Photo Courtesy of the Port of San Diego
By: Keith Pittsford, Principal
The future of retail is once again optimistic, after taking a heavy hit during the recession. Even so, new opportunities imply new truths: some of the old rules have changed and some are gone for good. To meet these shifts, the industry is in the process of developing modern rules for retail and mixed-use formats. At the ICSC Conference held earlier this month, SGPA team members brainstormed and connected with other industry professionals to identify key changes we anticipate:
• The internet has morphed the dynamic of retailing and people are adapting to a click’s and mortar mentality. Retailers will be doing more in less space; department stores and super stores will still find homes, but in greatly reduced numbers.
• The need for human interaction and experience has evolved from lifestyle to include multi-family residential in many locations.
• The heightened version of the Costco/Nordstrom dynamic shows us that while luxurious experiences are desired, bargain basement and deep discount retail centers are also wildly sought after, leaving middle of the road tenants to languish or reinvent themselves.
• Tenants are very selective, and one of the new drivers is cool, affordable, fast-casual dining.
As ICSC stated in a recent press release, “Without a doubt we are experiencing one of the most profound periods of evolution within our industry since the advent of the first suburban malls in the mid 1950’s. Both technology and the quest for experience have changed the way the consumer shops and so to how the shopping center has adapted to meet those newfound consumer wants and desires. Despite some inflammatory reports to the contrary, both shopping centers and malls are actually thriving. This comprehensive report by ICSC’s Research department delves deeper into the concepts of omni-channel shopping, where most retail spending actually occurs, why the latest demographic trends are favorable for the industry, and how shopping centers have improved both their productivity and appeal.”
SGPA Principal Stuart Lyle, as well as Senior Associates Philip D’Agostino and Glenn Wood also attended the ICSC Conference, held in San Diego. Stuart Lyle described the general consensus at the conference as that of retail development being the driver of mixed-use projects and eventual mixed-use districts. Philip D’Agostino received the same notion, recognizing developers articulating the value of the retail districts while driving growth for adjacent projects. “It was heartening to hear developers actually say they’ve been successful and that they see value in creating retail districts to help other projects be successful,” he said.
Glenn Wood reinforced the conference findings that recent trends reveal a story in retail. These days, traditional demographic analysis has proved less important; rather, psychographic analysis is a stronger indicator to understand the retail market. The reality is that most retail is becoming a commodity that can be found online, and since people are social creatures, people crave social environments. Wood’s take from the ICSC Conference was to in order to avoid becoming an online commodity, we need to create more great places and stores that can fill a social need.
SGPA plans to renovate and densify many existing well-placed properties over the next decade, allowing unique opportunities for well-located quality oriented centers to prosper. Mixed-use will also provide an experience in trade areas that do not have experience-rich centers. With many malls being repurposed to housing, neighborhood retail, health care and education, great retail can be the catalyst and drive huge added value to all other types of real estate. At SGPA, we are optimistic about how new centers will look and feel as more integrated community centers.