01:30 am
26 September 2018

Mercato – The Evolution of Post-Recession Merchandising

Mercato – The Evolution of Post-Recession Merchandising

Naples, Florida, is considered a jewel on Florida’s Gulf Coast. With an airport that services private jets and the newly rebuilt Fort Myers international airport less than 30 minutes from downtown, the resort caters to an affluent global mix of Canadians, Americans, South Americans and Europeans who flock there in winter for the tropical weather and high end array of top-tier attractions set in a relaxed cosmopolitan atmosphere. Forbes magazine recently listed Collier County (where Naples resides) as the top destination for the wealthiest families in the United States. It is also one of the major resort markets drawing from the Midwest. The ranking also

noted that Naples-Marco Island ranked third in the country for its personal income, with average resident incomes three times that of other counties across the country. With an affluent and discerning population, Naples also boasts low unemployment, skilled labor force, a business-friendly tax structure and a strong pro-business environment. Pristine beaches, world-class golf and recreation amenities and a highly evolved variety of entertainment and cultural offerings have made it one of the fastest-growing resort communities in the United States. Following the recession, however, Naples was hard hit. Many of its second-home “snowbirds” were forced into real estate de-accessioning. A substantial decrease in tourism had a confluent ripple effect that forced restaurants and stores to subsequently close. Launching in the midst of tough times, Mercato was unable to close on key tenant leases. Despite an inviting and beautifully designed village footprint, the center opened with only 25 percent of its retail space leased. In 2011, when Madison Marquette was brought in as an investment and management partner for Mercato, the center was not fully leased and sought to attract robust national chain tenants as well as independent retailers with a strong following in the Naples market. At that time, top center tenants included Sur La Table, Books-A-Million, Ulta and Silverspot Cinema. There was a clear need to move swiftly to add quality tenants and to strengthen marketing and social media outreach in support of Mercato.

The Situation

In 2011, Madison Marquette Real Estate Services (MMRES) was tasked with providing retail leasing, managing and advisory services for Mercato, a mixed-use property with 350,000 square feet of grocery-anchored (Whole Foods) retail space in addition to over 100,000 square feet of office space and a 92-unit luxury condominium. In 2011, the center was only 76 percent leased, condominium sales were lagging and the center lacked energy and excitement. Despite this, MMRES saw compelling upside opportunity for the center — with its convenient location, strong demographics and recession recovery signs on a positive track.

The Challenges

Mercato opened in challenging times and was failing to attract tenants that would drive restaurant and retail traffic to the center. The center was seen as “flat,” with condominium sales well below target levels and diminishing interest from the community. The center was also competing with newly opened mega-center Coconut Point, which became host to a number of popular national retailers and restaurants. Tourism declines during the recession also reduced the number of visitors interested in shopping and dining in the Naples area.

The Vision

Armed with statistical and demographic data, MMRES moved aggressively to transform Mercato into the area’s premier “entertainment” destination rooted in a forward-thinking retail strategy. Twelve leases in as many months brought in ten outstanding restaurant and informal dining tenants, including a wine bar and a specialty coffee shop that had been on the top of the center survey’s wish list. The center was also recast as a dynamic lifestyle experience. It featured a constant round of community and cultural events from film and craft beer festivals to concerts and holiday exhibitions — including a tree lighting for the largest tree in Southwest Florida. With the addition in 2013 of the first Nordstrom Rack on the Gulf Coast, Mercato became one of the most popular and heavily retailed centers in the Naples region.

The Results

Understanding that Mercato needed to be reconfigured as a distinct and sophisticated “entertainment” destination allowed MMRES to focus on top-tier restaurants and appealing specialty dining tenants. With an emphasis on hospitality opportunities, Mercato was also repositioned as a magnet for platinum-level personal service tenants (Aveda, Yoga Loft and Stylista Salon) along with the concierge level Silverspot Cinema. Named the “Best Theater” in the Naples area by the Naples Daily News, Silverspot added significantly to its space in 2013. In early 2014, Mercato was nearly 90 percent leased with an expectation of additional leases being signed later in the year. Benefiting from the renewed excitement at the center, condominium sales rebounded. The residences are nearly sold out, with only two units remaining. The center continues to benefit from collaboration across a variety of retail real estate skill sets — marketing, property management, development and leasing — and Mercato tenants have seen double-digit sales increases. The center is now one of the most popular destinations in the entire Naples area: Nordstrom Rack draws over eleven thousand customers a week; Whole Foods pulls in over ten thousand shoppers a week; and close to 200,000 visitors a week visit Mercato during the months of November through February.