Episode 008 Derek Waltchack: The Death of Retail Has Been Greatly Exaggerated
Derek Waltchack located in Birmingham, AL specializes in urban commercial development in the area. Derek was recognized as one of the top performing agents in the city in 1998, and was the youngest to ever receive the award. Today, Derek will be discussing his perspective on the retail market in the Southeast. Derek seeks opportunity where many investors are unclear of these assets.
Derek is an agent at the firm Shannon Waltchack, a member of TCN since 2014. He started the firm in 2005, and they now own around $300M of shopping centers and office space along with managing $100M of other properties. Based in Birmingham, Shannon Waltchack focuses primarily on convenience retail- small, un-acred retail strips.
Collapse of Retail- what does that mean?
Derek believes that while not all segments of retail are assets in today’s market, his focus- convenience retail, persists amongst worthy investments. This includes small, un-acred retail strips in wealthy pockets around the country. There are three different time frames of shopping: monthly, weekly, and daily shopping. Monthly shopping includes things like back to school, mall visits, birthday presents- which has been heavily affected by e-commerce. Weekly shopping is typically for groceries or common household items, competing well against e-commerce. Daily shopping revolves around physical needs like food, personal hygiene, and services- things that e-commerce would have a hard time replicating. Daily shopping is where we are spending the most of our time in retail. The objective in convenience retailing would be investing into these large strips of daily-shopping centered retail locations, and combining them into larger portfolios.
What are we looking for in these centers?
Throughout the pandemic, more retail locations are falling into bankruptcy and failing to produce sufficient cash flow. While building these larger portfolios out of strips, Mom & Pop owners are most attractive to investors. Bigger chain retailers are filing for bankruptcy or quickly pulling the plug on locations that are not performing up to standards in order to clean up their balance sheet, leaving the landlords in a tough situation. Small restaurant spaces are also attractive in these portfolios, easier to fill and set up well for delivery or pickup. Another type of tenant that fits well into these portfolios are doctors or dentists, not only because they tend to stick around longer but also the tenants that are not relying on location for success, but for consumers that are seeking them out and in turn driving more traffic into the shopping center.
Market Insight
The Southeast, along with a few of the areas that Derek specializes in (Nashville, Birmingham, Atlanta), are performing much better than other parts of the country. Derek believes it may be due to state regulations allowing businesses to stay open longer or open up earlier, helping landlords and tenants. Also, the trend of population growth in the Southeast boosts the consumer market- broadening the base of attractive investments in the area.
Retail Space Conversions
There are many different retail space conversions that Derek and Eric have seen being put into action following the shift in necessities for retail locations. Some of these include Amazon turning dead malls into fulfillment centers, malls becoming multi-family buildings attached to shopping centers with added office space, and conversion of retail spaces into gyms/fun centers. In Tampa, we are currently going through conversions in two large retail spaces- Westshore Mall and University Mall. Westshore Mall, amongst one of the most valuable retail/office spaces in the Tampa Bay area, ties all of Tampa Bay together and offers retail space, office space, and multi-family options in the near area- all within 5 minutes of the Tampa International Airport. The repurposing and conversion of these spaces allows for retail to continue to flourish in the area.
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