A.CRE

Lifestyle Retail Center

Lifestyle retail centers provide dining and entertainment in outdoor settings with upscale national-chain specialty stores. They tend to be over 300,000 SF in size, with a trade area of 8 to 12 miles. Large format upscale specialty is the most common type of anchor tenant for this retail subtype.

Source: ICSC

Putting ‘Lifestyle Retail Center’ in Context

Seaside Capital Partners, a boutique real estate investment firm specializing in retail acquisitions, recently acquired The Harborfront Commons, a 350,000-square-foot lifestyle retail center located in Long Island, NY. This core-plus acquisition reflects the firm’s strategy of targeting high-quality properties with opportunities for minor operational improvements.

Overview of The Harborfront Commons

The Harborfront Commons is a quintessential lifestyle retail center, featuring a mix of upscale national specialty retailers, fine dining establishments, and entertainment venues. Tenants include high-end anchors such as Williams Sonoma, Lululemon, and Restoration Hardware. The center also boasts an upscale movie theater and a selection of popular artisanal restaurants, contributing to its appeal as a destination for both shopping and social experiences.

The Property’s Competitive Position

The property serves a trade area of approximately 800,000 residents within a 10-mile radius. The demographic profile of the area aligns well with the tenant mix, with an average household income of $125,000. Additionally, Long Island’s dense population and limited availability of developable land create high barriers to entry for competing lifestyle centers.

Financial and Operational Context

Seaside Capital Partners purchased The Harborfront Commons for $175 million, reflecting a 6.86 percent going-in capitalization rate based on a year-one NOI of $12 million. The property has a strong occupancy rate of 95 percent, with leases structured to include annual rent escalations averaging 2.5 percent.

Despite its stability, Seaside Capital identified minor opportunities to enhance the asset’s performance:

  • Tenant Mix Optimization: Replacing underperforming tenants with high-traffic specialty stores or local boutique concepts.
  • Operational Efficiency: Implementing sustainable practices such as LED lighting and energy-efficient HVAC systems, which could reduce common area maintenance (CAM) costs by 5 percent.
  • Digital Integration: Introducing a mobile app for promotions, parking management, and event scheduling to enhance the customer experience.

Hypothetical Scenario – Assessing the Investment

One year into the investment, Seaside Capital anticipates incremental NOI growth of 3 percent due to strategic leasing and expense reductions. This would increase the NOI to $12.36 million and boost the property’s implied value (using the same 6.86 percent cap rate) to $180 million, reflecting a 2.86 percent increase in value.

Key Takeaways

This hypothetical example illustrates how lifestyle retail centers, like The Harborfront Commons, can generate attractive risk-adjusted returns for core-plus investors. These centers thrive in affluent suburban locations, offering a unique mix of retail and experiential services. Investors can further enhance value through operational improvements, tenant mix adjustments, and customer engagement strategies.

Click here to get this CRE Glossary in an eBook (PDF) format.
by