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Midwest Retail Is Using Customer Data, Past Mistakes To Future-Proof Itself

The future of retail is determined by the past ... and data. 

In a bifurcated market dominated by news of failing retailers and dark space in shopping malls, panelists at Bisnow's Midwest retail summit saw opportunity among the struggles. The experts said those who can best analyze data and pivot based on the lessons of past and current cycles can position retail on firm footing moving forward.

Midwest Retail
Gensler principal Benjy Ward

Gensler principal Benjy Ward said the U.S. retail industry is overbuilt by 1B SF, and predicts one out of every four malls will be out of business by 2022. Ward said the excess supply is an opportunity to redefine the retail experience.

Ward drafted a point plan for future-proofing malls that addresses redeveloping and demolishing the empty space left behind by failing anchor tenants, using smaller leases and pop-up stores to activate retail, adding a pedestrian and greenspace component to malls to make them more inviting and employing omnichannel marketing to solve last-mile distribution problems.

"By creating a sense of place with a mall, you define its soul," Ward said.

Midwest Retail Acquisitions
Pircher, Nichols & Meeks partner Dave Pezza, Centennial Real Estate CEO Steven Levin, KeyBank Real Estate Capital Senior Vice President John Hoffman, Pine Tree CEO Peter Borzak, Viking Partners Fund Manager Steven Miller, Peaceable Street Capital Executive Vice President Rob Nadler and Walton Street Capital principal Josh Zemon

Centennial Real Estate CEO Steven Levin said struggling retailers brought their struggles on themselves by focusing more on expansion over the past 15 years, and not enough on reinventing themselves or being unique.

"You walk into a big-box retailer in any market and they all had the same dated, tired look," Levin said.

But that is changing. Levin said Old Navy's turnaround is an example of what happens when a major retailer turns its attention to redefining itself, and retailers are shifting from being a transactional experience to an experiential one.

Centennial is redeveloping its shopping centers. The firm is demolishing old Sears boxes and redeveloping them into restaurants, and is looking to do residential and other mixed-use at other properties. Levin believes this approach will position Centennial well when the market improves and buyers return, as they see less risk.

"A path to creating value is there," Levin said.

Bisnow's National Retail Midwest event
Shake Shack Vice President of Development Andrew McCaughan, Regency Centers Managing Director Nick Wibbenmeyer, Abbell Associates CEO Liz Holland, InvenTrust CEO Tom McGuinness, DLR Group Associate Marina Berrones and Walgreens Divisional Vice President of Real Estate Joe Brady

Walgreens Divisional Vice President of Real Estate Joe Brady said the company is redefining itself as a necessity retailer by using the data it collects from customers registered in its rewards program, with 70% of its profit driven from pharmacy sales. With consumer behavior changing exponentially, Brady said Walgreens seeks to future-proof its stores. The consumer data allows Walgreens to pivot on healthcare needs like urgent care, vision and hearing. Walgreens also signed a national contract with LabCorp to bring patient service centers and laboratory testing to select stores.

"Not many retailers analyze predictive analytics properly," Brady said.

Shopping center landlords have taken a cue from their anchor tenants and are gathering data from customers. Regency Centers Managing Director Nick Wibbenmeyer said more landlords are capturing mobile data via WiFi. This gives landlords detailed demographic data — when customers visit a center, how long, what stores they visit — to determine future tenants and shopping center improvements to give them a competitive advantage in the marketplace.

Midwest Retail
Sherpa Capital Group Managing Principal Rahul Shah, Bucksbaum Retail Properties Senior Vice President Thomas Bernier, CBRE Senior Vice President Todd Siegel, RPAI Director of National Retail Leasing Maria Toliopoulos and Westfield Vice President Christy Catlett

RPAI Director of National Retail Leasing Maria Toliopoulos is a believer in the pop-up retail trend and sees it lasting and evolving as retail rebounds. By using modular construction and movable walls, owners can keep costs down and have space that is ready-made for temporary retailers, and can enter into partnerships with lessees who can fill the space with a rotating cast of tenants.

CBRE Senior Vice President Todd Siegel said high-foot-traffic retail corridors like Michigan Avenue are being redefined by flagship stores like Apple's Michigan Avenue shop and the under-construction Starbucks Reserve Roastery. The luxury boutique retailers that helped define Michigan Avenue as the Magnificent Mile are moving to Rush Street and Oak Street, where storefront space and foot traffic better accommodate their needs.

Michigan Avenue is competing with other national markets for tenants. Siegel said this is forcing brokers to think globally when executing leases. Tenants like Starbucks and Eataly recognized Chicago's economics, compared to the coasts, would give them a competitive advantage.

See other photos from our Midwest Retail event below: 

Midwest Retail
Indochino CEO Drew Green and Pircher, Nichols & Meeks partner Dave Pezza
Midwest Retail
Washington Prime Group CEO Lou Conforti, Kite Realty CEO John Kite and Singerman Real Estate President Seth Singerman
Midwest Retail
Some attendees at our Midwest retail event