Retail development at top levels, the type that Oliver McMillan is doing, is focused on the design and the feeling it creates with users.
Retail Landlords are Studying Consumer Behavior
Retail sales per foot is an issue now. The sales of retailers are lower and it will effect rents. Urban outfitters CEO came out with comments that they have too much retail, which mean they will close stores. Many retailers are in the same boat.
Landlords are getting creative about monitoring their centers. They also use social media in a big way to relate to users and customers. For example, landlords use cameras, not for security, but to see where the hot spots are located in their facilities.
New retail delivery systems will occur and the market will adapt. There are many absolute retailers out there and they will disappear. Retail is now very brand oriented and destination oriented with retailers that are trying really hard to connect with customers. Retailers and landlords are collaborating these days because they have no choice. Understanding future customer demands and needs will help with growth for retailers.
Current Conditions Based on Retail Investment Types
Gyms, like 24 Hours and LA Fitness, are expanding rapidly. The fitness industry is taking more vacant boxes. 24 Hours Fitness is streaming workouts on the web and producing a digital magazine, in an effort to innovate and add revenue channels. Vanity tenants like spa, hair and nail products are doing okay and new concepts are coming in. Food tenants came back in a great way after the recession. Food trucks are actually good for retail because they allows entry to the food restaurant business in a better way. Home goods and pet shops are looking good now too. Amazon is looking to do brick and mortar stores. Tenants that are local non-credit are the ones to look for since they will create value, especially in urban settings.
Final Points to Consider
Consumers are much more sophisticated these days, and are expecting more today than they used to. They also are more inclined to show in multi-channel environments. They are influenced by reviews, peers and all types of media.
Technology is effective in changing the retail market, but trends in branding and the way consumers shop are effecting retail real estate even more.
Institutional investors are looking today at space by space and understand the experience of consumers. Underwriting all type of retail is more difficult. Investors are realizing that sales and profitability is the most important investment item to look at. How are the tenants doing? In NYC we see today an entrenchment of rents as capital market got ahead of itself.