Go to where consumers are headed
“Skate to where the puck is going, not where it has been.”
Hockey great Wayne Gretzky’s advice is an appropriate mantra for retail brands and landlords. The retail industry needs to go where consumers are headed — and put them at the center of every decision.
Our starting point
The U.S. retail market is grounded in strong fundamentals, as its relative low vacancy rates show. Still, turbulence around interest rate movement has slowed new construction and cut into capital for repositioning and redevelopment. At the same time, consumers continue to shift where they spend their time — and their dollars. Where does that leave the retail industry?
New directions for retail
Keeping up with the consumer will take some skillful navigation for:
Retailers For at least a decade, retailers have turned to location analytics in site selection. Even so, many held to familiar property formats and co-tenancies — until now. Today, brands are moving past their traditional mindsets. As they expand, they are more agnostic to property format and consider locations they might not have earlier. Some, for example, are expanding from malls to open-air centers, and the reverse is also true.
Owners On the flip side, some owners — developers and investors — are determining the highest and best use for their real estate based on where the consumer wants to shop. In the process, they are reverse- engineering the way they attract retailers.
Instead of holding to a traditional merchandise mix, owners are pursuing the categories and brands that reflect the needs and wants of consumers in the property’s trade area. With a blend of data and storytelling, an owner can show retailers why its property is a great fit for their brand, even if the location marks a departure from the norm. This approach expands the pool of retail brands as well as non-retail uses. It also means developers and investors must build relationships across a broader real estate landscape—a landscape that will take innovative approaches to navigate.
Fresh approaches for properties
The slow flow of new construction, redevelopment, and capital expenditures has dampened tenant turnover and rent growth. To stay primed, owners must keep their brand experience fresh. Those who concentrate on attracting more consumers, more often, and with greater sales volume will reap the rewards when space becomes available.
Meanwhile, these four approaches can help owners, property managers, and leasing teams raise asset value.
1. Find the highest and best use. Advisors like CBRE’s Location Intelligence team can help owners dive into the data on consumer profiles, demographics, and buying habits. Predictive modeling keeps properties on pace with changes in what consumers want and what the market offers.
2. Ramp up events and social media. The right social media program and calendar of events can boost retail foot traffic. From a 10K charity run to a concert series or a holiday celebration, an event can engage existing shoppers and attract new ones. Likewise, social media can spread the word while raising the property’s profile overall.
3. Look into pop-up shops. If a zone in the property needs more traffic, a pop-up or temporary lease is an option. The right brand could evolve into a long-term tenant. Some digitally native startups are testing markets with pop-ups before committing to bricks and mortar. On-site consumers become the focus group those retailers need before making a longer-term commitment.
4. Add revenue with digital media and corporate sponsorships. When economic headwinds slow rent growth, revenue sources like digital signage and corporate sponsorships can boost net operating income, which, when capitalized, increases property valuations—all while captivating consumers.
Consumers at the center
What do these approaches have in common? The consumer. The highest and best use focuses on consumer preferences. Events and social media connect consumers and communities. Pop-up shops let consumers experience a new brand. Digital media gives consumers a flash of information and entertainment.
Retail can be wildly diverse. But it all comes together when we put consumers at the center—wherever they go next.
