Millennials Driving Philly Retail
The secret to future success for Philly retail, both in the city—and more surprisingly—the suburbs? Millennials. (They aren't known to be a very frugal group.)
Millennials are known for their city-loving ways, now that they're getting better jobs and forming households at a greater rate than any generation since Baby Boomers, according to the speakers at Bisnow's fourth annual Retail Real Estate Summit at the Rittenhouse. Urban retail is reaping the benefit of that demographic for now. But even Millennials will age (don't tell them that), and there's some evidence that many of them will move to the suburbs—to the benefit of suburban retail.
Snapped: Goldenberg Group EVP Jeremy Fogel, whose company formerly focused only on shopping center development, but has diversified into other property types in the Philly area. According to our speakers, the impact of Millennials has been dramatic in City Center—attracting some national retail players, but mainly still the boutiques, independents and regional stores that the age group favors. In the last six years, 100,000 Millennials have come to live in the city, with two-thirds of all new residents in the city in that age group.
Kimco Realty Corp president, Mid-Atlantic region Tom Simmons. With 29 assets in Philadelphia totaling 4.5M SF, Kimco is working on the development and redevelopment of its retail assets, and is buying out some of its JV partners. Retailers focused on capturing the Millennial dollar are now busy re-tenanting the space that other retailers have left, the panelists explained. Sports apparel store Under Armour, for example, is one of a number of retailers popular among that age group that's coming to Walnut Street.
RioCan REIT AVP Mark Wampler. The Canadian REIT is a major owner of retail and mixed-use properties in Canada and the US, including metro Philly. For all their current impact on the city, a lot of Millennials will eventually be suburbanites, the speakers added. That won't destroy retail in the city—there will still be a lot of people who want to live, work and shop there—but retailers will also need to cater to Millennials who move to the suburbs.
BET Investments president Michael Markman. BET has about 7M SF of retail in 14 states, as well as office and multifamily properties. One current project for the company in greater Philly is the redevelopment of the Granite Run Mall, which is going to be a mixed-use property, including a major retail component. Mixed-use is a way to assure the future viability of retail, our panelists asserted. The suburbs are going to become more dense, and retail will thrive in mixed-use developments as a more accessible, walkable experience.
Cedar Realty Trust COO Nancy Mozzachio, whose company specializes in supermarket-anchored shopping centers, with about 1.5M SF in Philadelphia. Another point made by the panelists: Most retail leasing teams have been proactive when it comes to re-tenanting the space left by troubled tenants, since it's rarely a secret when a brand is troubled. No recent closures, such as Radio Shack, have been surprises. But there are re-tenanting challenges, especially as stores merge and have fewer locations, such as in the office supply business. That means fewer opportunities to fill space and keep a healthy mix. Smaller, Radio Shack-sized space isn't that hard to fill, unlike the larger and midsized boxes.
CBRE SVP Larry Steinberg, who focuses on Center City retail, both leasing and investment sales, and who's currently working on leasing Brickstone's development 1100 block of Chestnut, and repping Restoration Hardware's new Mansion concept in the area. Astute retailers are out in front of the changes wrought by the Internet. Best Buy, for instance, is devoting less space to items that are easily bought online, and focusing more on what people still want to see and touch before they buy, such as large electronics. Even so, there's pressure to downsize the boxes—to repurpose them with more than a single tenant, which can be expensive, or to make spaces smaller from the get-go for ground-up development.
Starbucks Coffee Co store development manager Greg Rees. Among other initiatives, the coffee giant is in the process of renovating all of its Philly locations. There's an entire class of retailers who are dead but don't know it, such as Kmart and Sears—Radio Shack writ large, the speakers said. For owners, recycling these big boxes can offer opportunities to acquire newer and stronger tenants, especially in markets without enough of that kind of space. As long as owners can plan far enough in advance, they can market the space effectively and attract the best replacements.
The Martin Architectural Group principal Drew Romanic, who moderated, and who's done a lot of design work in the Mid-Atlantic. To be successful, retailers have to have stores that offer experiences and a great online presence. Pure commodity-based retailers have suffered the most from the Internet. But it's possible for them to differentiate themselves. Again, Best Buy is an example—it's setting up store-within-store vendors, featuring highly trained people who can offer expertise on the spot to the buyer, which differentiates it from standard retailers.