Developers & Landlords:
Now, Retailers Hold the HIgh Cards!
Developers and landlords need to catch up. Retailers are responding to the 2020 grimness in real time. But consider this:
Our conclusion is an alert: Developers and landlords must pivot, big time!
For your consideration, here are a few concepts that may be useful.
To begin, our research indicates that there are two groups that are poised to fill the vacuum of retail and restaurant graveyards.
From our Strategic Retailing perspective, here are eleven ideas that warrant new consideration:
Size does matter – and the spaces often are simply too big!
Fill the spaces somehow; it’s the overall project that must pencil out, not just the first floor.
No more scoffing. It’s time to get with this New Normal.
The abundance of “Space Available” is a form of urban blight. Fear is a common motivator for tenants and landlords alike; do you have it?
Overcoming this situation calls for bold vision, leadership, and fresh judgment. The retailers and the shoppers are more than ready. Could be a heavy lift for many property owners, however.
The real estate that retailers need going forward may be in different locations, with different demands for access. AND, very likely, savvier tenants looking for more flexibility in their leases.
No, retailing is not dead. And it is NOT going to be happening only online.
What IS endangered? Humdrum and deadly retail real estate!
Here’s one of several trends to watch for: some brick-n-mortar stores are being re-imagined by savvy merchants as the new “third place”, offering a community separate from home or workplace.
That’s where these re-imagined retail stores can shine. They may function almost like a clubhouse, places where customers will want to hang out. Whether it’s a pet store, kitchen store, auto parts, hardware, electronics, apparel stores, bookstores, jewelry stores; no matter the merchandise, there are enthusiasts who care about it, and want to be close to it.
These spaces will likely spawn new kinds of adjacencies. Lockers to receive goods ordered online, daycare centers, gyms, food halls, popup shops, help centers for all the IOT (internet of things) devices now multiplying in homes.
And new metrics will need to be applied to these re-imagined stores. Instead of the old metrics of sales per square foot, or sales per employee, stores now will be treated by suppliers much more like a media platform.
As a result, much existing traditional retail real estate won’t work. The number of pedestrians won’t matter; only the right ones will. This trend has been accelerated in 2020.
Moreover, while independent retailers have been renowned for being "technology laggards,” thanks to the pandemics, those days have come to an end! Many are now leaders in technology.
There's a whole alphabet of resources out there, already being embraced by many: ML (machine learning); AI (artificial intelligence); AR (augmented reality), QR (Quick Response matrix barcodes). All enabling chatbots, robots, digital displays and much else to become "smarter" and more applicable.
The savvy retailers are using technology to enhance their in-store experience, versus relying on technology to replace that experience.
(Yes, you might want to read that again.)
Why? Because retailing is a people business. It’s not enough to have profitable merchandise lines, or even profitable stores. Going forward, the retailers who will thrive are those who are laser focused on their most profitable customers.
That customer relationship, that connection, is meaningful for retailer and customer alike. And it is just one of the many changes enlivening retailing today.
Now retailers hold the high cards!
- Today, there is more new and pre-existing retail square footage in this country than ever before.
- Meanwhile, there are fewer viable retailers and restauranteurs than we have had in many decades.
Our conclusion is an alert: Developers and landlords must pivot, big time!
For your consideration, here are a few concepts that may be useful.
To begin, our research indicates that there are two groups that are poised to fill the vacuum of retail and restaurant graveyards.
- One group obviously is those owners with one or more stores who have survived 2020. They will have the experience, determination, and confidence to succeed and thrive. And they sure are motivated!
- The other group of successful retailers to watch will be folks from any number of different business backgrounds (victims of downsizing?) who decide to “do it myself,” be their own boss, assume the entrepreneurial risk of building a business.
They will bring new approaches, new energy, latest technology, and often a cause to support through their business.
From our Strategic Retailing perspective, here are eleven ideas that warrant new consideration:
Size does matter – and the spaces often are simply too big!
- Create smaller spaces for multiple small tenants (that means separately metering utilities, fire separation protection, etcetera.)
- Remember, even the national chain retailers are shrinking their spaces.
Fill the spaces somehow; it’s the overall project that must pencil out, not just the first floor.
- Retail is a critical component to the office and multifamily users. Landlords may have to subsidize that retail space as an amenity to the building’s tenants.
- Recognizing this, some developers have abandoned efforts to sign ground floor leases. Instead, they run their own restaurant, their own fitness center, or rotating pop-up concepts.
- The future of mixed use is programming. Sophisticated owners who can offer programming through events, activities and retail experience will be most competitive.
No more scoffing. It’s time to get with this New Normal.
- Buy out the present leases of preferred retailers in order for them to move to your space.
- Charge percentage rents only.
- Provide liberal out-clauses under reasonable conditions.
- Double the commissions of brokers.
- Start-up retailers are worth $ for your project; destination retailers or restaurants are worth $$$.
- Open your wallet! Isn’t halitosis better than no breath at all?!
The abundance of “Space Available” is a form of urban blight. Fear is a common motivator for tenants and landlords alike; do you have it?
Overcoming this situation calls for bold vision, leadership, and fresh judgment. The retailers and the shoppers are more than ready. Could be a heavy lift for many property owners, however.
The real estate that retailers need going forward may be in different locations, with different demands for access. AND, very likely, savvier tenants looking for more flexibility in their leases.
- Do retailers really want to be in (legacy) shopping centers that are essentially gated compounds, surrounded by acres of parking lots or barricaded by multi-story parking garages?
- Or will those suburban office parks (presently “retail deserts”) be the first places to adapt to these new retail destinations?
No, retailing is not dead. And it is NOT going to be happening only online.
What IS endangered? Humdrum and deadly retail real estate!
Here’s one of several trends to watch for: some brick-n-mortar stores are being re-imagined by savvy merchants as the new “third place”, offering a community separate from home or workplace.
- Especially in the next 12-15 months, offering a place for enthusiasts of a store’s brand or products will be invaluable.
- Many consumers will likely lack discretionary buying power. But more than ever (with masks on!) they will crave a sense of community.Remote jobs and working from home will foster this desire.
That’s where these re-imagined retail stores can shine. They may function almost like a clubhouse, places where customers will want to hang out. Whether it’s a pet store, kitchen store, auto parts, hardware, electronics, apparel stores, bookstores, jewelry stores; no matter the merchandise, there are enthusiasts who care about it, and want to be close to it.
These spaces will likely spawn new kinds of adjacencies. Lockers to receive goods ordered online, daycare centers, gyms, food halls, popup shops, help centers for all the IOT (internet of things) devices now multiplying in homes.
And new metrics will need to be applied to these re-imagined stores. Instead of the old metrics of sales per square foot, or sales per employee, stores now will be treated by suppliers much more like a media platform.
- Just like a website, or social media presence, this new generation of brick-n-mortar stores should be evaluated for their advertising and marketing outreach.
- How effectively are they positioning and reinforcing the store’s brand? Do they tell the story? Are they filling this need? Are they good “influencers?” Are they adequately appealing to and bonding with their loyalists?
As a result, much existing traditional retail real estate won’t work. The number of pedestrians won’t matter; only the right ones will. This trend has been accelerated in 2020.
Moreover, while independent retailers have been renowned for being "technology laggards,” thanks to the pandemics, those days have come to an end! Many are now leaders in technology.
There's a whole alphabet of resources out there, already being embraced by many: ML (machine learning); AI (artificial intelligence); AR (augmented reality), QR (Quick Response matrix barcodes). All enabling chatbots, robots, digital displays and much else to become "smarter" and more applicable.
The savvy retailers are using technology to enhance their in-store experience, versus relying on technology to replace that experience.
(Yes, you might want to read that again.)
Why? Because retailing is a people business. It’s not enough to have profitable merchandise lines, or even profitable stores. Going forward, the retailers who will thrive are those who are laser focused on their most profitable customers.
That customer relationship, that connection, is meaningful for retailer and customer alike. And it is just one of the many changes enlivening retailing today.
- No, retailing is not dead. But it is being re-invented. The train leaving the station has retailers on it.
- Our questions remain: will developers and landlords sufficiently re-invent themselves? Will they catch up?
Now retailers hold the high cards!