The retail real estate market’s leading players gathered in Las Vegas recently for their biggest event of the year, the International Council of Shopping Centers’ RECon or ICSC RECon 2019. RECon is the global convention for the shopping center industry. Here are some of the most talked about trends that I noticed at this year’s show.
Brick-and-Mortar vs. Online Retail Sites
Physical stores are playing a larger role in the success of online brands and their sales. This shift in the marketplace signals that traditional retail is not dying, it’s evolving – retailers must continually evolve and grow to stay competitive. For example, new technologies like Google Images and Pinterest Lens let shoppers send an image of a product found online, so that they can quickly locate the item when visiting the physical stores. These apps help you easily access and purchase goods in the manner best suited for your needs. Retailers that adapt to this trend will have larger product exposure and greater ability to convert consumer traffic into sales.
Amazon’s partnership with in-store pickups and Warby Parker’s push to open storefronts nationwide are two examples of online brands seeing the advantage of adding a brick-and-mortar element. The ICSC reports that sales drop 77% when an online brand closes a physical location, while purchases increase 37% when an online retailer opens a new brick-and-mortar store.
The ongoing trend of big box store closings still offers opportunity for developers and owners with a potential upside. The reason is because it creates an opportunity for landlords to change the footprint of a center. Many shopping center owners will take one large empty space and create 2-3 new spaces, which means bringing additional retailers to a center’s merchandise mix and often provides an increased opportunity for rent growth. Some of the closings, such as Dress Barn’s recent announcement, should result in a stronger parent company and an ability to focus on more profitable and desirable brand concepts of the chain.
Both retailers and owners/developers are being more strategic in their growth plans. There is a definite move to understand market conditions on a deeper level, i.e. forecast not just residential growth, but also shifts in traffic flows. For example, which area will be downtown’s next high-growth center or new gentrification zone? Is there a new sports venue coming that will create a new retail node in an existing shopping area, and hence a corresponding shift in the consumer traffic pattern?
Industry players are looking closer at the profitability of a store and project – increasing costs are making the partnership with contractors more important. In addition, with the growth of mixed-use projects, developers are finding the need to create strong partnerships with other developers and/or contractors that specialize in hotels, office and multifamily. Vetting of potential partners and contractors is also more critical than ever.
Part of this strategic planning involves careful monitoring of any trouble spots such as a potential decline in consumer spending, at-risk retailers, and a pending shakeout in the grocer segment. This approach also requires an awareness that mixed-use is not the solution to every dark box or mall. “Mixed-use” is still a key buzzword for now, but it’s not always the right answer. Overall, both retailers and developers/owners are being more discerning in their real estate decisions.
Here are three exciting new brands and concepts to watch out for in 2019.
Fourpost – Fourpost is built around the concept of lowering the barrier to entry for brands when opening brick-and-mortar stores. Their store is more a community that features not only rotating selections of products, but also embraces a family-friendly environment that offers educational programming, networking and workshops designed to inspire engagement and discovery. Fourpost’s first location opened in Minnesota’s Mall of America and they have others planned for 2019.
Foxtrot Delivery Market – a new “experiential” retail concept that sets out to be the new C-store of the future, i.e. the corner store for a one-stop spot in the neighborhood. Foxtrot is both a café and market that is curated with everyday essentials. Consumers can shop via their app, stop in-store to pick up, or have items delivered within the hour.
Politan Row and Bar Politan – This restaurant group is a sister concept to Politan Group’s flagship food hall, St. Roch Market in New Orleans, and is one to watch in the category of food halls. They seem to have hit on a successful mix of local chefs, design and connecting the culinary curious consumer to a communal that inspires sharing, community and conversation in addition to food. Currently, they have food halls in New Orleans, Miami and Chicago, along with offering data management software and analytics tools specifically for the growing food hall segment of the restaurant industry.
Whitney Butler is director of retail leasing at Franklin Street, where she specializes in retail landlord representation across Jacksonville and throughout North Florida and South Georgia, as well as, assisting in the expansion of local, regional and national retailers. She can be reached at 904.271.4120 or [email protected].