What Cities Need to Know About 2018’s Retail Real Estate Trends

What Cities Need to Know About 2018’s Retail Real Estate Trends

The retail and restaurant industries are navigating sweeping changes. Whether your community is trying to attract new retail development or simply retain existing retail and restaurant businesses, you need to be aware of how these changes are influencing real estate investment decisions.

Below, we summarize three of the restaurant and retail real estate trends highlighted in Buxton’s 2018 Retail and Restaurant Real Estate Outlook and share their implications for economic development processes.

Experiential Retail

The way that brick and mortar store locations are used is changing. In the e-commerce era, customers choose to visit physical store locations largely because of the experience. Retailers and restaurants are responding by reimagining their stores as space for classes, events, demonstrations, and other elements that push the experience envelope.

These changes are influencing real estate requirements. More brands are seeking spaces with unique aesthetics and places for events, classes, or in-store restaurants. Stay tuned to retailers’ and restaurants’ changing real estate needs and consider which property listings in your community might be adapted to suit those needs.

Mixed-Use Retail Developments

A close cousin to the experiential retailing trend is the movement toward mixed-use retail developments. While retail developments have often contained a mixture of stores, food, and entertainment, the ratio is changing. Retail author Doug Stephens says the new formula for success is 70 percent food, entertainment, and lifestyle experiences, with 30 percent dedicated to retail.

Mixed use development also taps into consumers’ desire to return to the pre-World War II “town square” model of the past. Throughout history, people have shopped, dined, worked, and lived in a relatively small geographic space. Mixed use development is not only convenient, but it also fosters a strong sense of community that many consumers seek.

If your community hasn’t considered mixed-use projects, evaluate this approach as a way to both increase community engagement and attract new retailers and restaurants.

Shopping Malls Reimagined

Everyone agrees that the mall of the past cannot be the mall of the future, but are malls dead?

“I wouldn’t say malls are dying; I would say they are changing,” comments Cody Howell, senior vice president at Buxton. “This is caused by the widening middle-income gap, lease renewals rolling over and even the rise of e-commerce…. Mall tenants who understand their customers’ behaviors will survive and take full advantage of a change in the mall landscape.”

So how are malls responding to changes in consumer behavior and adapting to a new era of retailing? They’re focusing on experience, redeveloping into mixed-use properties, emphasizing food and entertainment, and even offering opportunities for pop-up retailing to make getting into a mall “as easy as booking a hotel room.” 

Alternative uses will be most common at malls where the trade area has shifted to the point that traditional retailing no longer makes sense. As Buxton Vice President Peter Healey sums up:

“Malls aren’t dying, but they are evolving. As with any evolution, some malls in ‘bad’ trade areas are going to become extinct while malls in ‘good’ trade areas will continue to thrive. The key to prosperity is proper alignment of tenants and trade area households. Being the most convenient option for the best types of customers will provide a viable path forward. As major anchors relocate (or go out of business) malls must get creative in how they fill these large voids. Knowing what tenants to recruit so that a win-win-win situation between the mall, retailer, and customers is created is the key to survival of the mall.”

If your community has a mall that is struggling, consider working with the property owner to conduct a retail matching analysis to identify new tenants or explore opportunities for creatively repurposing the space.

The Bottom Line

Today’s retailers and restaurants are operating in a new environment. By educating yourself on the challenges and opportunities facing the industries, you’ll be better prepared for economic development conversations.

To learn more about the trends influencing retail and restaurant real estate decisions, register to attend our live webinar on January 24, 2018, “A City’s Guide to 2018 Retail and Restaurant Real Estate Trends.”