By Rick Latella, Executive Managing Director & Practice Group Leader for Retail Valuation & Advisory in New York City
There continues to be many discussions centered on whether the country has become over mall’ed and over stored. With a lot of discourse going on in the retail world, the big question is whether the industry can recover from the damages that have fallen upon it – most specifically, malls, which is one of the most affected sectors.
It is reassuring to see that the skilled operators are finding ways to re-purpose big boxes which have been the traditional anchors around which malls had been built.
The retailers with the best chance of survival have a plan or a program in place for their large inventory of real estate. Strategies range widely and include downsizing existing footprints, renovating the box, subletting some of the space, closing under-performing department stores, and focusing on finding creative ways to grow the value of their properties.
The degree of industry evolution has been dramatic over the last 60+ years but it is driven by the speed of change we have seen over just the last 24 months. Back in the 50s and 60s, every major city had an iconic department store brand downtown, which was the center of the retail world for that community. Automobiles were the technological disruptor of that era as they facilitated the shift of the population to the suburbs. The changes we are witnessing today are just the natural evolution of how retailers need to adapt to changing consumer preferences. Retail is not dying—it’s the outdated and poorly merchandised concepts that are dying.
Malls are finding that to stay relevant today, they really need to re-purpose the space for different types of tenants. Innovative owners are building retail with more experiences, involving food, entertainment, family–centric events and stores curated to meet the core demographic of a particular market.
Health clubs, cinemas, medical uses along with more traditional tenants such as Dick’s Sporting Goods, H&M, or Forever 21 are finding opportunities to get large blocks of space in locations that previously could not accommodate them. But the spaces are also attracting unique and interesting tenants. Medical uses, grocery stores, aquariums, government offices, not to mention the growing list of former on line only retailers such as Shinola, Warby Parker and Bonobos.
And not to go unmentioned is the proliferation of Food Halls which seemingly every major mall in country is proposing or vying for.
Being able to adapt quickly to their ever changing environment is a necessity for any retailer today hoping to be successful. Think out of the box and embracing today’s new generation of tenants is definitely one way to help grow the value of these large boxes and re-purpose them for another generation of users. The established rules of space usage no longer applies in the new world of retail. Store locations should be carefully evaluated and should be a natural extension of the brand. The challenge to change is dwarfed by the opportunity for success.
To view Rick Latella’s Video Interview from “Live at RECon 2017!” CLICK HERE.
Rick Latella is Executive Managing Director & Practice Group Leader for Retail Valuation & Advisory in New York City