Is This the End of Bricks and Mortar Stores? It's Complicated
Trends shaping the future of retail real estate in the age of multi-platform shopping
by Christopher A. Bruck, Former SVP of Leasing at GGP, Inc.
The growth of multi-platform shopping has forced retailers to reevaluate their digital and in-person business models. Recently, retailers, including department stores Macy’s , Kmart, and Sears announced plans to close down many bricks and mortar locations in favor of offering wider digital offerings. On the other hand, once digital-only retailers like Bonobos and Rent the Runway, recently opened physical store locations with suggested appointment-only visits. The convergence of online and physical store retailers will continue to increase as retailers strategize the best delivery methods and consumer experiences for their brands. As a result, mall owners and managers are adjusting to how this will impact their properties, lease standard expectations, and shopping environments.
A Changing Shopping Landscape
The customer shopping experience is alive and well today, albeit different from before. In today’s evolving marketplace, shopping has fragmented into several channels. To ensure that customers perceive favorable value, retailers must adapt seamless channels of communication and interaction for their online, distribution and bricks and mortar store locations. The backend of this chain ensures timeliness and quality, and customers benefit from better service and performance on all platforms. The changes needed to succeed may take time, but retailers willing to commit to multiple platforms, will see better performance and longer term appreciation and retention rates from their customers. Omnichannel retailers will continue to fine tune and enhance their offerings and strategies, making further gains at the expense of those retailers that have not adapted to the evolving marketplace.
What to Watch in Retail Real Estate
All in all, consumer confidence has been on the rise, and demand for high quality retail properties remains strong, however many lower quality assets will need to be repurposed. High quality assets will continue to attract significant interest and capital for redevelopment, including in-line and department store/anchor spaces. Accordingly, proactively seeking control of better space in better assets continues to be a major theme.
Greater awareness and sensitivity to major lease provisions and covenants needs to evolve to reflect the ever-changing retail environment. Providing adequate protections and maneuvering room for both owner and tenant is essential. Leasing to new and innovative retailers, expanding and enhancing the shopping environment, its offerings and the overall customer experience is also paramount to differentiate and provide appropriate point of difference to consumers who shop in-stores. For mall owners and managers, the health and performance of major tenants and in-line retailers will need to be proactively and closely scrutinized in coming years.
Please note: This article contains the sole views and opinions of Christopher A. Bruck and does not reflect the views or opinions of Guidepoint Global, LLC (“Guidepoint”). Guidepoint is not a registered investment adviser and cannot transact business as an investment adviser or give investment advice. The information provided in this article is not intended to constitute investment advice, nor is it intended as an offer or solicitation of an offer or a recommendation to buy, hold or sell any security.
