We think there is a better way. By curating a synergistic tenant mix that engages customers, we elevate our shopping centers from transactional spaces to thriving community hubs. This transformation results in centers that attract high sales and maintain a waiting list of prospective tenants, inherently enhancing value and stability in our portfolio.
“We pride ourselves on our reputation that merchandising matters. It’s about finding that perfect balance, between the best in class local, regional, and national tenants. It’s not just shopping; it’s an immersive experience,” says Wendy Seher, Federal’s East Coast President.
Striking the right balance
The results speak for themselves. Our approach to tenant optimization has effectively driven up occupancy rates across Federal’s portfolio.
Don Wood, our CEO, recently shed some light on the subject: “Our small shop occupancy today stands at 90.7%, up 200 basis points since early 2022. With this trend, a steady and powerful trend, we anticipate continued growth over the next 18 months or so, underscoring the strong demand for high-quality retail assets.”
Risk, reward, and the right mix
Our tenant selection process is a balancing act of prudence and innovation. How do we go about this process? We blend the stability of well-established retailers with the fresh energy of promising new tenants.
“It’s not just about filling shops; our aim is to create thriving retail ecosystems,” says Jeff Kreshek, Federal’s West Coast President. “This involves a deliberate mix of large and small retailers. It’s about driving meaningful footfall, which in turn enhances the financial performance of each property. That strategic mix is key to our success – it’s what brings our centers to life and delivers real value to our shareholders.”
Driving demand
Frequently, the term “small shop” is wrongly interpreted as a local startup or young business without much of a track record. When considering tenants, we lean heavily toward signing with credit-worthy national and regional operators to reduce risk. In tandem with this practice, we also rely on our keen instinct to embrace first-time retailers who demonstrate potential. It’s this blend of strategic foresight and a bold instinct for innovation that enables us to enhance the customer experience uniquely.
In either case, tenants are not hard to find. Federal’s premier locations tend to generate demand among the strongest of brands – large and small.
At Bethesda Row, just outside Washington, DC, the interest from retailers is evident, with a current waitlist of 10 to 12 tenants eager to join this dynamic mixed-use development. Similar buzz has sparked around The Grove in Shrewsbury, N.J., where we signed a significant lease with Bloomingdale’s in just 40 days.
These instances reflect more than desirability; they underscore a mutually beneficial synergy. New tenants bring fresh energy and draw, enhancing the overall appeal of our centers. This, in turn, benefits our existing tenants, who thrive amid the increased foot traffic and diversified offerings. It’s a dynamic win-win, where each new addition amplifies the collective value and appeal of our properties.
“It’s not just about filling shops; our aim is to create thriving retail ecosystems.”
Jeff Kreshek, Federal’s West Coast President
A contributor to growth and resiliency
Bringing together the right mix of tenants is certainly an important ingredient in our broader operating formula. It is made all the more powerful when combined with our strategy to locate in densely populated trade areas that are marked by robust disposable incomes and high barriers to entry.
Overall, this model has proven its resilience and effectiveness across decades and various economic climates. From the high interest rates of the early 1980s to the bursting of a tech bubble, a financial crisis, and a global pandemic, our approach has consistently delivered results. Since the late 1960s, Federal Realty’s dividend has grown steadily even in the face of economic challenges. Thus, positioning us as a best-in-class dividend growth stock, or more succinctly, a “dividend king.”
