CREJ - Retail Properties Quarterly - November 2017
The word “curation” usually is associated with art galleries, museums or trendy music festivals. However, it is rapidly gaining traction among retail landlords. Where once they talked about “active asset management” or just “improving the tenant mix,” today many landlords consider themselves “retail curators.” In today’s changing retail landscape, it is more important than ever for retail landlords to have tenants that complement each other, creating convenience for the customer and added traffic for the retailers. Retail remains strong and will continue to be, despite the rumors of its demise. At its core, retail real estate is about convenience, access and visibility. As long as you have those key ingredients, there always will be a need for space that can satisfy those fundamental needs of consumers. However, a lot of the businesses and categories that landlords have relied on in the past are no longer viable options (i.e., Blockbuster, Borders, Ultimate Electronics, etc.). So, adapting to the new retail reality is important. Although the categories and names may change, the need for well-located retail space prevails. For long-term stability, shopping center owners need to have the right mix of tenants and adapt to the new economic realities and consumer realities of the times. It is more important than ever that community shopping centers offer a unique destination that gives consumers a reason to stay. This could be unique restaurants that drive nighttime traffic, entertainment options for weekend crowds or a quality mix of daily needs that bring a steady stream of daytime traffic. In many cases, we have reached the point where rents are difficult to sustain unless the landlord can find the right type of use that can generate the sales, in which case rents can keep improving. With pressure from rising rents and competition from online sales, retailers are scrutinizing locations more than ever. It is important to understand the benefits of a particular location. Each location has a distinct set of characteristics and those characteristics will drive what type of retail will thrive there. Landlords and brokers must consider if the space is urban or suburban and what age groups it is targeting – such as millennials, elderly or young families with kids. It is important to understand who the target audience is going to be in order to create a mix of tenants that will meet the needs of the area. It is more difficult for a retailer to thrive solely on its own than when it is surrounded by complementary retailers. For example, the health and wellness trend is as strong as ever. We’re still seeing new fitness workout concepts pop up, whether it’s Pilates, yoga or cycling. Along with that, you have your healthy eating options that are actively looking for new locations. These uses are great complements to each other and can provide the convenience consumers want while driving sales for retailers. Denver’s population growth is driven by millennials and young families, and both have strong buying power and are looking for very specific things on which to spend their money. As areas change, so do the needs of those who live there and the needs that should be met by retailers. Synergy is not only created with the retailers themselves, but also through the overall development of the center. Developments can drive uses by creating an inviting atmosphere that encourages people to hang around to socialize and be entertained. Millennials, for example, are looking for authentic environments that respond to their aspirations. Sustainability is a great example. Millennials wants sustainability to be present within the brand of a retail facility, because they recognize sustainability in design and respond positively to it. They also are attracted to an atmosphere that feels like an outdoor living room. In urban areas, a mix of unique shopping, entertainment, hotels and exciting restaurant and bar concepts tend to bring the crowds and invigorate retail. Areas like River North, South Broadway, Union Station, and suburban developments like Belleview Station and Old Town Arvada have managed create an exciting retail mix that is thriving. Meanwhile, young families are looking for convenient access to medical services, uses oriented to children and a Main Street environment for shopping and dining. For the young family, a retail destination that combines activities for kids like karate, tutoring or gymnastics, with a fitness use for the parent and healthy eating options can create convenience and activity for the whole retail project. This can work in larger retail formats like lifestyle centers (Belmar, Streets of SouthGlenn, Southlands), but also is a dynamic that works great in neighborhood shopping centers. Another driver of strip mall demand is convenience, including drive-thrus and outparcels. Many restaurants, dentists and optometrists are looking to be conveniently located in neighborhoods, offering shopping center owners opportunities to convert some of their excess parking to convenient outparcels or pads. Retail categories that are key in today’s new retail reality • Medical. Common medical tenants include urgent care, dentists, optometrists, physical therapy and medical spas. Strip malls are benefiting from the decentralization of medical campuses. As more hospital groups reenter neighborhoods where their patients live, outpatient clinics and specialized medical services such as physical therapy centers and MRI facilities have found homes in strip centers. There also has been a surge of activity from alternative health and wellness tenants including chiropractors, acupuncture, float spas, meditation rooms, IV bars and cryo-therapy. • Restaurant. From quick service to full service, the restaurant business continues to grow. This segment in not being hurt by online retailers because people still want to get out and socialize. Consumers are looking for unique offerings and healthy, locally sourced, organic foods. Burgers, pizza and chicken seem to be the categories dominating the quick-service category. • Fitness. Popular fitness tenants include boxing gyms, yoga studios, Pilates, barre, cycling/spinning and CrossFit. Fitness is a category that is insulated from online competition, and is a category that has become smaller and more specialized, offering not only a place to work out but also a place to socialize and find community. • Beauty. Traditional retails such as barbershops, beauty and nail salons continue to grow, and we are seeing more of these services operating under one roof in salon-suites concepts, such as Phenix Salon Suites and Sola Salons. Cosmetic services, such as laser hair removal, facials, spray tanning and Coolsculpting, are expanding, and some are putting a variety of these services under one roof in day spas such as Ella Bliss.