Internet Aids the Brick and Mortar Star: Key Learnings on Retail Real Estate
This week, Schwabe and the Portland and Puget Sound Business Journals hosted PNW Predictions: Retail Real Estate Reimagined, a discussion on the impacts from the last 18 months and predictions for the direction that retail real estate is moving.
The panel delivered a variety of perspectives via guests Kemper Freeman, Chairman & CEO, Kemper Development Co.; Patricia Johnson, Founder, The Retail Owners Institute(R) & Partner, Outcalt & Johnson: Retail Strategists; Kim Malek, CEO & Co-Founder, Salt & Straw; and Erika Plummer, Senior Director, Leasing, CenterCal Properties.
Early on, panelists reveled in the data that many retailers in their retail shopping locations are tracking ahead of 2019. They also shared sentiments that in spite of a common perception that brick and mortar establishments are suffering due to the prevalence of internet retailers, the overdue shift retail is experiencing is actually partially a result of a decades-old over-saturation of physical stores. Simply put, retail of today is correcting an over-abundance of stores—and catering to a more informed customer.
Other top takeaways from the PNW Predictions: Retail Real Estate Reimagined event:
- Great retail is a catalyst for other commercial real estate, and if you build mixed-use and it’s successful, it makes the retail more successful.
- Many retail sectors experienced a surge in demand during the last 18 months, including athleisure, health, and retailers in the home goods sectors. Luxury retail benefited from customers who kept their jobs and had the salaries (combined with limited expenses on categories like travel) to support spending habits. Other retailers, like dollar stores, saw an increase in growth as well. Additionally, “today’s department stores” such as Fred Meyer, Walmart, and Target, which were able to remain open and supply groceries and consumer products, experienced high sales during the pandemic.
- A new kind of customer has emerged. Gen Z is 82 million strong, and they continue to spend on apparel. They have different criteria from previous generations, such as brands that support causes that align with their values. Across generations, customers have more power than ever before to do their research and understand the products they are purchasing. This creates a new kind of demand on the retail workforce.
- The challenges retail now faces are finding employees and dealing with distribution and supply chain issues. Hospitality retailers are getting hit hard by these factors. It is not necessarily affecting real estate decisions, but finding employees is a big challenge for the business.
- Customers and employees alike are looking for safety, and technology is helping address this concern, whether it is the communication of COVID-19 protocols or creating options like curbside and contactless pickup.
- Customers still value in-person connection, and retail locations provide them with a place to gather and be together. Retail is definitely not dead.
One of the biggest takeaways is that mixed-use is the way of the future. There is an opportunity to rethink and merge work, living, and shopping environments. New anchors for shopping centers are Whole Foods and Trader Joes, as opposed to the department stores of previous years, and business parks may experience new life if they incorporate mixed-use solutions such as venues for human interaction, food and beverage options, and even access to services like child care or healthcare.
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