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The competition might be heating up, but Tanger Factory Outlet Centers Inc., a pioneer of today’s outlet concept, has a big head start and a valuable knack for cajoling the right mix of retailers into its regional shopping meccas.
Tanger jumped into outlets in 1981 when the stores were a venue to clear factory overruns. Now the centers are a way to bring new shoppers to fashion brands at lower prices.
The consumer affection for a good deal — something that’s nice in good times and necessary in bad times — has kept the outlet real estate sector on a relatively steady trajectory.
Consumers are also focused on the task at hand when they go to an outlet center.
“They make the trip with the intention of shopping,” said Cyndi Holt, vice president of finance and investor relations. “They stay longer and they spend more than they would at their neighborhood mall.”
Holt said the Tanger’s business has held up in good as well as in challenging times, adding that the firm’s year-end occupancy rate has never fallen below 95 percent.
And the Tanger footprint has been growing. The company built or acquired 21 outlet centers over the last decade, bringing its total to 43. Four more centers are in the works.
A big part of the formula is finding the right spot for a center.
Holt said Tanger looks for areas with at least 1 million people within 30 to 40 miles, household incomes of $65,000 or more, and 5 million or more tourists each year. Prime sites also include frontage on major roads and a daily car count of at least 55,000.
Without anchor stores like Bloomingdale’s or Nordstrom, which draw shoppers to regional malls, Holt said Tanger has to market and brand its outlet centers to draw in consumers and keep them happy with a nice shopping environment.
Rich Moore, an equity analyst at RBC Capital Markets, said outlet centers have become an important part of the distribution mix, along with full price stores and e-commerce.
“[The demand] is kind of off the charts,” Moore said. “There’s an enormous desire by retailers to be in the outlet centers. You’ve got very full centers. For the most part, these things are running 98, 99 percent occupied, which is very unusual.”
Moore said Tanger’s experience — both in knowing where to put new centers and what retailers are looking for — is an asset, as other real estate firms look to expand into outlets.
“You have a 400,000-square-foot center,” Moore noted. “You probably have about 100 tenants. There is not [an] anchor to speak of.…You have Coach saying, ‘I’ll come if this guy comes.’ You have each of these retailers saying, ‘If you get the mix and the type of retailer….’”
That’s a balancing act Tanger has had time to hone to a fine art.
Carol Kemple, analyst at Hilliard Lyons, said outlet centers “seem to be the best space in the retail REIT sector right now.”
“Even if the economy is suffering, there are still people who like their Nikes and they might not want to trade down to a Wal-Mart shoe,” Kemple said.