Retail Real Estate Has Become A 'Treasure Hunt' For Investors, Brokers, End Users And Customers
The shopping mall of even 10 years ago is a dinosaur, replaced by a vibrant mix of name department stores, junior box retailers, restaurants and entertainment to meet modern demands. In the best cases, everyone in the food chain, from investors and developers to end users and customers, feels like they have a seat at the table.
Regency Centers managing director Nick Wibbenmeyer said the something-for-everyone approach to retail these days is similar to a "treasure hunt." Developers are emphasizing the consumer experience inside and outside the shopping center, piecing together what mix of retailers and entertainment is needed to keep consumers on-site longer and spending more money.
Food and beverage leads the charge, Wibbenmeyer said, and retailers that are able to integrate into the shopping experience, whether it is a coffee bar or a fast casual café, are able to separate themselves from the pack. But it is capital intensive.
Another driver in retail development in the last four to five years is junior box retailers. Noon said Builtech has completed between 60 and 100 junior box projects in that time, which have proven to be popular with the developers and REITs they work with, and add to the treasure hunt experience shoppers seek.
For all the talk about how tech, particularly e-commerce, has affected retail, Terraco Real Estate Development & Management CEO Scott Gendell said most everyone tends to forget how technology relates to transit and how we live. Millennials want to live in the city and a growing number of them are not driving; they want convenience. Gendell said this has influenced Terraco's focus on wanting to be in urban markets where the population density is increasing and there is easy access to public transportation.
Gendell said these opportunities can benefit when neighborhood residents feel as though they have partial ownership in a retail development. Their input can improve a project. Logan's Crossing, Terraco's redevelopment of the Logan Square Mega Mall, relied on neighborhood feedback to evolve over a 12-month period into a project whose design complements existing architecture, instead of a glass and steel structure that stands out.
There is also a shift in the balance in mixed-use, multifamily/retail projects. Previously, aspect was considered an afterthought. Today, Gendell said, developers are giving each equal attention and looking deeper into how one complements the other.
Mid America Asset Management principal Michelle Panovich said that somewhere in the past, owners lost sight of the customer demographics they were serving. At Ford City Mall, Mid America started from scratch, studied the population demographics surrounding the south suburban mall, and signed national and regional retailers that fit those demographics.
It is a reversal of when the major department stores were the drivers of foot traffic. Panovich said having a mix of retailers, along with quality food and entertainment options, led to increased sales at Ford City.
Regency Centers was the largest landlord for Dominick's Finer Food in 2008. Then Safeway shut down all of the Dominick's stores. Wibbenmeyer said that was an example of "bad news is good news" in retail. Regency Centers was able to fill most of that dark space with new supermarkets, which started a chain reaction of replacing the older surrounding retailers with newer, better retailers.
Our investment panel said the influence of e-commerce on retail's struggles is much ado about nothing. Heitman managing director Mary Ludgin said the fear of e-commerce on retail is "overplayed," while Centennial Real Estate CEO Steven Levin said one of the greater problems facing retail is overexpansion. There is roughly 25 SF of retail space per person in the U.S., compared to 15 SF per person in Canada. These days, mall owners are either dividing large blocks of vacant space to lease to specialty retailers or razing them completely to transform the old malls into modern lifestyle experiences.
Levin laid some of the blame for retail's struggles at the feet of the retailers, which he said have grown complacent and stopped reinventing themselves. "Twenty years ago, I could walk into an Old Navy and buy a button-up shirt," Levin said. "I walk into that same Old Navy today and that same shirt is still for sale. Put a stripe on it."
Good retailing stands out, and Levin said the strongest retailers change with the times.