Forget bricks vs. clicks, it’s all about distribution
Everything you know about the battle between online and physical retail is probably wrong, according to a report issued this week by CBRE.
As business analysts and retail pundits focus on store closings, they miss the fact that 58% of retail warehouse space was leased by brick-and-mortar retailers in 2015 and 2016. Only a third of such space was leased by pure-play Internet sellers.
“As the brick-and-mortar brands continue to do more online business, they can’t rely on the single distribution center anymore. They’re realizing that they need more, smaller warehouses that are closer to their consumers,” said Melina Cordero, CBRE’s head of retail research for the Americas.
In the report, “Is the e-pocalypse here?” CBRE points out that 90% of retail sales still take place in stores and that traditional brick-and-mortar retailers account for more than half of e-commerce receipts. When it comes to the so-called GAFO categories (general merchandise, apparel, furniture, and other), three-quarters of purchases took place in stores during first quarter 2017, according to U.S. Census Bureau statistics.
At the same time, the report points out, several brick-and-mortar mainstays are implementing successful omnichannel strategies. In Q1, Williams Sonoma did 51.8% of its business online, Restoration Hardware 44.8%, and J. Crew 37.7%.
“The number one thing that surprises people when they see this list is the fact that less than 10% of retail sales take place online, but the fact is that the apparel category is still very fragmented and big brands like this are still a small percentage of the whole,” Cordero said.
The bottom line, according to Cordero, is that retailers are shifting to the most efficient supply chains in order to survive. That, in some cases, even means stores serving as local fulfillment centers.
“One retailer told me that they’ve started having store associates receive local online orders and then package them and send them,” she said.
A lifestyle center architect’s view of the world
International architects, developers and municipalities have been pushing the commercial real estate envelope for generations, and International design ideals are increasingly taking root in the U.S. From unique communal environments that encourage social engagement to innovative entertainment concepts and extreme sports, domestic developers are slowly but surely integrating formerly international elements into centers. In many ways, this is driven by consumer demand for an experience — coupled with increasingly dense markets that require more creative thinking.
Baltimore-based DDG is an internationally renowned architecture, planning, and graphics firm that delivers innovative and award-winning design solutions to commercial developments in cities, towns and suburbs around the world. Here are some highlights from the firm’s portfolio, which covers more than 50 different countries.
Menlyn Shopping Center, Menlyn, Pretoria, South Africa
A drive-in movie theater outside the parking garage (pictured here) was added to this center to bring a new form of entertainment to the region. Menlyn Park is a 1.2 million-sq.-ft. mixed-use shopping and entertainment district that has been renovated several times by DDG over the last 15 years. A multi-purpose arena inspired by Roman amphitheaters that provides a venue for activities including concerts, family-oriented attractions, Barnyard Theatre and sporting events.
Akasya, Istanbul, Turkey
At Akasya, DDG transformed an old Ford factory site into a dramatic mixed-use destination that embodies the vital energy and compelling complexities of an evolving Istanbul cityscape. The KidZania space is accessed through a full-scale Turkish Airlines jet. A park meanders through the retail area of the 4.3 million-sq.-ft. lifestyle center and reaches into residential areas — reinforcing Akasya’s commitment to environmental progressivism.
Evkur Bahçelievler, Istanbul, Turkey
DDG was charged with renovating this site through “placemaking,” focusing on the concept of public space above retail. The design is supported by communal spaces that create a sense of place and serve as a social infrastructure to the surrounding region, as well as those who live and work at Evkur Bahçelievler. This was accomplished through “The Courtyard” open-air lifestyle zone, “The Promenade” highline park, “The Park” gardens and activity zones, and “The Gardens” on the roof and in the mall’s large interior atrium spaces.
Expo-Xplore, Durban, South Africa
Expo-Xplore is a branded two-level, interactive sports and entertainment facility that serves as an anchor for the Gateway Theatre of Shopping in Durban. Every part of Expo-Xplore was designed around movement, vitality, and high-energy interactions between person and place. A Tony Hawk-designed skate park adjoins the building, where other facilities include a basketball court, a competition-class standing wave for surfing, and a 4×4 track. A central rotunda towers over the keystone feature – the world’s largest freestanding indoor climbing rock at 29 meters. Expo visitors explore Planet Blue, a waterboard sport-based merchandise rotunda, and also take advantage of an IMAX theater, cultural offerings and live performances.
Istinye Park, Istanbul, Turkey
Istinye Park is an innovative retail, dining, and entertainment center situated above a natural topographical “amphitheater” of master-planned mid-rise residential neighborhoods. It consists of four conceptually and architecturally distinct elements: the Grand Rotunda, a central entertainment space; the Lifestyle Center, an open-air town-square component; the Fashion Zone, a glass-roofed indoor retail area, and the Grand Bazaar, a traditional Turkish market and food zone. The centerpiece of the 936,000-sq.-ft. center Istinye Park is the Grand Rotunda. This dramatic structure is a four-level arena-like space beneath a scalloped shell-roof structure. Supported by a central exterior mast and suspension cables, the rotunda’s 328-ft.-diameter hard-shell “canopy” encloses the entertainment-oriented portion of the mixed-use residential and retail project.
Bryce Turner is Chairman of DDG BCT Architects, a global provider of design, planning, architectural services to commercial developments. Bryce can be contacted at [email protected].
Woodbury Common agrees to drop New York trade restrictions
Simon Property Group has agreed to a settlement with the office of New York State Attorney General Eric T. Schneiderman that will have it loosening its stranglehold on the outlet business in Metropolitan New York.
Schneiderman maintained that Simon’s Woodbury Common outlet center in the Hudson River Valley owned a virtual monopoly in the region — including New York City — by virtue of a clause in tenant leases that forbid the opening other outlet stores within a 60-mile radius.
“No business should be allowed to stifle an entire industry at the expense of the consumer, but for years, that's exactly what Simon Property Group did to New Yorkers,” Schneiderman said. “Simon's anticompetitive conduct blocked competition and drove up prices for New York consumers.”
Simon will pay New York State $945,000, revise existing leases to remove the radius restrictions, and cease employing radius restrictions or other exclusionary tactics that might deter Woodbury tenants from opening additional outlet stores.
The settlement is welcome news for Staten Island developer Joseph Ferrara and his BFC partners, whose Empire Outlets NYC are under construction and set to bring luxury outlet stores to New York City in 2018. Brands signed to lease space at the 1.1 million-sq.-ft. development near the Staten Island Ferry terminal include Nordstrom Rack, Banana Republic, Francesca’s Collection, and Columbia Sporting Goods. But this week’s news should quickly add more names to the list, according to Casandra Properties’ James Prendanamo, who directs leasing for Empire Outlets.
Asked if the settlement expanded the prospective tenant pool, Prendamo replied, “We were looking at a tenant pool that was 10 Olympic-sized pools, then it shrunk to four, and now it’s back to 10 again.”
In a statement, Simon Premium Outlets argued that the radius restriction was lawful, having been in use since 1985, long before Simon acquired the center from Chelsea Property Group. The company decided to settle, however, since Schneiderman’s investigation had become “an unnecessary distraction.”
“Simon has never sought to limit competition. It regularly granted exceptions to radius provisions and understands the importance of competition and consumer choice in the market,” Simons stated. “While we do not agree with the suggested findings, the settlement has favorable terms for Woodbury Common and will permit Woodbury Common to focus on providing tenants and shoppers the type of premium experience they seek.”