Historically, consumers had to go to a shopping center, now, they must be compelled to go to a center based on an emotional connection that connects to the consumers values.
Today, Brick and Mortar retail is filled with uncertainty. We are in a time where many are packing up their bags and heading to the exit gates, but others see tremendous opportunity ahead.
Uncertainty often means risk but those that are able and willing to manage the risk will be rewarded with exceptional returns. I have read too many articles where an author indicates that if retailers do not evolve, they will die. Respectfully, no matter what an individual’s roll is within the industry, we all must evolve or suffer the same result.
While the conventional shopping center Landlord might complain that “there are not enough retailers” my question to that Landlord is, what you are doing to make your property more relevant to attract the retailers that are in the market? Throughout the country, we have a dated supply of brick and mortar inventory. Most of the square footage of shopping centers throughout the country were designed based upon the principals of formula retail.
As an industry we need to re-imagine the role of retail real estate. This starts with understanding what the consumer is truly seeking today. In more and more cases, today’s consumers are looking for what Howard Schultz refers to as the 3rd place. A ‘Third Place’ is somewhere besides one’s home and work where they can live out a part of their lives at some regular interval — daily, a few times a week. It becomes the place they prefer to hang out or take their friends and family to see because it inspires their lives and those around them.
The consumer wants the comforts and convenience of a home and office. A nice chair, a place to talk on the phone, look out the window, surf the web and shop for products and services. The idea behind customer service here is to make it one that isn’t just good, we want to make it great. How many shopping centers can we truly say make us feel this way?
The US still has 26 feet per capita of retail space. I think it is safe to say that this number will increase dramatically, but who will win and who will lose along the way? Will power centers prevail over malls? At the end of the day, is high street retail the sole survivor?
While no one knows for certain, it does not appear that there is one right answer to this question. Retail properties are becoming hyper local but what works best in one neighborhood no longer translates to the same formula in another neighborhood. Today, properties need to become brands that reflect the communities in which they serve in order to attract the target consumers and retailers.
If people have a bad experience, they’ll tell 7 people. If they have an average experience they’ll tell no one. If they have a great experience, they’ll tell 2-3. Making it a great experience though, isn’t just about service.
We work with numerous retailers that have an appetite for growth but are struggling to find locations where the property is brand relevant. Does the real estate organically provide a brand message that is consistent with the retailer’s brand promise? Is it innovative, is it fresh, is it interesting? Is it relevant to the retailer’s target consumer? In too many cases, the answer is NO. The answer is NO primarily because Landlord’s have not “had” to think this way in the past. Only an exceptionally sophisticated landlord has thought this way in the past and even fewer have followed thru to make the investment to truly become a 3rd place for a community.
Brick and Mortar needs to resonate with its targeted retailer’s brand message. Shopping center owners that are equipped to transform their environments through strategic planning of brand message, design, marketing and consumer analytics, will be more successful with leasing, financing and valuation as a result.
Retailers, Owners service providers that are students of the game, and willing and able to embrace the change, are setting themselves up for future success. They will be the ones to thrive in the new paradigm of retail real estate.
About the author:
Richard Rizika is recognized as one of the top retail real estate professionals globally. Formerly a Vice Chairman at CBRE Inc, Richard Rizika is the Co-Founder of Beta, a leading real estate services firm based in Los Angeles CA.
Mr. Rizika has represented an impressive list of brands over his career including such recognizable retailers such as Nike, Target, Columbia Sportswear Company, Crate & Barrel, The Container Store, VF Corp, and Chase Bank.
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