Retail real estate development has evolved from enclosed shopping malls anchored by large department stores offering similar products to more open-air facilities that mix local stores and national chains, upscale and discount merchants, and which mix shopping with a variety of other activities, according to industry experts at a recent retail conference sponsored by the Urban Land Institute.

Retail real estate development has evolved from enclosed shopping malls anchored by large department stores offering similar products to more open-air facilities that mix local stores and national chains, upscale and discount merchants, and which mix shopping with a variety of other activities, according to industry experts at a recent retail conference sponsored by the Urban Land Institute.

The institute’s 11th annual “Reinventing Retail: Community, Lifestyle and Entertainment” conference focused primarily on the trend toward more lifestyle centers that serve as multiple-purpose destinations. “It’s all about having multiple choices, where you want to be entertained, or shop for fashions, or just hang out,” said Rick J. Caruso, chief executive officer and president of Caruso Affiliated in Los Angeles. “If you understand what guests want and need…the opportunities are endless.”

Caruso and others noted that outdoor centers, offering plenty of public space for socializing and a variety of uses, are becoming increasingly popular. “Our challenge is not competing with a mall. Malls are driving customers to us,” he said, noting that a greater challenge is attracting locally based “organic” specialty retailers who want to operate on their own terms. Such unique tenants “give centers life” and make them more compelling, he pointed out.

The trend toward more open-air retail environments represents an evolution from malls to “alls” that cleverly combine uses, including residential and commercial uses, which were formerly segregated, said Michael McCarty, president of the community centers division of the Simon Property Group in Indianapolis. “We are finding that retail can be integrated with different price points, with luxury and discounters all together. The same people will shop at both,” he said.

Retooling existing malls to make them more lifestyle-oriented is mandatory if they are to be competitive, McCarty said. “As a developer, we have to reinvent these pieces of real estate so they will be more productive.” For instance, a department store might be replaced with a residential building or medical facility, he noted. “We don’t have to have anchor stores all selling the same stuff. We have to figure out what can raise the bar and drive more traffic to the (lifestyle) center at different times of the day.”

“All of us are faced with the challenge of how to be relevant to a very busy, very picky, very smart consumer,” said Kenneth P. Wong, co-chief operating officer of Westfield Inc., in San Marino, Calif. “It involves a combination of hardware and software, which is the type of experience you are providing people, what memories they will have when they leave.” Wong identified five factors that will have a long-term impact on the retail industry:

  • Oversupply–The current retail oversupply will stretch into the years ahead;

  • Deflation–People will have less disposable income, putting pressure on buying habits;

  • Acceleration–Consumers’ attention spans will grow increasingly shorter, leading them to focus quickly on what is new and authentic;

  • Segmentation–Retail will become increasingly segmented by age, taste, and locale;

  • Disposability–It will be more difficult to maintain a brand–which hinges on a strong emotional connection–over a long time period.

    These factors will only increase competition in an already highly competitive industry, Wong predicted. Although the basic combination of food, movies, shopping and social connection will continue to drive retail development, “we will be thinking of new ways to get people out of their homes,” he said.

    In discussing development trends, the speakers noted that the definition of “anchor” has evolved from a large department store perceived as necessary to attract other tenants to a dynamic atmosphere created by a cluster of dining, shopping and entertainment facilities. “If the definition of anchor is what is going to draw people to the property and drive the business, then the anchor is the environment you create,” Caruso said. “The lines are so blurred in product categories today that you have to overlay (the tenant selection) with something else.” Being successful is increasingly dependent on putting together the perfect combination of location, demographics and amenities, he noted.

    According to Shaheen Sadeghi, president of The LAB and The CAMP in Costa Mesa, Calif., young mothers represent the most powerful consumer–a demographic group he described as thirtyish, with children, well-educated and very interested in exercise. “They make all the major purchasing decisions in the household. That (demographic group) is an area that is wide open,” he said. The next generation of (retail) centers–regardless of innovation–will only be successful “if Mom approves,” he said.

    The Urban Land Institute is a nonprofit education and research institute with more than 20,000 members representing all aspects of land use and development disciplines.

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