REAL ESTATE

Five trends in five years will reshape U.S. mall mix

BY Marianne Wilson

Expect the malls of 2023 to include new uses and experiences, as retail real estate responds to five major industry and demographic trends over the next five years.

That’s according to a new report from global think tank Coresight Research, which predicted that mall operators will move away from an apparel focus to create retail-and-services ecosystems that include a variety of uses.

“Over the coming years, many malls will reshape their offerings, moving from a focus on apparel stores clustered around department store anchors to more diverse networks of nonapparel retailers, leisure and entertainment tenants, event and pop-up spaces, and business service providers,” stated Coresight Research CEO and founder Deborah Weinswig in the report, “Deep Dive: The Mall is Not Dead, Part 3-Five Predictions for Five Years Out.” “Those property firms that are proactively dealing with market shifts by broadening their range of tenants now—rather than simply reacting to apparel store closure programs and bankruptcies as they arise—look set to be the most resilient as the apparel market shifts further.”

According to the study, the five trends that will prompt these changes are:

1. Department store consolidation: Coresight Research predicts that 1,100 to 1,200 department stores will close between 2017 and 2023, reducing the total number of stores in the sector by one-fifth. However, with the exception of bankruptcies by chains such as Bon-Ton, these closures will have a bigger effect on lower-traffic, lower-sales regional malls than on higher-traffic premium malls.

2. Shift to services: Between 2000 and 2017, consumer spending on goods as a share of total discretionary spending fell from 50% to just over 45% As a result, U.S. consumers spent $139 billion less on discretionary goods in 2017 than they would have if the goods/services split had remained at 2000 levels.

“Looking ahead to 2023, we expect consumers will be redirecting an additional $78 billion to discretionary services at the expense of discretionary goods,” Weinswig stated.

3. Apparel sales diverted online: Brick-and-mortar apparel sales will remain flat, as e-commerce captures a greater percentage of a growing total market. Shoppers will spend approximately $73 billion more online on apparel in 2023, with e-commerce capturing one-third of total apparel sales (up from 20% today).

4. The maturation of millennials: The oldest millennials will be 43 in 2023, and will wield more than $5 trillion across all spending categories in that year. The next age group, Gen Z (those born after 2000), will also be fully fledged consumers in five years’ time. Together, the two groups will constitute more than half of all U.S. consumers, and will continue to prioritize value for price paid and experiences over goods.

In addition, their familiarity with digital brands is likely to support the continuation of the clicks-to-bricks trend in retail.

5. Growth of nontraditional channels: Retail alternatives such as rental, resale and subscription services could capture $17 billion in spending at the expense of traditional retail channels in 2023.

“Brick-and-mortar retail will face significant challenges in the coming five years,” Weinswig writes. “The mall is not dead but challenges await the most unexceptional, apparel-dominated regional malls.”

 

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M.Sapir says:
May-25-2018 07:15 am

Our 30 year expert experience tells us the consumer wants the “full experience”. The want good deals , social environments like Starbucks and engagement. Open aired single level outdoor Promemades, walkable , fresh air,featuring food and Entertainment and Shopping. We are building a live entertainment stage at our 150 M Snow Heights Promenade in Albuquerque, New Mexico. We are sure this retail trend will continue across the nation. Michael Sapir, CEO, Sapir Real Estate Development.

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REAL ESTATE

JLL lays down benchmarks for retail experience

BY Al Urbanski

Indoor skydiving and punch-fueled karaoke are surely worthy retail center experiences, but for most retailers the nature of “experientiality” is more elemental.

That was the conclusion of a press conference in a booth of the ICSC RECon Show in Las Vegas yesterday, where JLL released a study identifying six “dimensions of retail experience.” They are:

  • Intuitive: Shoppers find quality products, new items, and find them easily.
  • Human: They have favorable interactions with knowledgeable associates
  • Meaningful: Retailers make a difference in shoppers’ lives, who feel a sense of pride when shopping their stores.
  • Immersive: The exterior and interior of the store are captivating and shoppers enjoy spending time there.
  • Accessible: Shoppers can shop where they want — in stores or on websites — and the retailer knows their preferences
  • Personalized: The experience is how shoppers want it, with associates who understand their unique needs and can satisfy them and offer rewards based on past behavior.

JLL’s Big Red Rooster unit asked 2,000 shoppers to rate 20 national retail chains on these traits based on recent experiences. Receiving the five highest aggregate scores were Apple, Victoria’s Secret, Ulta Beauty, Bath & Body Works, and Ikea.

“Our goal was to create new benchmarks to better understand how well retailers are meeting shoppers’ expectations,” said Big Red Rooster managing director Stephen Jay. “This is just a starting point in measuring how people rate their retail experiences.”

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Report: Retail investment will pick back up in second half

BY Al Urbanski

Investment in retail assets plummeted by 46% in the first half of 2018, but JLL predicts a second-half comeback that should end up surpassing last year’s investment increases.

“We’re pragmatically optimistic of today’s market, and are seeing investors begin to rebuild their confidence in the sector as fundamentals strengthen,” said Naveen Jaggi, president of JLL Retail Advisory Services. “Vacancy is stabilized at under 5% nationwide and rents have reached pre-recession levels.”

In a report released at ICSC’s RECon show in Las Vegas, JLL said it based its forecast on the following factors:

  • Major markets are still showing stronger fundamentals when compared to the United States as a whole, but even those top tier properties are seeing impacts of retailer fallout. Rents continue to rise but remain inconsistent across major markets.
  • Retail construction remains limited with only 14.2 million sq. ft. delivered so far this year. Less with less than one-third of new construction came in the shopping center and mall space, with most concentrated in general retail.
  • Leasing remains steady and absorption rates remain in line with 13.4 million sq. ft. absorbed through April.

JLL pointed out that investors were slow to close deals at the beginning of the year, even though such fundamental measures were already showing improvement.

“Sellers are under more pressure to sell than buyers are to buy,” Jaggi said. “There is tremendous opportunity unfolding to buy quality retail at a discount to historical values.”

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