Five Fundamental Changes Driving the Future of Shopping Centers
By Mike Kercheval, International Council of Shopping Centers
As tens of thousands of retail real estate industry members head to Las Vegas for ICSC’s annual RECon event, I find myself reflecting on the evolution of the industry and the fundamental changes that will affect the shopping center business over the next five years.
In recent years, there have been significant shifts in the way people shop, in turn causing shopping centers to shift how they engage with consumers. Namely, the rise of omnichannel retailing, in which mobile, online and in-store experiences complement rather than compete with one another, is driving rapid innovation. To meet the needs of shoppers, malls and shopping centers are integrating technology to add convenience and personalization that invigorate the shopping trip.
The ante has also been raised on the overall experience. When a shopper hits the stores, they can find an exciting mix of retail, services and entertainment and centers are investing billions of dollars in new construction and renovations to modernize the look, feel and layout of their properties.
But this is only the beginning. After watching this space since 1986, I expect that by 2020, retailing will undergo more change than it has in the past 29 years. Shopping centers are well-positioned to meet this new era of retail head-on. However, the only way to do this is to anticipate what’s next.
Here are five of the biggest changes affecting the future of shopping centers as identified by industry leaders:
The complete unification of bricks-and-mortar and online
The ability to use multiple channels interchangeably and conveniently, with the expectation that retailers and shopping centers will deliver a better-than-ever experience, is no longer optional. Shopping centers will sit at the apex of this paradigm shift and will help create seamless shopping experiences both on and off-line through the merging of digital, physical and social channels.
Adaptation to the environment
Shopping centers will continue to adapt by becoming more customized and personalized, offering an engaging environment, modern design and appealing to key markets and demographics, such as millennials or parents.
Some developers are taking this trend a step further by designing an environment catering to specific demographics. For example, La Gran Plaza in Fort Worth, Texas, is the largest Latin America-themed mall in the U.S. with more than 200 stores, dining options, medical offices and more, and hosts unique weekly entertainment and special events tailored to the community.
Not just a place to shop
The shopping center is no longer simply a place to shop: it has been reinvented to become an entertainment destination to spend quality time with family and friends. Malls are transforming away from the traditional center into a community within itself, which seamlessly offers both retail and entertainment options, and even services.
Creation of a unique connection with the consumer
Technology will help to create a customizable experience for each individual shopper – allowing greater intimacy than ever before. Enhanced customer service initiatives will provide multiple connection and interaction opportunities, offer location-based services and create compelling in-store environments. For example, many retailers and malls are already introducing beacon technology, which can provide customers with personalized deals or assistance.
The arrival of a retail-friendly investment outlook
According to recent research from the National Association of Real Estate Investment Trusts, REITS performed well for investors in 2014 and experienced a total return of 27.15% and a dividend yield of 4%, which is nearly double the S&P 500’s total return of 13.69% and dividend yield of 1.92%. This performance will help lead lenders to become more knowledgeable and interested in the real estate sector, resulting in a higher level of consideration throughout the investment community.
Mike Kercheval is president and CEO of the International Council of Shopping Centers (ICSC).