When it comes to consumer tastes, convenience and experience are king.
The strongest demand we’re seeing on the ground is for retail as an amenity – whether it’s a boutique fitness brand, food hall, or personal services brand (think blow-dry bars and nail salons). In this way, retail is a piece of a larger puzzle: they represent stellar products and services that add value to office and residential components of an asset. They “activate” the first floor of a mixed-use building by drawing new people in and boosting the amount tenants of that building will pay to be there.
There’s been a decided overall shift in consumer preferences – one that’s even more pronounced among the millennial demographic – as to what is a priority. People are spending less money on cars and more on fitness, food, and travel. Platforms like Instagram are changing and connecting everything and everyone. Consumers are less concerned with owning luxury cars or large homes; instead, your status comes from the life you live on Instagram. Whether it’s being the first to try a chef-driven restaurant concept (and posting photos to your story about what you ate and drank at the opening) or sampling the latest hot cycling studio (because you’ve got to look good on the ‘gram!), there’s no denying that social media is driving consumer tastes and trends.
A great example is the Pokemon-themed pop-up bar coming to Cincinnati. The buzz is it will be the “real-life version of the hit game” and serve up colorful character burgers, drinks and more while also charging tickets for entry. Sounds like the perfect place for those obsessed with Pokemon Go – and an Instagrammer’s playground. Another great example? Karaoke bar Tokyo Kitty, inspired by the movie Lost In Translation. Robotic bartenders drop drinks from the ceiling into private singing rooms – seriously! – so you can croon to your heart’s content.
Smart landlords and developers know that experiential concepts are taking retail by storm. They’re adapting to include new types of service-oriented, experiential concepts on the street level of their assets. Driven primarily by fitness and food, these concepts serve the dual purpose of attracting new customers to a building while servicing the tenants above. If you can put a coffee shop – especially a Starbucks, which pioneered and perfected the art of mobile ordering done well – on the ground floor of your building, psychologically how much more is an office tenant willing to pay to be there? These retail spaces also serve multiple purposes — a coffee shop or cool bar on the ground floor of an office building can become the “annex” for manager meetings and brainstorming sessions, while a cool fitness concept in a mixed-use building can host after-work fitness-meets-happy hour events for tenants.
The value-add is truly exponential – and it speaks to the role convenience plays in maximizing the retail experience. The developers I’m working with are really embracing the idea behind the term “mixed-use” and putting considerable thought into how retail, office, and residential interact and affect one another. Retailers who can get ahead of the curves of these trends will ultimately see gains in loyalty – and their real estate strategy will benefit in the long term.
Click here to watch my interview discussing more on this trend from ICSC RECon 2019.
Terry Ohnmeis specializes in retail services. He provides project leasing of retail shopping centers and mixed-use developments in both urban and suburban markets. He also provides acquisitions, dispositions, and site selection, for both Tenants and Landlords.