Trending topics: Pop-ups, wellness, shrinking stores and entrepreneurship
Smaller, faster, local — the retail projects of today and tomorrow are in many ways starting to resemble the small towns of yesteryear.
As shopping centers and downtowns seek to fill spaces left vacant by shuttered department stores and big boxes, they’re turning to new uses, new concepts and entrepreneurs to reinvent their experiences.
Jump to stories on these trending topics: pop-ups, wellness products and services, filling vacant mall space, shrinking stores and entrepreneurship.
Don’t refer to them as “temp tenants.” As retailers close or downsize permanent stores, shopping center owners are becoming increasingly amenable to pop-up shops, recognizing the opportunity to create excitement at their properties and perhaps incubate new long-term retailers.
“In all cases of specialty leasing, a more contemporary view is being understood of the worth of retail space, recognizing the inherent value of the advertising billboard it represents and how this consumer interface opportunity compares to brand-building space elsewhere, including online,” according to “Exploring New Leasing Models in an Omni-Channel World,” a report from the International Council of Shopping Centers.
Even well-established, high-end centers are devoting significant space to embryonic brands — both start-ups and new concepts from national and international brands, ICSC noted. Pop-up shops and short-term leases have found favor in malls, which now view them as complements to existing retailers and attractions for shoppers.
Lease terms, including length and co-tenancy, are becoming more flexible. The long-term lease of 10 years or more for a specialty shop is a memory, according to Arnaud Simeray, VP of strategic partnerships for Storefront, a New York-based online marketplace for short-term leasing with offices around the globe.
“Brands and landlords now want more flexibility,” Simeray said, adding that even three- to five-year leases require significant capital expenditures. Pop-ups tend to be less expensive to set up, and leases can be concluded more quickly. The short term also avoids co-tenancy concerns.
Pop-ups lower barriers to entry in major markets, Simeray said. Instead, brands such as Everlane are testing concepts and layouts with pop-ups, and now have permanent flagships in New York City and San Francisco, something the brand eschewed years ago. Established retailers are using pop-ups to continue to extend their reach without adding substantial space, he said.
“Nike has two flagships in New York. They have enough stores but are still focused on short-term experiences to drive traffic, announce collaborations, and showcase the brand in creative ways,” Simeray said.
[caption id="attachment_467219" align="alignnone" width="800"]
photo courtesy of Roosevelt Field[/caption]Shopping center operators are also recognizing the importance of pop-ups. At Roosevelt Field in Garden City, N.Y., Simon has launched The Edit@Roosevelt Field, a dedicated space for both entrepreneurial and established brands to pop up. Look for even more cooperation and acceptance of short-term leases in the future.
“Partnerships between retailers and landlords will increase in 2018,” CBRE notes in its 2018 Real Estate Market Outlook. Several factors are fueling the trend, according to CBRE: retailers demanding more flexibility in lease lengths and terms, landlords looking for ways to ensure the long-term viability of their tenants, and both sides seeking new ways to drive traffic and sales.
Driven by millennials’ focus on health and desire for socialization, the growing need for medical services by aging baby boomers, and a need to fill space, shopping centers in all categories — from malls to neighborhood projects — are adding wellness tenants. Boutique fitness operators, upscale equipment manufacturers like Peloton, spas and even medical offices are taking spaces previously reserved for more traditional tenants.
The number of gyms leased in shopping centers has doubled over the past five years, according to CoStar Group, and comprised 17% of the retail space leased by the most active tenants. While some large operators such as Lifetime Fitness are taking all or parts of former anchor spaces, small operators also are expanding. Boutique fitness concepts such as Club Pilates comprise nearly half of the overall health club market, according to an infographic from retail consultancy Traub.
Similarly, The Village at Westfield Topanga has a concentration of wellness tenants, including a UCLA Health clinic, YogaWorks, and a Skin Laundry facial clinic. And some developers are placing full medical facilities in centers, as the providers seek convenient locations with plenty of parking. PREIT has leased space to Main Line Health for an ambulatory care center at Exton (Pa.) Square Mall and an outpatient care center from Mercy Suburban Hospital at Plymouth Meeting (Pa.) Mall.
The former Macy’s at Auburn Mall in Worcester, Mass., is now occupied by Reliant Medical Group, which offers outpatient services. Vanderbilt University Medical Center occupies the entire second floor of One Hundred Oaks Mall in Nashville. The Runway at Playa Vista (Calif.) now has a Cedars-Sinai urgent care clinic.
Even department stores are following suit. Last summer, Saks Fifth Avenue opened a 16,000-sq.-ft. Wellery at its Fifth Avenue flagship in Manhattan, featuring fitness brands such as Peloton and Technogym, apparel from Bendable Body, a salt room, and even a medical spa.
Department stores deconstruct, centers reconstruct
It seems as though department store retailers are announcing more store closures every day. Macy’s has announced plans to shutter 11 stores this year, and J.C. Penney will close seven. Target is closing 12, but opening 35, according to Coresight Research. And look at this year’s extremes: Nordstrom announced it will close one store, while Sears/Kmart will close a total of 103 locations.
The result leaves landlords with well-located, vacant mall space, and they’re finding new uses for the large spaces, including traditional offices, co-working spaces, and perhaps supermarkets. Simon Property Group plans to replace a vacated J.C. Penney at King of Prussia with office, hotel, and other uses. Starwood Retail Partners replaced a long-closed Lord & Taylor at Fairlane Town Center in Dearborn, Mich., with office space for Ford Motor Co.
Less traditional office space is being considered as well. A former Sports Authority at Chicago’s Water Tower Place has been replaced by Cowork at the Mall, a 15,