The retail industry is in the midst of massive change. From the rise of e-commerce to record bankruptcy rates, it’s clear that retail needs to evolve with the times.
Nobody knows that better than the experts who presented at the International Council of Shopping Center’s RECon 2018 convention, which ended just last week. The event is the world’s largest gathering of retail real estate professionals, and while the mood was largely optimistic, many people also voiced concerns about where the industry is heading.
During the convention experts discussed all things retail, and from fine tuning the tenant mix to using technology to create an omnichannel experience, here are four key takeaways from this year’s convention.
1. It’s all about tenant mix
The modern mall is changing. Yesterday’s equation of a few department store anchors, a bunch of retailers and a simple food court are over. At RECon 2018, experts agreed it’s essential to rethink the tenant mix by bringing in new categories of tenants. That includes everyone from hotels to medical services, and when it comes to rethinking anchors, grocers are quickly becoming a new favorite.
This dynamic is forcing CRE professionals to rethink how much space tenants need and figure out ways to reconfigure spaces when a large retailer, like Toys ‘R’ Us, shuts down shop. Inland Real Estate Group Vice Chairman Joseph Cosenza said some companies are already finding innovative solutions, pointing to Kohl’s partnership with Aldi to repurpose excess space while boosting productivity and traffic.
As we move forward, experts said we should expect these types of creative arrangements to become more common.
2. We haven’t seen the end of closures
Despite record high bankruptcies, experts largely agreed that more shops around the country will shutter as inventories continue to rebalance. As this trend unfolds, Starwood Retail Partners Chief Strategist Carl Tash said he expects America’s total shopping mall count to cut in half from 1,200 to 600.
To be one of the survivors, malls need to creatively redefine themselves. That redefinition could look something like Fairlane Town Center, the Starwood mall in Michigan that struck a deal with Ford Motor Co. to transform a recently vacated Lord & Taylor store into office space. Or it could be about incorporating technology and attracting a changing arsenal of pop-up stores, another popular strategy discussed at RECon 2018.
3. Using technology to create experiences
To fight back in the age of e-commerce, experts said retail centers need to find ways to create meaningful experiences for customers. The idea is simple: if you want people to come to your stores rather than buying on Amazon, you need to give them a good reason to leave the house.
One way to do that is through technology. At RECon 2018, property tech startups presented on ways to integrate technology with brick-and-mortar to create an immersive, omnichannel experience.
Yet some segments of the industry are not adopting technology fast enough — Avison Young Principal and Executive Managing Director Jedd Nero noted that the session focused on merging technology with retail real estate drew a small crowd.
While some retail centers focus on building omnichannel offerings, others are experimenting with a mix of leisure and entertainment venues to draw crowds. Speakers suggested repurposing vacant space to house everything from virtual reality consoles, art installations, coworking spaces and medical centers to make retail centers more experience rich.
4. More focus on food
Food halls and restaurants were a popular topic on the convention floor, and many experts think food-service offerings are a critical tool to revitalize shopping centers. And while there was little disagreement that finding the right restaurant tenants has become increasingly important, most speakers agreed that malls shouldn’t allocate more than 20% of their square footage to restaurants or food halls.
Yet finding the right balance isn’t always as simple as sticking to a given percentage, said Grant Gary, President of Brokerage Services at The Woodmont Company. Gary said that while food halls may increase foot traffic, they often hurt sales at restaurants and can lead to sustainability problems.
So while there wasn’t broad agreement on the best way to use food services to boost overall retail success, we can rest assured that we won’t go hungry at the mall anytime soon.