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Specialty-Focused Centers, No Weed: 5 Trends To Watch In The Future Of Retail Centers

Houston Retail

Right as developers are getting a better grip on the changing retail sector and the emergence of the online experience, new changes are coming to retail as companies dig deeper into the in-store experience.

Retail experts at Bisnow's Mixed-Use and Retail event in Houston outlined five future trends to look for in retail shopping centers.

A D.C. Equinox Sports Club in the same building as The Ritz-Carlton at 1170 22nd St. NW.

1. Specialty-Focused Retail Destinations  

Evergreen Commercial Real Estate principal Lilly Golden predicts the next big trend in shopping centers will be specialty concepts, with entire mixed-use centers revolving around one idea.

She described one possibility, a health and wellness-focused center with an Equinox hotel, an upscale gym brand that expanded into the hospitality sector, a fitness concept, healthy eating options, activewear brands like Lululemon and sporting good stores.

Another example is a gourmet food-focused center that could feature a specialty grocery store, high-end restaurants, a Sur La Table, a retailer that hosts cooking classes and other food-related concepts. 

“It’s a just a different type of anchored center," she said. "I think that is going to be the wave of the future.”

2. In-Store Focus On Freshness Means Goodbye Giant Grocers

Grocery stores will begin to downsize to adapt to the evolution of the customers’ shopping experience, Transwestern Managing Director Nick Hernandez said.

“The fact that you can get your staples delivered to your house, grocery stores are going to be more focused on fresh product," he said. "And, they do not need a big box in order to do that.”

A warehouse serves as a cheaper option to house those products compared to in-store storage, he said. While industrial space is in high demand in Houston, most of the recent deals have come from e-commerce companies and not grocery retailers. 

Moderator and First American Title National Commercial Services Senior Vice President Patrick Shields, Transwestern Managing Director Nick Hernandez, Evergreen Commercial Realty principal Lilly Golden, Weitzman Senior Vice President JoBeth Prochaska and NewQuest Properties partner Dean Lane chat about retail trends at Bisnow’s Mixed-Use and Retail event in Houston.

3. Smaller-Scale Mixed-Use Environments

On the mixed-use development front, Hernandez expects smaller, more intimate projects to adjust to the rising cost of land and lack of large tracts within the Inner Loop.

“There is no question: There will be some contractional necessity in our business,” NewQuest Properties partner Dean Lane said.

Even in the face of footage shrinkage, he said we shouldn't expect the death of brick-and-mortar. People still want to see, feel and touch, and that experience cannot happen online.

Only 10% of the retail sales are internet-based transactions, Weitzman Senior Vice President JoBeth Prochaska said.   

“You are not going to see the contraction that you are afraid of from the internet,” she said.

E-commerce and internet concepts are launching physical locations to help convey their brand, Lane said. Brands do not need thousands of stores to accomplish this feat, but maybe only a few hundred.  

4. Watch Middle America's Shopping Patterns 

While it may be attractive to shoot for high-end retailers, Middle America is where the consumers are, Lane said. It is important to understand their shopping habits, which may not include using a delivery service or other trendy shopping habits.

People's shopping preferences depend on their economic background, culture and where they came from, Lane said. A 2017 report by Acosta found that 79% of Hispanic shoppers brought along another person (spouse and/or children) when shopping. They also take more trips to the grocery store and enjoy the process of picking up ingredients for a planned meal more than the average U.S. shopper. 

“You see families in certain cultures that love to shop together and do it on the weekends,” he said. “They like to go to flea markets and markets. That is just the way they do business." 

5. Centers Restricting Marijuana Sales

Lane noted that nearly all big-box centers he has done deals in restricted all type of marijuana sales.

“That is an interesting planning perspective because we are going to see a world of change in that arena,” he said.

The legalization of recreational and medical marijuana is pushing through around the country and accelerating options within commercial real estate. Last week, Canada joined the short list of countries that allow the legal sale of cannabis.  

Texas has asserted strict rules for dispensaries and other marijuana-related businesses, though some experts think that will loosen eventually. So far, the state has only approved a few companies to sell cannabis oil for medical-related treatment.