retail and restaurant tenants, these owners are typically financed by public markets or through sophisticated private capital. And it’s not just Real Estate Investment Trusts (REITs). Today’s owners and retailers alike are dominated by firms backed by VC’s, hedge funds, state teachers retirement funds, life insurance companies, off-shore funds, public employee retirement funds, sovereign wealth funds, and other institutional investors that value the track record for growth that Formula Retail continues to deliver.

Today’s sophisticated retail owners straddle a cultural fence with Trammell Crow on one side and George Jetson on the other. The traditional business of bricks and mortar has evolved in so many ways that today’s owner has become an enlightened conductor whose symphony consists of branding experts, e-commerce data, LEED certified buildings, multi-national law firms, transit villages and political consultants. Yesterday’s developer had a nose for a deal, great people skills and one or two key anchor tenant relationships that he nurtured on the golf course and rode hard. Today’s developer, and certainly tomorrow’s, will increasingly have a Wall Street resume, an MBA and speak multiple languages.

On the coattails of the retail and dining brands that continue to push into new markets and the developers that create those environments, go the brokers, law firms, contractors, architects and consultants that serve them. Thus, the success of Formula Retail has fostered the parallel rise of Formula Law, Formula Real Estate and Formula Architecture. Today, firms like CBRE, Gensler, Skadden Arps and Bechtel are…everywhere.

So don’t worry. It’s not just your imagination acting up the next time that you travel and the buildings, the businesses and the food all seem an awful lot like home.