Is retail absolute? Not entirely, no. However, many retail investments which fail are then successfully redeveloped. Many of these redevelopments are public and private partnerships. Partnerships with communities are the key to the future of these “old” real estate developments. When thinking about redevelopment of older real estate centers, understanding the differences between “need” based facilities and “want” based retail facilities is important.
“Need” based is where a consumer’s dollar goes first. Characteristics of purchase decisions are driven by rational critiria with a high frequency of visits.
“Want” based is a choice to shop. There is a high variable between high income and low income households. Purchase decisions are more emotional and less rational compared to “need” based.
Looking at the financial models of each: “need” rent is based on cost, but “want” is based on sales. Need based is the basic amenities which a community must have to survive. Want based defines and adds value to the community. It also contributes to the community’s economic development. Want based retail facilities change the community by creating high end retail. All cities wish to have a “want” based project; however, need based projects are important to maintain the amenities in the community.
Parking needs are different. There can be ample parking for a need based retail project. It is important to have an access amount of parking in need based projects because of the psychology of consumers and how frequently consumers visit. Aesthetic needs are different for each of the uses. Mix-use enviorments (having both want and need in the community) are great for office tenants.
When redeveloping, retail facility developers and owners should understand which direction they would like to go with respect to these above points. It is important to decide whether the retail center will be “need” or “want” based prior to redeveloping. Have questions? Call Sagiv Rosano: (213) 802-0305