NEW YORK CITY—With today’s news of retail rents outpacing sales and the challenges of brick-and-mortar stores, at ICSC’s second largest conference running from Dec. 5 through Dec. 7, 2017 at the Jacob K. Javits Convention Center, conversations will certainly focus on the latest CRE innovations in retail. GlobeSt.com interviewed Amira Yunis, executive vice president, retail services, at CBRE; Beth Rosen, executive vice president at RKF; and Brandon Singer, managing director, retail services at Cushman & Wakefield. They sketch out today’s landscape for both landlords and tenants.
“It’s a time of a new age. Innovation is happening like we’ve never seen before,” says Singer. “Seeing these new worlds collide in retail space, where you can touch and feel and really interact with consumers, it’s an incredibly exciting time.”
Yunis observes in traveling around the world, other countries have added restaurants, champagne and other “fun amenities” to differentiate the shopping experience. “The stores in New York are now starting to follow this trend,” Yunis says. “It is important that US stores stay current with what all customers find interesting, for both young and old.”
Rosen says short-term leases and pop-up stores are becoming more common. “’Pop to perm’ is a great way for brands to test a new concept or explore brick-and-mortar retail channels without a major financial commitment,” says Rosen. She notes if the retailer has a successful run they may consider a longer term lease. “Retail brokers are definitely having to get creative, canvass and think outside the box.”
“Creativity is the key word here,” says Singer. “In today’s market, landlords need to think outside the box about what other landlords haven’t done in the past. Tenants need to put ideas on the field.”
Singer provides examples of retailers, who have shown innovation in turning around what has traditionally been perceived as a clash between brick-and-mortar and internet sales. He emphasizes the internet did not come out and kill retail but can actually support retail with synergistic models.
What started as a strictly online retailer, Bonobos, established physical “guideshops,” with limited inventory at locations that allow immediate on-site ordering of clothes.
Happy Returns is a brick-and-mortar retailer, where online shoppers can come to return goods and get instantaneous refunds on their credit cards with participating retailers.
UNTUCKit started as an online men’s clothing store for shirts that men wanted to wear untucked. But without knowing how long a shirt would be or exactly how it would look untucked, the brick-and-mortar stores bring people into physical locations, merging internet shopping with the shop around the corner.
Singer cites another example of creative use of current technology. Class Heroes works with fitness center landlords to activate spaces. The company uses fitness trainers and instructors who have substantial social media followings to market spaces for landlords on Instagram and Facebook.
“I have daily conversations with tenants who mention how important it is to have an omnichannel sales strategy, and to leverage both online and brick-and-mortar sales,” says Rosen. “They go hand in hand.” She explains “experiential retail” means more than live entertainment or sticking an iPad in a fitting room. As an example of a unifying experience, Rosen personally browses clothes online, then visits stores to try on items, which she “favorited” online.
As almost all consumers use smartphones, she says it makes sense for retailers to leverage geodata and to send promotions and discounts to customers in the store.
Yunis notes retailers are establishing more of a seamless process—as seamless as the internet. “When you go into a store, you can buy a product and they’ll ship it straight to your house. You don’t have to carry bags around,” she says. Shops have started to send personalized letters, with information including when shoes a customer was looking at are on sale. Developing personal relationships with customers can combine today’s technology with personalized services.
In terms of rent concessions, all of the retail professionals interviewed note landlords are more amenable to concessions and build-outs in the spaces. Yunis adds she’s seeing greater flexibility on lease terms and cancellation clauses. “The objective is for retailers to lease more space and stay in business, and the only way to stay in business is to have successful locations,” she says. “We’re seeing that many landlords are now working with tenants to try to accomplish just that.”
“Tenant improvement allowances were previously unheard of in urban retail leasing, and now it’s commonly accepted,” says Rosen. She points out how deals may be structured where the base rent starts low with greater accommodations before the standard annual increases kick in.
All of the experts agree that the days of the overwhelming department stores, carrying excess merchandise unattuned to consumer demands are limited. There will always be reasons for people to get off their computers and into stores—whether it is to work out at a gym, get a haircut, or buy a frozen yogurt at Forty Carrots while shopping at Bloomingdale’s. Retailers continue to creatively figure out a new generation of shopping.