CREJ - Retail Properties Quarterly - November 2016
Denver is a hot city for millennials on the move. According to data collected by the U.S. Bureau of Statistics, Denver is one of the fastest-growing cities in America. The Mile High City is consistently listed as one of the top destinations for young professionals, due in large part to the city’s healthy and growing economy. Millennials, aged 18 to 34 years, account for roughly 35 percent of Denver’s population and will have a large influence on the future of retail in Denver, just as they are driving changes in the national retail market. Millennials are the largest cohort in U.S. history. In 2015, there were roughly 92 million people between the age of 18 and 36, compared to 61 million Generation Xers, aged 36-50, and 72 million baby boomers, aged 51 to 70. As they age, millennials will have an immense impact on the U.S. retail market and economy as a whole; by 2020, millennials will make up the majority of the American workforce. As young professionals flow into Denver, the city’s retail market is expanding in all directions. Employment in Denver is up 3.2 percent over the last year, and total retail sales are up 1.3 percent from February 2015 to February 2016. The new light rail, completed in April, has expanded Denver’s retail boundaries, transforming once inaccessible locations into land ripe for development. The Retail Attraction Program, developed by the city’s Office of Economic Development, is pushing to attract first-in-market retailers. On the downside, as demand continues to grow and supply is strained, rental rates in Denver have increased 35 percent since July 2013; some Denver businesses have seen their rent increase by as much as 300 percent since they opened their doors. This is forcing retailers in Denver to downsize or relocate their storefronts, moving from high-rent districts like Cherry Creek and Capitol Hill to lower-rent areas like Englewood, South Broadway and River North. This year, retail construction grew 24.4 percent year-over-year nationwide, with most of the growth coming from renovation of existing storefronts. Retailers have been moving quickly to keep pace with new buyer expectations. Nationwide, large storefronts like Macy’s and Bed, Bath & Beyond are suffering because they are losing their appeal with shoppers, many of whom are millennials, who are less interested in “stuff” and more interested in experiences. This shift in what motivates shoppers, who would rather buy a plane ticket than a luxury handbag, poses a major challenge for brick-and-mortar businesses. The “social generation” is challenging retailers to adapt to their new buying habits, which are influenced, in large part, by their online presence. Dramatic visual impact of a store’s space is even more important in the age of social media, where many shoppers go to learn about retailers and brands. Brand loyalty is built predominantly by social means or word-of-mouth. Forty-four percent of millennials claim to communicate about a brand by text message, while 38 percent communicate by social media. Now, more than ever, it’s beneficial to have a storefront that generates buzz – where customers walk in and pull out their phones to share a photo on Facebook. Last year, Restoration Hardware premiered its flagship store at Cherry Creek Shopping Center in Denver, renovating the four-story, 58,000-square-foot space once occupied by Saks in the style of its new “mansion concept,” a renovation effort the company is using across the country. This is an example of turning lemons into lemonade. While malls across the country are struggling to stay open, RH saw an opportunity to enter new markets and brand its stores as destinations. By creating a unique space, the company encourages buyers to step beyond the screen and into its storefront. Even if the product you’re selling stays the same, changing your presentation can be a big game-changer. Ralph Lauren experienced lackluster sales in recent years, due to the overall slump in department store sales. Last month, the luxury clothing store unveiled a redesigned flagship storefront in Beverly Hills, featuring the store’s first interactive, touchscreen handbag salon. This innovative feature – along with a collection of high-end finishes and products – helps to establish the Rodeo Drive Ralph Lauren as a destination shopping experience. Pictures posted on RL’s Instagram of the new store, with all the Hollywood glamour of a millionaire’s mansion, have generated over 35,000 likes. As Denver’s popularity continues to grow, national and international retailers are taking notice. Japanese retailer Uniqlo – popular with millennials for its affordable, trendy clothes – opened its first Denver store at 16th Street Mall in October. The Denver store is Uniqlo’s second U.S. store not on the East or West coast. The retailer has the name recognition and social-media savvy to attract millennial buyers to the 16th Street Mall, which has struggled in recent years as traditional department stores left downtown Denver. Millennials are drawn to Denver for the growing job opportunities and beautiful scenery. As the city continues to grow and attract first-in-market retailers, Denver has the potential to become a top-shopping destination.