In this episode of Retaili$tic, Rachel Elias Wein and Deborah Weinswig explore the evolving landscape of retail and real estate, discussing the impact of consumer behavior, convenience, and technology on the industry. They delve into the importance of strategic real estate decisions, the role of employees, and the influence of private equity. The discussion also touches on the future of commercial real estate, the significance of data centers, and the changing dynamics of consumer loyalty and membership models.
Video version of this podcast is here.
Takeaways
Retail is currently in the spotlight due to changing consumer behaviors.
The evolution of retail requires looking at historical trends to predict future changes.
Convenience has shifted from traditional stores to online delivery services.
Consumer loyalty is declining as shoppers become more comfortable with multiple retailers.
The role of employees is crucial in enhancing customer experience in retail.
Membership models can create loyalty but may not be the only solution for retailers.
Owning real estate can provide long-term benefits for retailers compared to leasing.
Private equity plays a significant role in unlocking real estate value for retailers.
The future of commercial real estate is influenced by high interest rates and economic conditions.
Data centers are becoming increasingly important as businesses leverage technology.
Chapters
00:00 The Evolution of Retail and Real Estate
03:07 Consumer Behavior and Retail Dynamics
05:56 The Impact of Convenience Stores
09:01 Retailer Identity and Consumer Loyalty
12:05 The Role of Employees in Retail
14:51 Membership Models in Retail
17:39 Strategic Location Planning in Retail
20:53 The Future of Retail and Real Estate
23:52 Unlocking Real Estate Value in Retail
29:54 The Value of Real Estate Transactions
32:05 Regrets in Real Estate Monetization
35:11 Asset Class Perspectives
39:28 Demographic Shifts and Migration
45:36 Commercial Real Estate Challenges
49:18 The Future of Real Estate Innovations
Welcome to Retaili$tic, the official podcast of Corsight Research for September 9th, 2025. This week, Coresight Research CEO Deborah Weinswig welcomes Rachel Wein, real estate consultant and strategist for many of the country's largest retailers, to discuss the macroeconomic, demographic, and geospatial variables shaping the success and failure of the stores we shop. But first, we get to visit with Isla from the London office to hear about the exciting research publishing this week on Coresight.com.
Hi Philip, this week we've got fresh insights to help you stay ahead. First up, our Intelligent Inventory Playbook, designed to guide companies on the smartest inventory strategies for 2025 and beyond. Next, the latest Innovator Matrix highlights the martech companies you need to know to keep your marketing ahead of the curve. And we're continuing our weekly Store Tracker series, bringing you the latest updates on physical retail changes across the US and the UK. Tune in for actionable insights, trends and analysis you won't want to miss.
Thanks, Isla. Now here's Deborah and Rachel.
So Rachel, thank you so much for joining us today. Right now retail is absolutely in the spotlight. And with that real estate, because what we're seeing right is Gen Z is much more likely, in a unified commerce world, much more likely to touch the stores at some point during their transaction. So maybe give us a little bit of your background because it's really unique and why real estate?
Rachel Elias Wein (00:44.567)
All right, well, first, thank you so much for having me. I'm really excited to spend some time with you today and I guess we'll jump right in. So as mentioned, I'm Rachel Wein and I work with very large owners of real estate and retailers who have large portfolios of owned real estate to help them make better strategic decisions about their portfolio in good times to help them invest strategically and in challenging times, to help them harvest strategically from their portfolio.
And my background, actually was, I went to school for architecture. And in the last year of architecture school, I got a business degree and that's what led me to real estate. And I was with Ernst & Young for a number of years in their real estate transactions and real estate advisory group. And then I started my practice in 2009. And I've been working with many of the largest publicly traded and private real estate companies in the country.
And then on the retailer side, really household names, all of the ones that you would have thought of in terms of essential retail, drugstores, wholesale, grocers. And I really, I've enjoyed every minute of it.
Deborah Weinswig (02:02.03)
What is, right, obviously everything and nothing has changed, if you will, but in terms of what you're seeing right now in 2025 and leading into 26, what are some of the things that you hadn't expected that have happened that are leading to change in your industry?
Rachel Elias Wein (02:19.341)
Yeah, that's a great question. And I think, you know, so much of you're looking at the everyday, every quarter feedback for these retailers and for the consumers. And I look at that, but I'm really trying to take it into a, what does this mean for five, 10, 20 years from now? And what happened five or 10 or 20 years ago that leads us to where we are today? So.
I think for example, know, this, the announcement of Amazon doing same day grocery with the same carts, like that is a today activity, really big change. What will that mean for the next five and 10 years? But then I also kind of take it back and say, what happened when, when Amazon started doing more than just books 20 years ago? How did that impact the real estate footprint that we have for retailers today? So in 2000, 2002, 2004,
Eckerd drugstore, CVS, Walgreens, were blanketing America. mean.
Deborah Weinswig (03:13.812)
my gosh, I haven't heard Eckerd in like, and I was just in ACDS, I'm like, have such, it's funny, I have such fond memories of Eckerd, but like nobody even, I mean, most people have said, like I said, I was part of all of that, but it is amazing how quickly you can forget a banner too.
Rachel Elias Wein (03:26.307)
Yeah.
Rachel Elias Wein (03:34.286)
Well, think about this. So I'm taping today from St. Petersburg, Florida, which is 10 miles down the road from Largo Clearwater where Eckerd Drugstore was headquartered. So my very first internship in commercial real estate was with Carlos Alfonso at Alliant Partners in Tampa, and we built Eckerd Drugstore. So that was back in the day when they were building out...
Phoenix and Denver and Eckerd said, you know, we've got four developers. You're each going to take a quadrant and you're the Southeast corner of Denver and you're the Northwest corner of Phoenix and go make it happen. And that was because that was convenience, right? Were you on the going home side of the road? Someone that needed to grab milk or, or shampoo, they would stop there on the way home and grabbing that two acre parcel.
and having that 14,000 square foot box was the quintessential definition of convenience. And it just didn't take that long for convenience instead to mean Instacart or shipped delivery from Target or pick up at Walmart. And now all of a sudden it's just as easy to pick up or have something delivered as it is to stop at Walgreens or CVS. And that's why those front end sales are hurting so much.
and you think about it. for real estate, real estate is, you know, bricks and mortar. It takes a long time to build a store. It takes a long time to relocate a store. It takes a long time to figure out you need to change your format or your footprint and all of those things. And so here we are, the relative quickness that the consumer can move and that we can have online and on the channel. Real estate takes longer to catch up.
and the implications are for reaching for a long time. So what was pulled from retail then became really important for industrial real estate. Do we have the right locations for last mile, two day delivery, then one day delivery, then three hour delivery, then right now delivery. So all of that infrastructure, the strategic infrastructure of the physical footprint is very important to retail.
Deborah Weinswig (05:52.258)
So I'm gonna kind of push back a little bit because I think we had the drug stores, then we had the growth of dollar, right? And then we had the growth of, I mean, I've always called them hard discounters, but like the Lidls and Aldis. And wherever you wanna kind of, square peg round hole Trader Joe's in there as well, right? As people get more comfortable with private brand. And then...
Rachel Elias Wein (06:00.824)
Totally.
Deborah Weinswig (06:18.126)
maybe a little bit earlier than that, right? We had the whole kind of dismemberment between oil and gas and sea stores. So you've had kind of a, which I live through, so you've had a lot that's happened. I mean, I actually think this is the most, this is where we're starting, because we could start anywhere, but this is like the most to me personally, like from an intellectual perspective, the most interesting area of retail and with what we're starting to see now with convenience. I I talked to a sea store, they own,
you know, many locations and just the initiatives that they had. And I'm sitting there and I'm just like, you know, you would think you were talking to Walmart in terms of their level of sophistication. And so can you take us, can we go like way back where we started, right? Can we start with Eckerd and Revco and write like all this, some of the consolidation, what was the impact of the C stores and some of the change there?
And what did you see from a footprint perspective? Because when you and I started the industry, everybody was like an inline strip. Then they moved to the very expensive corner. And so that had to all, as you start to think about it, and they used to have like 20,000, 30,000 square foot stores, and they went down to 10,800 square foot box or whatever it was. So can you walk us through that? Because this is an industry that's had unprecedented change in a very short period of time.
Rachel Elias Wein (07:39.93)
Yeah, it's a great point. And a short period of time, 20 years, it's not so short, but it's not so long either. So certainly every retailer, all of the smaller box retailers wanted to be in line with the major grocery retailer, let's say. how the drug stores used to want to be in line. And there's still a handful of stores here and there, and Rite Aid had more of those and whatnot.
that are in line next to the main line grocer. So that was at a time where there were, we were predominantly shopping for grocery at a main line grocer that didn't have a pharmacy. And then we would walk down the aisle and we would go to CVS that was in line. And all of a sudden, it's not just with grocery and drug. There's no boundaries between categories.
Deborah Weinswig (08:21.928)
That's good point. Very good point.
Rachel Elias Wein (08:37.431)
Right? So like the dollar stores used to be dollar stores. Now they also have grocery, right? They've got cans. And so in all of the grocery leases that want to put, they don't want a dollar store nearby them because the dollar store is impacting their grocery sales. I'm trying to think of some of the real like discount stores that have, you know, they have cans, they have
parchment paper and aluminum foil and all of these things that are part of the profitable basket, right? And so not only was Kroger and Albertsons and Safeway and on all the rest, not only were they getting caught in the middle with the dollar stores coming after theirs, their side, but then they say, well, people are already coming for milk and eggs. How much harder is it to get them to also get their prescription? So now they're also competing there. Then you have Target buying.
Deborah Weinswig (09:06.36)
What the?
Rachel Elias Wein (09:35.244)
CVS pharmacies in their store. You know, there are a lot of different machinations of this, but I think at the core, there used to be much more distinct boundaries between how we shopped and now we are all, and certainly COVID accelerated this, we are all much more comfortable with shopping different things in different places than we once were. And even who shops, right? Mom used to go shop and now it's lots of different things like that.
Deborah Weinswig (10:05.144)
So if we go back to the beginning, right? So let's say we go back 20 years, you would identify with a store you shopped at, right? I'm a CVS shopper, I'm a Kroger shopper, I'm a Sears shopper. So what was so interesting about your last comment is that this idea that you can now aggregate more spend into one retailer, but I feel that people identify less with where they're shopping. So how do you think about that like juxtaposition?
Rachel Elias Wein (10:34.647)
Yeah, I think, I actually think that is largely determined by the retailer that you're shopping with. So again, I'm in Florida. This is Publix country, right? So if you are a Publix shopper and Publix is the sixth largest grocery retailer in America, right? So if you don't live in the Southeast, you don't know about Publix, but they're really big. They have like 1500 locations and they dominate Florida.
They certainly give Kroger run for their money in Atlanta, right? And they're pushing up into the mid Atlantic. So if you are a public shopper, then you talk about your publics always. But if you take that same shopper and you put them in DC or Boston or Philly, they're not going to have the same feeling. Right. And I think that comes from a lot of different ways. There are a lot of ways that a retailer can create that loyalty. But I think that comes from
not just simply locations and selection, it comes from the associates and the ethos of the company.
Deborah Weinswig (11:41.71)
You know, it's very interesting. I felt that, right, if you look at kind of the history of retail in the US, right, we've always been very kind of retailer centric. Like the retail, the retailer themselves was kind of in the middle going back to that's how you identified. And then there's been all of these kind of customer first initiatives. And I'm like, I don't know if the customer is really first, you know, there ergo your prior comment. But I think that we need to move to a place where the employee
is in the center of everything that happens because they can really, I think, have a huge impact on that customer's experience, whether it's online or offline or unified commerce or whatever it might be. getting to that, first of all, enabling the technology that the associates need. I first of all, it's available, it's not expensive. It's just a matter of doing it. I think we're actually behind where I thought, and I don't usually say that in tech, but we are behind where I thought we would be. And I don't even know if...
executives are thinking that way. And so I do wonder if it leads to bit more dislocation where consumers are, okay, I'm gonna shop this retailer this week and this retailer next week. And actually what we're seeing in the data is right because of inflation and other opportunities, I guess, we're seeing greater, more visits per trip, if you will. So you're visiting more locations and you're kind of like cherry picking.
Now you're getting to know more retailers better, but maybe your loyalty is declining, which, you know, in this environment is probably one of the most important things if you look at retail.
Rachel Elias Wein (13:21.465)
So I am curious if you can slice that data with memberships. For example, you know, like if you were to say, like how sticky is a Costco shopper who pays for their membership and has incentives to go and get all of their, as much of their, you know, it's a very big warehouse. It's very busy. The parking is tough and there's only 3,200 SKUs. But if it's the 3,200 SKUs that you need,
and you pay for that membership and you're getting that executive platinum 2 % back, you're going to Costco. And you talk about associate loyalty. I mean, there's no one better than Costco for that.
Deborah Weinswig (13:58.67)
mean, I was just out at their HQ and it was amazing, right? You go to the Costco location that's closest and you talk to some of associates, right? They've been there 19, 20, 22 years and it is interesting. And then you just talk to some of the customers and a lot of them, I would say it's the same for us, right? And these are non-business members. They are there, there are two or three SKUs that they cannot get anywhere else.
and they matter so much in their weekly slash monthly shop that Costco is always on their kind of map, if you will, in terms of where they visit. And so I think it goes back to what you said, right? It's an item level business and they also understand kind of the item level by location as well. so, and they're doing more and more in terms of small businesses. mean, they really do try to kind of connect back to the community and
I think that that's a fascinating point because when Walmart rolled out Walmart Plus, I knew it was against everything they believed in because Mr. Sam always thought that you shouldn't kind of separate out customers based on their ability to pay. And so the data must have been incredibly convincing if they were going to kind of move in that direction. And I thought honestly that we were going to see
Target do something along the same lines. And if you look at the, we go back to Amazon Prime Week this year and you look at the wording, right? So it was very interesting, right? You had Kohl's, Dick's, Ulta, Walmart, Target. You had a lot of retailers who participated and Target's messaging was probably the most like mouth of marbles that it was not like, it's like, well, we're kind of like a membership, but we're kind of not. I'm like,
Deborah Weinswig (15:53.966)
I can't even, and I missed it, mean, I probably read it truly 20 times. I was like, okay, I have a target credit card. Does that make me a member? What is it that they're trying to say? And who is it they're going after? Because I do think this idea around a membership is really important. And do you think that we see that continue to kind of evolve retail? And then what's the impact on commercial real estate?
Rachel Elias Wein (16:23.929)
So there's a lot to unpack. One thing I want to just touch on your visit to that Costco warehouse and how there's these couple of SKUs that that member can only get there. Target has the same thing, right? So there are, and maybe they have not leaned in as much to the Tarjay lately, but there are certain things you can only get at Target, right? The cat and Jack or other things. mean, I think especially the kids things, some of the home decor things are really nice and unique.
when you have a situation where shipped and delivery is now kind of table stakes, if you can lean into more of some unique items that aren't totally overwhelming, like Walmart's 100,000 SKUs, but if you can lean into some of the things that make you unique from a, just unique items or other characteristics, then I think that can be an important differentiator because we're not all the same, not all of us.
retailers are the same. do have certain things that that we're better at and whatnot. And sometimes when you can find anything, right? Like I can Google, can chat cheap E.T., whatever blender mixer I want. But if I just show up at the Costco warehouse, I know that the one that they have there is the best one because that's the only stock, the best one. Right. I don't need to have 30 to choose from. I don't need to have an unlimited to choose from. I just need the one that Costco tells me is the best because it's the best. Right. So so.
What does that mean for commercial real estate? I think you touched on it that is that location proximate to your weekly or daily rotation, right? And as our communities move, right? So every retailer has the same kind of life cycle where, you
hey, we did really well in this one location, two locations, dozen locations, and now it's time to get a little bit farther out of field from our home turf, and where are we going to pick, and how are we gonna blanket the world with our amazing retail concept, right? And they all get, I don't know, but they blossom and they bloom and they decide, okay, are we gonna lease locations? Are we gonna own locations? Is this a one?
Rachel Elias Wein (18:39.317)
store location or is this this three store location and how do we you know there is a imperfect science for choosing those locations and and making the decision is should this be a leased store or an owned store if you are able to and I would say as a caveat essential retailers are more likely to own more stores than luxury or you know nail salons and hair salons and and whatnot
So, and I'm happy to unpack owned versus leased. But when you go through and you make those decisions and then if you, I love Milton Cooper says, the only thing I know for sure is eventually the retailer will go bankrupt. Right? Like how many leases have you looked at from a mall that has like, you know, all these old Marshall fields and whatever else, you know, co-tenancy clauses. So you have this life cycle with the retailer, like things are going great. We're getting bigger. We're expanding.
We're going into all these far flung locations and then, you know, some of these work better than others. The demographics have changed. Maybe we moved into this location. It was great 30 years ago. Now it's not great. What do we do about that? And then eventually you get to, can the retailer pivot their offering, their locations, the needs of their customer in line with how the market pivots or can they not? And how many, I mean, you could rattle off.
dozens and dozens of names of retailers that figured this out and retailers that didn't.
Deborah Weinswig (20:11.874)
Well, the interesting thing I was doing some, was on, was on Bloomberg at the close last night and it was really, I will say, it takes a lot for me to get stressed, but I was on it for 10. They actually pushed it because Gap hadn't reported yet. So they report I'm on like three minutes later and you try and do as much work as you can to prepare for those things. And so for some reason I
I really looked into growth, right? Ulta had a phenomenal quarter in terms of growth. And you start to look at, right, the growth across all of retail and you realize Walmart in one year, and I'm not saying anything I hadn't thought about before, but I don't know, it had more of an impact this time, right? So in the past year, right, they grew $33 billion in sales. Well, that is, if I think about our clients, that's a lot of them, right? I mean,
Rachel Elias Wein (21:05.495)
Yeah, totally, them all up together.
Deborah Weinswig (21:09.006)
And I was like, you know, it's really, know, those retailers who are reinventing themselves and marketing is obviously such an important piece of that. But this, as retail and I don't know if I ever thought we would see the benefits just accruing to the large rights. If you look at, I you named them, right, Costco and Walmart. This advantage of size and it could be to attract talent, to get kind of the best in class real estate.
how they think about, you know, kind of their relationships with their vendors and whatnot. But we've really seen this bifurcation unlike anything I, and hey, the bigger getting bigger, so that probably exacerbates all of that, but it is very interesting. And going back to this kind of idea around commercial real estate, how do you think as, you know, as let's say, and the consumer's moving, right? We continue to see, you know, kind of migration. How do you think,
planning is taking place in a different way than it did, let's say, pre-pandemic.
Rachel Elias Wein (22:13.943)
Yeah. So I'd like to talk about the strategic location planning and how this is impacted also by owning versus leasing locations. So when you think about how a retailer makes real estate decisions, right, or how the retailer thinks about real estate, I would say traditionally, and this is really my bread and butter. This is what I spend all day thinking about and all day working with.
with clients on and how can we make better decisions with these billions and billions of dollars of real estate that is really our core business. So the core business is milk and eggs, but those milk and eggs have to come from somewhere, right? And who is it that is gonna dictate to us how we use our space, how long we can stay there, how much we have to pay and all of those things. So I would say in very simple terms,
If you have the cashflow to accommodate it, there is a lot of benefit to owning your real estate, right? When times are good and you have cashflow, what better to invest in than your core business and the longevity of that core business? And I would say every retailer has a different return hurdle or cost of capital, whatever. But I would say it's roughly generalized. If you think you're gonna be somewhere more than 20 years,
why would you pay a landlord rent? Right? There's all kinds of health ratios and it's different in a jewelry business or a luxury business than it is in grocery, but let's say one, two, three, 4 % of sales may be rent. Now, of course that means 97 % of the costs are coming from something else, but if your store, if you can make that upfront investment and save that long-term ongoing, not just two, three, 4%, but also,
the risk associated with, well now we're at the end of our lease. Are they gonna triple our rent? Are they gonna double it? Are they gonna say we need to leave? Now that doesn't happen that often, but it's a risk associated with the core business that if you are well-funded, well-capitalized, and you can invest in owning the store, you should own the store, right? And I would say, Walmart's been owning their real estate.
Rachel Elias Wein (24:29.035)
as much as they can. And sometimes they're owning the land and the building. Sometimes they have a ground lease for 99 years or some extended period of time, but it's certainly their preference to own the real estate. Now, you typically have CFOs if retailers that are not real estate, you know, they don't have a real estate background. They might have a finance, banking, you know, retail operations background. And so when they look at the financials and the balance sheet, they look and they see,
Deborah Weinswig (24:53.934)
Thank
Rachel Elias Wein (24:58.839)
Wow, that's a lot of rent that we pay. I'd like us to pay less rent, right? Can you work on that head of real estate, right? And so a lot of these heads of real estate, they're spending day and day out trying to figure out like, how can I pay less rent? You know, can I do a blend and extend? Can I do some kind of two for one consolidation? I've got two locations. They're both above average, but maybe they'd be amazing if we consolidated those locations. So they're always trying to do this blocking and tackling. And then at the same time, the CFO also sees a book value.
for their real estate that is generalizing here significantly less than the market value of those assets, right? Because you have, what did I pay for it? What did I invest in having all of the furniture fixtures and equipment, right? And then it's depreciating, right? I don't need to get into accounting 101, but essentially the value always goes down where if you were gonna operate that store for 50, 60 years and you were to sell that income stream of the rent, the value would be
higher and higher and higher and higher. So you end up in a situation where, I mean, name a large grocery retailer that has a lot of owned, I mean, you could say Costco, Walmart, Publix, Kroger, Albertsons, any of them. And if you were to take the market value of what they own in a, you know, just an open marketplace, it is probably 20 to maybe even 30 % of that.
enterprise market value is tied up in real estate. But if you look at the book value, it's like peanuts. you have these two situations, you have the situation where from a financial standpoint, you say, want to pay less rent. And I mean, yeah, I own some real estate, but like, you know, the book value is not that high and it's not like I'm gonna sell it anyway. So it's not an asset I can trade in and out of. But when times are good and you have cashflow,
you should invest in owning your forever locations. That may be developing, know, build to suit development. Like we're going into a new place, but we know, we have conviction that it looks just like these other markets, right? So now let's talk about market strategy. I would say the amount of data that the retailers have access to now, as you know, is enormous. How they use that data, they each use it in a different way.
Rachel Elias Wein (27:20.139)
I would say to generalize, they are focused on the primary business, which is retail operations. And then the ancillary businesses that support that typically have less access to that information, but not no access to that information. know, real estate is supporting retail. Retail has better, retail operations has better access to data than real estate has, but real estate still has great access to information. And so you end up,
you know, we spend a lot of time looking at, is this a location? What are the three or four sub markets that the subject market is the most analogous to? Does it look like, you know, a Northern suburb of Chicago, or does it look like Dunwoody outside of Atlanta? Like, what do these sub markets look like? How have those similar stores performed? And how can we use that to indicate how these future, these new markets are likely to perform?
And that's how we can start to say, do we want our preferred developers going out and finding locations and we pay them a fee and we end up owning that store forever? Or do we think we're not sure maybe it's in a tweener location and we're gonna make sure that we do a lease that has a right of first offer or a right of first refusal so that if and when that store transactions in the future, we get a bite at the apple? Or you know what, this is just not on our radar right now. Someone else can handle it. know, like Trader Joe's doesn't know literally.
that's fine, no big deal. Like you could be very successful and not own your locations, but I think it is a strategic advantage for the retailers that can do it. It becomes a strategic long-term advantage.
Deborah Weinswig (28:59.246)
So we've seen a lot and I don't disagree with anything you've said, but to build on that, we've seen a lot of activity in the private equity space over my career, right? So whether it was Bill Ackman in 2008 or other iterations after that. And I think that this idea of how do you unlock that real estate value, right? And if you think about it from a valuation perspective, how do you kind of think about that?
Rachel Elias Wein (29:21.806)
Yeah.
Deborah Weinswig (29:29.1)
I mean, I've always said, right, you take the sum of the parts of the retailers and it's usually worth more than the market cap. But I think real estate in particular is something that's very easy for people to understand and to value.
Rachel Elias Wein (29:39.034)
Yeah, you know, it's kind of the same as the housing market almost like the best time to, the time you really need the money is almost never the right time to sell it, right? So to your point about private equity or look, it's no secret that there's been quite a bit of sale these back activity, not in the very recent immediate short term after they've been, but over time, know, 7-Eleven.
Walgreens, Albertsons, like there has been a lot of, you know, multi-billion dollar sale lease back transactions. And, and I would say in each of those situations, it is, it is what you are saying that the sum of the parts, the sum of the parts analysis, it is significant. If you were to break these things up, you would create more value, but I would say create more value for whom and for how long, right?
Right? So you go and you sell billions of dollars of Walgreens to fund the core business or to fund a turnaround. You have to have some significant conviction that that's a turnaround that's going to be successful. And if it's not, well now not only did you invent, I mean, I'm using them as an example, but across the board, when you're choosing to sell those locations to harvest the capital,
It is when you are in inherently a challenging environment, because you wouldn't normally do that, and then you are effectively saddling yourself with more long-term debt. And debt in a way that is, you know, it is against the functioning of the core business. Because now all of a sudden you have so much more rent obligation and you have such a greater liability against your core business of the stores that you operate, right? So if you were...
it creates a scenario where a challenging environment just becomes more challenging. I'm not saying you can't do it or you shouldn't do it and retailers forever and ever will use that asset. And I facilitate doing those things, right? I work with them on doing that when that's the right decision in the moment, but it does create long-term headwinds. And I would say,
Rachel Elias Wein (31:59.628)
know, the executives at these companies, they're not, they're eyes wide open. They know that, but that's the difficult decision that you have to make in a challenging environment is how are we gonna access capital for this turnaround, for this transformation? And are we gonna be in a better situation when it's done? And certainly they hope that they will be.
Deborah Weinswig (32:21.346)
Have you seen examples where they've monetized real estate and then regretted it?
Rachel Elias Wein (32:28.457)
I mean, yes.
Deborah Weinswig (32:34.414)
So what, and without being specific, because obviously that would, unless there, and those were ones you can share that were in media or whatever, but what was it about that that they regretted?
Rachel Elias Wein (32:37.913)
You
Rachel Elias Wein (32:46.019)
Well, I mean, I think you could look at it. You could probably take a number of, I don't work with department store retailers. Excuse me, I don't work with department store retailers, but they've traditionally owned their box and they have over time sold them. And sometimes they redevelop them. And know, certainly Sears has done this through Seretage, through TransformCo and whatnot. But, and look, Macy's is in this too. So I don't work with any department store retailers, but.
I prefer when the retailers stick to their core business and making that great. They have traditionally not been great real estate developers. That's not to say that they couldn't be in the future, but when the core business has a strategic difficulty, you can't fix it through monetizing real estate. You can't fix it. It's just the core business has to be fixed.
And if it can't be, then what are you selling? That's the other thing. So traditionally you would sell the long-term rental stream. And so when the market and when the credit indicates that your business has a long-term reliable outlook, then you can sell something at a low cap rate, which in turn equates to a high valuation. But the more risky your business becomes,
the more the market will respond through your credit rating and through other things by saying, actually, we think that's a lot of risk and we're not gonna give you that low of a cap rate. We're gonna keep ratcheting up the cap rate, right? So now all of a sudden, maybe when you could have sold it at a really good cap rate for a really high valuation, you didn't do it. Cause you didn't think I, you know, maybe I don't really need to sell it right now. Maybe I can wait. And the longer you wait, well, everyone else has figured out.
Not a lot of secrets, right? Everyone else has figured out your business is also struggling. So now you want to sell it and you thought you could get three or four billion for it. Now you're getting one or two billion for it or, you know, put the zeros wherever you'd like. And so this is where I get back to you. The day you need to sell your real estate is almost never the right day to sell your
Deborah Weinswig (35:03.758)
Yeah, no, I think it works like that, you know, throughout the, which is actually something I want to touch on. You know, as we look at different asset classes and we talked about this in kind of your opening remarks and you think about office, industrial, know, kind of how are you thinking about where, because right, there's been so many do-mers and gloomers on, right, office and, know, it just hasn't kind of come to pass.
I think industrial has definitely, I think since the pandemic, from evaluation perspective, et cetera, how do you kind of look at the different asset classes? And then how do you decide kind of where to spend your time? Because obviously there's so much to be done.
Rachel Elias Wein (35:53.038)
Yeah. So I would say I spend most of my time in retail, although certainly there's a lot of industrial and logistics space that goes into that. especially when I'm assisting large retailers, which I would say is the bulk of my business is assisting large retailers. They're thinking about the network of their footprint and that is stores or warehouses, logistics, depots, last mile.
and how that network services the customers and the members. And so we're thinking about, well, you take one, if I close a few stores in this sub market, well, now all of a sudden I have less sales to support the distribution center that I have down the road that handles multiple locations. So you really have to think about it all together in the cohesive ecosystem. And certainly there are offices to go along with it.
Given just the way nature of work has changed, not, I mean, I'm not super bullish on the office market. Although I would say one of the things that's important to caveat is that, you know, the largest owners of real estate, the Highwoods or Cousins, you know, publicly traded reads in office, they don't have your run of the mill, class C, half dead office building, right?
And it's the same for shopping centers. It's the same for Regency and Kimco and Brooksmore, right? So years and years and years and years ago, back in the stone ages with Eckerd, Years ago, they had everything. was all just about size. Like we need 400, no 500, no 600 shopping centers. And so you ended up where not everything was the best. It was about aggregating scale and reducing costs in that way. And I would say...
since the GFC, there has been such a really diligent look at...
Rachel Elias Wein (38:01.529)
focusing on what are the best assets in the best markets and the best team and the best retailers or third party providers or office leases, whatever it is, what are the best of the best? And certainly in the shopping center space, the institutional owners of real estate own 5 % of the shopping centers in America. They don't own 50, they own 5 % and they own the best 5%.
Deborah Weinswig (38:10.094)
Thank
Rachel Elias Wein (38:29.953)
right, because they had all this time to call and to get rid of the ones that were not the best. So I think I have, I certainly have concerns about certain aspects of real estate. I also think it's important to remember that when you drive down the road in any town in America, those are not necessarily assets that are owned by the big professional institutional owners of real estate. And I just want to add one more cap.
Just because it's big and pretty doesn't mean it's gonna last forever. I think certainly in the mall space and then the super regional power center space, we learned in the GFC, there were a lot of institutions, a lot of pension fund advisors, a lot of folks that said, well, as long as I buy the fortress mall or the fortress power center, I'll be fine. And we have come to learn that...
That definition has changed, right? Surely when there were 1500 malls in America or 1100 malls in America, if you would have asked me, Deb, and I'm sure we would, I'm sure we had this conversation actually, I'm sure you and I would have had this conversation. How many malls does the Tampa Bay market need? I would have said three four or five or six, and maybe we need two. I don't know what the number is, but it's wildly different today than it was just a few years ago. And it's the same with every asset.
Deborah Weinswig (39:36.718)
Thank
Deborah Weinswig (39:54.286)
Well, I think it's really interesting. We work with several companies that have, let's just say, a broad real estate portfolio. And as we're about where to invest, I would tell you it's completely different than it was in even 2020 and 21 because of human migration. And so that I think is changing things at a level that nobody could have predicted. And was interesting, I...
I remember when I discovered the website or whatever, deadmalls.com, and you go back and first of all, it's like, your whole like, you know, history, like you're like, I remember going there and I remember like that. And, and I think that it, you know, we have a much healthier kind of mall industry these days. We also have less, but you know, when you're talking to some of these owners and they're like, we can't, we're, over a hundred percent.
right, kind of occupancy, right? I have to be honest, in my lifetime, I never thought I'd hear that from anybody. And so, you know, we're like, they're like using the outlaws because they don't have enough space and stuff, right? Like enclosed. And that to me is, is a really interesting phenomenon. And I also think, and one question I'd love to, right, as we look at Gen Z, right, where 83 % of their transactions touch
Rachel Elias Wein (41:04.961)
Yeah, yeah.
Deborah Weinswig (41:21.878)
a store in some way, shape or form. Now they may go in, they may put items in their basket so they're not transacting in store, but they're in the store. And so we've been built for a generation of millennials where they were not stores first. And so I think that, I mean, gotta say every retailer you talk to, it's like a head scratcher for them. And so I feel you've got the, and there's, sure five other things you could throw in there, but you've got human migration, you've got Gen Z,
Rachel Elias Wein (41:35.566)
Yeah.
Deborah Weinswig (41:51.438)
the stores first, how are people reassessing their portfolios? And once again, none of this, as you said, right, it can't happen quickly, but there's a lot of change kind of going on at once. And I'm sure there's a million other things you could throw in there too.
Rachel Elias Wein (42:06.583)
Yeah, I mean, let's start with migration. When folks ask me what I look at, what kind of indicators that I look for, I mean, if I only had one, it would be, is this a net out migration location or is it a net in migration location? Right? So demography in that way can fix a lot of problems, right? So are people leaving Rochester and are they moving to Houston? Yes.
And so if I've got 20 stores in Rochester and I've got 20 stores in Houston, maybe I don't need 20 in Rochester. But if I'm not careful, someone else is going to take my market share in Houston if I'm not adding stores in Houston. So certainly people are moving largely north to south and out to the coast and from higher regulatory environments into lower regulatory environments. If I was just going to say macro, right? And so when I think about that, if I...
Deborah Weinswig (42:33.742)
Is this a test?
Rachel Elias Wein (43:03.129)
put my real estate hat on, I wanna make sure is my portfolio, and that is not, it takes time to build a building. No, you can buy and sell them pretty quickly, but it takes time, right? But it does not take time to know that. That is something that anyone can know. It is not proprietary. It is not confidential. People are moving north to south, towards the coast, high regulation to low regulation. That's, you know, bread and butter, right? So now we have to consider have our...
physical locations, whatever they may be, have our, it could be self storage, have our self storage portfolios been keeping up with that demographic shift, north to south, towards the coast, high America, you know, all of those things. And how do we make sure that we're creating an environment to be successful as those areas continue to shift? Now, when I think about Gen Z versus Millennial and,
there's in store, there's out of store, there's also, are they more or less likely to migrate for a job? You know, we had this great migration of, you know, not boom towns, zoom towns, right? Like everyone moved to Asheville and everyone moved to, you know, out West in the middle of nowhere. All that is fine until Amazon wants you to come back to work and Microsoft wants you to come back to work. And now who's going to find a job in Asheville, right? By the way, I love Asheville. All of you should move to Asheville. It's amazing.
Deborah Weinswig (44:07.202)
Hey.
Rachel Elias Wein (44:30.719)
So what that means is we have to consider how those changes and I think, and you correct me if I'm wrong, I think Gen Z is less likely to move around. I think they are more likely to want to be, want to make a life and stay there and they may forego certain career advancement to be able to stay in place. And that may be because they saw their
know, boomer or Gen X parents making all of those decisions for career. Anyhow, this is my two cents about it. But I would say we do have the ability through transactions and other means to make sure that we are keeping up with that pace of migration. And, you know, the portfolios that are dynamic and the folks that are making strategic investment decisions
in that manner will be the ones that are the most successful.
Deborah Weinswig (45:31.182)
That makes perfect sense. I mean, in 26, what do you think will be different than 25? And how do you think people, right? Because our clients now, Their minds are already in like the middle of 26. And so they're investing. And I will say it's really interesting. It's probably the earliest we've ever seen planning. And so, and I think that a lot of folks feel they have a fairly good handle on reading the tea leaves.
And so because of that, what are you seeing on the commercial real estate side?
Rachel Elias Wein (46:06.391)
Yeah, that's a great question. know, we have really, commercial real estate has really struggled with high interest rates. You know, there's just, it's really difficult to invest accretively unless your cost of capital is really low, right? So when it's so expensive to borrow and when you have, you know, many, most of these asset classes have long-term leases. Some of them are long-term flat leases. So I would say in general, the asset classes that have
a greater ability to reset rents in line with inflation tariffs, cost of capital, right? So a hotel gets to reset their rate every night, right? You stay every night, you get a new chance for a new lease. A self storage, you know, maybe it's once a year. An apartment, it's once a year. Industrial, maybe it's a five year or a 10 year lease. Maybe there's no options. Maybe there's one option, but a retail lease, if you have a lease with Kroger or you have a lease with CVS,
You've got 75 years worth of relatively flat lease term. So I would say in the near term, and I say near term, 25, 26, 27, think the headwinds for commercial real estate are really strong in a high interest rate environment. I think if we get even just small rate cuts to give an indication that maybe the worst is behind us and...
people should feel free to get the capital flowing again. I think that would be really good for commercial real estate. And then I would say, you the other piece of that is we didn't talk about AI or data or, you know, whatnot, except that retailers and really every business owner, every day they're smarter than they were before about these things, right? Every day they're figuring out how can I use the information that I have better? How can I, you know, maybe take away some of the menial tasks so that I can focus my time?
on something that's more important. I like to liken it to how you used to have to go to the airport to get a paper ticket, right? Think about how much time you had to spend to go and get a paper ticket. And now you are really only calling the airline or going somewhere if you have a real serious problem because everything else you have on your phone. I bought the ticket on my phone. I changed the ticket on my phone. It rerouted me to another, you know, a different stop because we had a delay, whatever it is.
Rachel Elias Wein (48:29.731)
And so how can we do that with our businesses, our retail operations, or even our real estate businesses? What are the things that are everyday repeatable tasks that can be automated so that we can focus our human brains on something that only we can do? And I think we're just gonna continue to get better at that. We'll get better at it every single day, but the real estate implication for that is also through data centers, right?
So where does the computing power come from for all of that? Like where does the cloud live? Well, the cloud doesn't live in the sky. It lives in a big data center and they are really expensive and they take so much energy. so I would say that the final piece of this puzzle is solving that. you know, retail has never really been the darling in real estate. That's okay. I don't mind. Industrial was the darling for a long time.
Deborah Weinswig (49:10.124)
What a thing.
Rachel Elias Wein (49:24.205)
multifamily, but now it's really data centers. I think, you know, as we continue to use information in these new and creative ways, there's still a physical component to that. And I'm really excited to see what happens next year and the year after. There's so much development in data centers and what can they do? How can we solve the energy problem? I think that's really an exciting thing to look forward to.
Deborah Weinswig (49:47.55)
There is actually a purpose for the dead malls now to bring it full circle. So the as we kind of jump into our last few minutes together, I wanted to kind of jump into a lightning round. And so I'll ask you a series of questions. You can pass if you want, but kind of like whatever comes top of mind. All right. So number one, most underrated commercial real estate market today.
Rachel Elias Wein (49:50.137)
Thank
Rachel Elias Wein (50:17.165)
Asheville, North Carolina.
Deborah Weinswig (50:19.49)
most overrated market.
Rachel Elias Wein (50:22.25)
Austin, Texas.
Deborah Weinswig (50:25.614)
3. Flagship store pop-up shop. do you prefer?
Rachel Elias Wein (50:30.473)
Ugh, neither. Just made your real store great.
Deborah Weinswig (50:33.166)
Okay.
Deborah Weinswig (50:37.538)
Love it. Four, if you had a billion to deploy tomorrow, which asset class gets it first?
Rachel Elias Wein (50:45.006)
Retail.
Deborah Weinswig (50:47.022)
Five, what retail trend makes you roll your eyes?
Rachel Elias Wein (50:51.769)
pop-up stores and flagships.
Deborah Weinswig (50:55.576)
Good one. Six, sustainability or convenience, which wins with consumers today?
Rachel Elias Wein (51:02.915)
Convenience.
Deborah Weinswig (51:04.896)
seven most exciting real estate innovation right now.
Rachel Elias Wein (51:17.687)
rent, the modeling associated with rent in apartments and industrially.
Deborah Weinswig (51:26.444)
I was going say digital twins. but no, that's a good one. Eight, the last retail space that truly wowed you.
Rachel Elias Wein (51:40.441)
Costco's Essequa location.
Deborah Weinswig (51:43.31)
Yeah, it is great. Nine, if commercial real estate were a stock, are you bullish or bearish this year?
Rachel Elias Wein (51:51.159)
neutral.
Deborah Weinswig (51:53.006)
Last one, number 10. One word to describe the future of commercial real estate.
Rachel Elias Wein (52:00.718)
dynamic.
Deborah Weinswig (52:03.026)
Rachel, thank you for your quick fire wisdom and always like keeping us on our toes. I appreciate it. And really what I love about our conversations is you always remind us what we should be thinking about today for success tomorrow and not getting caught up in all of the headlines. So truly thank you. It's always a pleasure.
Rachel Elias Wein (52:22.297)
Thank you, Deb, you're the best. Thanks for having me.
Deborah Weinswig (52:24.482)
Take care, talk to you soon.
Thanks Deborah, and thank you for joining us this week. Coresight Research provides our subscribers with insights, trends, and consulting services that create competitive advantage. Visit us at coresight.com to learn how Coresight Research can support your success. Have a wonderful day, and we'll see you next week.