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Clicks-And-Bricks: In Today's Culture, One Can’t Function Completely Without The Other

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The industry is nearing a point where retailers cannot thrive without establishing a strong online presence to engage with customers.

Melina Cordero, Brandon Weber

But don’t let the bold headlines suggesting the death of brick-and-mortar fool you. Physical retail is far from dead, but the physical landscape has evolved. There’s been a shift in the last few years in which e-commerce retailers have been opening physical stores, and CBRE head of retail research in the Americas Melina Cordero said that trend will only grow.

“I think that we’re moving away from everyone talking about e-commerce and now it’s about omnichannel. We’re seeing that on both sides,” Cordero said. “What’s new is seeing the online players making investments in brick-and-mortar. The clicks-to-bricks trend is only getting bigger.”

Studies show that the strongest retailers span physical, mobile and social platforms. Being omnichannel is particularly important for companies targeting Millennials. (And most are; Millennials are the largest living generation and the main consumers driving the U.S. economy.)

recent CBRE study on Millennials found that while these 19- to 34-year-olds do a great deal of shopping online, they still prefer the experiential elements offered in a physical retailer. Millennials are more likely to research a product online and search for deals and promotions via social media before purchasing the product in stores.  

“The growth in rental values and drop in vacancies will continue to be concentrated in markets where employment is growing. Retail growth follows the people and the money," Cordero said. "That's where sales and rental rates will go up."

Experiential Retail: The Divide Between Class-A And B/C

Mobile shopping, e-commerce, omnichannel

Experiential retail is another hot topic in the industry today as landlords look to repurpose their centers to drive traffic. That’s where mixed-use office, residential and even hotel developments coupled with fresh retail concepts come into play.

“The lifestyle, really high-end experiential centers still continue to succeed,” VTS co-founder Brandon Weber told Bisnow. “Some of these retailers are trying to reimagine their retail by [bringing in] coffee shops and restaurants to drive traffic.”

In catering to Millennials’ live/work/play needs, developers are building mixed-use lifestyle centers in vibrant urban and suburban markets — particularly those cities exhibiting strong job gains, major growth in population and shifting demographics in favor of young professionals.

“The growth in retail rental values and drop in vacancies will continue to be concentrated in markets where employment is growing," Cordero said. "That's where sales and rental rates will go up."

Clicks-To-Bricks

Vacant store, big box, empty, Macy's

But what’s to come of the smaller Class-B and Class-C malls and centers that don’t have the space nor capital to repurpose on a larger scale?

“A lot of the headlines have been around the death of these B/C properties, but I don’t think that’s the whole story,” Cordero said. “There’s a lot of repurposing initiatives going on.”

Owners of smaller centers are pushing for adaptive reuse initiatives as anchors increasingly go dark in struggling centers. Cordero said healthcare-related tenants are becoming more prevalent in strip centers as well. Landlords tend to favor these tenants because they come with strong credit history and typically sign long-term leases.

But a big traffic driver remains entertainment-focused and experiential tenants. For example, Weber said there’s an innovative redevelopment project in the New York City area that converted part of a strip center into a space for indoor rock climbing to appeal to customers.

"If you own 50M SF of Class B-minus strip centers around the country its really really tough," Weber said. "I would say there’s not going to be one solution to the problem...[Landlords] will need to get creative to create demand for a space that is kind of old.”