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Plain Talk
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Top 5 Retail Real Estate Trends of 2015
From The Buxton Co The retail landscape has been evolving at an unprecedented rate over the past decade, as brick and mortar retailers adapt to advancing technologies and changing consumer demands. These changes are most apparent in retailers’ new real estate strategies. We began seeing the formation of some of today’s most notable retail real estate trends in 2014, but these trends are expected to gain even more momentum going forward. Let’s take a look at the top 5 retail real estate trends for this year. 1. Spotlight On Omni-Channel – there’s no question that the term “omni-channel” has been used to the point of nausea. However, it’s impossible to deny that the concept of integrated, silo-free customer experiences is a reality that’s here to stay. What’s starting to change is the fact that retailers are getting smarter about implementation, instead of haphazardly adopting so-called omni-channel strategies and capabilities. While omni-channel hasn’t been perfected yet, retailers are starting to understand what works and what doesn’t, how to measure ROI on omni-channel initiatives and how to improve this business model. 2. The Return of Brick and Mortar – many have predicted the death of brick and mortar stores and the rise of e-commerce as online sales progressively take over a larger portion of total retail sales. But the physical store is reasserting its importance and proving to still not only be one of the retail industry’s cornerstones, but also its future. And as retailers make their way to true omni-channel integration, the physical presence and the online presence will form a more coherent ecosystem. Physical stores need to be an integral part of a retailer’s omni-channel strategy through more personalized shopping experiences. Once that is achieved, physical stores will be more compelling and relevant to consumers. 3. Smaller Footprints, Bigger Impacts – one of the most prominent retail real estate trends over the past few years has been the trend toward smaller-footprint stores. There are several key reasons for this shift, most notably efficiency. Restaurants, for instance, are slightly shrinking their square footage in order to reduce overhead and occupancy costs. Another key reason retailers are getting smaller is that they’re moving to the city. Convenience is a priority for consumers who live in urban centers, and smaller footprint stores give retailers the ability to reach shoppers in previously unrealistic locations. 4. Clicks Move to Bricks – one of the most intriguing trends in retail real estate is the movement of online stores to offline channels. Whether these offline channels are pop-up shops á la Zappos, partnerships with traditional retailers such as the arrangement between Blue Nile and Nordstrom, or full-fledged brick and mortar stores such as the ones being opened by Birchbox and Bonobos, online retailers are recognizing the benefits of a physical presence. They are discovering that if they want to take their brand to the next level, they need to exist in more than just the digital space. With physical stores, online retailers have the opportunity to connect and engage with their customers on a deeper level as well as expose their merchandise to completely new audiences. 5. The Reinvention of the Mall – another notable shift in the retail real estate market is the resurgence of malls. With years of declining interest in the enclosed mall, real estate developers and mall operators are following the trend of lifestyle centers and are essentially turning themselves inside out in order to keep up with changing consumer preferences. Today’s customer is looking for an experience that feels more real and fun, with more variety in the shopping experience. As a result, mall owners and operators are redesigning malls with more street facing storefronts, outdoor spaces for dining and entertainment, and high-end luxury tenants. By adding restaurants, services, and experiences that cannot be mimicked online, malls will ultimately be turned into places where people go to shop, eat and be entertained. As the retail real estate market rebounds, the stakes are higher than ever before and retail executives will find themselves trying to tackle not only the usual challenges, but also new, more complex ones. The bottom line is that 2015 is already shaping up to be an exciting year in retail real estate.
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