Top five trends in retail real estate for 2015

Shopping Mall -City Life - Modern Architecture - Downtown DistriAs buyers of surplus retail real estate, we are keen to understand the market forces driving supply and demand of brick and mortar. According to the PwC report Emerging Trends in Real Estate, investment and development strength in the retail sector ranks the lowest of all the major property types. Despite that bleak outlook, there are some very positive trends in retail real estate of which savvy retailers can take advantage. We’ve collected what we believe to be the five most important such trends influencing retail real estate.

1. Main street is back

Not long ago, the hollowed out streets of urban downtown were thought to spell the end of main street shopping. Big box stores, the internet and massive suburban malls were predicted to kill off main street shopping. But in one way, the opposite has become true. Ecommerce has helped bring back main street by using it as display, advertising and distribution. The above mentioned PwC report lists US Neighborhood/Community Centers as the best retail investment opportunity by more than a factor of five. Between the growth of omni-channel distribution and the resurgence of brick and mortar, urban downtown is coming back in a big way.

2. The redefinition of malls

While the massive indoor malls anchored by the upscale and mid-market stores may becoming played out and not expected to return to that form, malls continue to have a value but that value is being redefined. As consumer confidence grows and shopper preferences change, pedestrian-friendly “lifestyle centers” are popping up across the American landscape. Malls are being redesigned to be more welcoming, with attractions such as high-end restaurants, health clubs and specialty grocery stores. Another interesting trend is the emergence of pop-up stores – specialty retailers who set up shop for a few weeks or months at a mall kiosk, vacant mall or downtown storefront without incurring large overhead costs.

3. Bricks born of clicks

Not too long ago, many of us were predicting the demise of brick and mortar retail. After all, with everything at the click of a mouse, who needs to travel to the store? But some innovative companies are coming to realize that while stories can be told online, the palpable feel of a brand comes best from a physical store. Take Bonobos, a menswear apparel brand launched exclusively online in 2007. In 2011, Bonobos created brick-and-mortar stores called Guideshops, hybrid stores combining top shelf customer service with the ease and convenience of online retail. Shop and order in the store and receive your purchases via mail two days later. And with others like Birchbox, eyewear brand Warby Parker, and Nordstom boutiques following suit, this trend is gaining momentum. Yes, the internet is changing retail as we know it, but it looks to be creating a whole new role for the physical store.

4. The 18 hour city

Remember when your bank was open 10 -4 Monday through Friday? Even with the ubiquity of cash machines, branches are now open longer and on the weekends, some even on Sunday. No longer the exclusive province of the great coastal cities, urban centers in second and third tier cities are alive night and day and on weekends – some even 24/7. Revitalization of downtown areas are bringing young people back and following them are the shops and restaurants catering to their tastes and round-the-clock lifestyles.

5. Technology as both friend and foe

Once seen as strictly the enemy of offline retail, the internet can be a profitable tool for retail chains with vision. Forrester Consulting recently released the results of a study on onmi-channel retailing in which 73 percent of shoppers claimed they would buy from local retailers if they could check the product’s availability online first. Rather than fighting the instant online access to products, technology can be harnessed to increase sales and spread the physical experience of shopping and of the brand. But to truly take advantage of technology in this way, brands must create an in-store experience worth the consumer’s time and effort. Cutting store costs and service in order to compete with online outlets will continue to prove futile.

 

The only consistent aspect of retail is change. And while change is often disruptive, it can also create great opportunity for those fearless enough to embrace it. The retail real estate market is rebounding, but taking advantage of this new opportunity requires not just the embrace of change, but the courage to lead that change.

About Bill Bell

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