Internet affects retail negotiations

NEW YORK - E-commerce is a force that is being dealt with by retailers and developers alike, and is not only influencing the buying public, but also how real estate leases are being negotiated and how space is evaluated. So says Robert K. Futterman, of New York-based Robert K. Futterman & Associates LLC.

"In the retail market, the impact of the Internet has already greatly affected marketing, communications and distribution," he says.

As an example of the impact on marketing, Futterman says, "You go to a Barnes & Noble and buy a book and walk out with a shopping bag that says on it. There is a lot of strategic marketing going on between [bricks-and-mortar and clicks-and-mortar]." Although Futterman does not have the answer as to how e-commerce will change commercial real estate, he does have a few thoughts on the subject.

Futterman believes that people still want the tangible shopping experience and that consumers want to see, touch and feel their purchases before buying. "Socialization is an important process," he says. "People want to go out for the experience and for the physical touching of the merchandise." Futterman also believes that retail has become entertainment, not just a collection of shops, and that e-commerce will not become the only way to shop because not everyone has access to the Internet.

An additional Internet effect is the newfound power that tenants have in landlord negotiations. He says that retailers are beginning to recognize that they have more leverage over landlords. "I think there are two ways that retailers have leverage. No. 1, the argument can be made to the shopping or strip center developer that because of the resources the retailer has to commit to their online retailing, they can't afford to pay as much rent to be in the center," says Futterman. "Two, because of the impact e-tailing might have one day, [retailers] are scaling back the size of their stores." Futterman adds that he also sees a trend toward e-tailers eventually having traditional retail stores as well.

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