How Experiential Retail Will Revitalize The Shopping Mall And Other Retail Spaces

Last month two of our brokers, Deana Arden and Judy Niles-Simmons, were featured in an article by NHBR for their work in helping to revitalize the Steeplegate Mall in Concord. This got us reflecting on the ways traditional retail has been changing and, as it continues to migrate online, the ways in which retail properties are either evolving to attract consumers or going extinct.

The Steeplegate Mall is a great example of how brick-and-mortar spaces are changing with the times, as Amazon swallows more and more retail sectors. As retailers like Circuit City, Bon-Ton, and Old Navy move out, Altitude Trampoline Park, Capital City Charter School, ViParty Bounce House, and ZOO Fitness Club move in. A pivot away from being a traditional retail space to, as the article states, a consumer engagement space. A pivot that more and more landlords and retailers are taking as the industry continues to be disrupted.

So how are other shopping centers and strip malls across the country filling the vacant anchor spaces traditionally leased by disappearing retailers, and drawing consumers back in?

One option is indoor virtual reality theme parks.

Legend Heroes Parks, a Singapore-based franchise of indoor virtual reality theme parks, is looking to break into the U.S. market by targeting vacant anchor and sub-anchor spaces at regional malls and strip centers. The parks, which use a combination of technologies, including virtual and augmented reality, to help guests experience a wide range of rides, games and other kinds of entertainment, have the potential to bring millennial's back to the malls and strip centers they’ve ignored in recent years, by offering them something more than just hanging in the food court and browsing the same old stores.

Bringing in businesses, like Legend Heroes Park, aimed at the tech-savvy and fickle millennial generation, can potentially bring those dollars back into the shopping centers they’ve deserted. But what can retail spaces do to attract families?

Fair Oaks Mall in Northern Virginia has found a way to get families through their doors and keep them in their stores longer, and it starts with the holiday season. The mall’s annual Santa’s Flight Academy gives kids an interactive experience set at the North Pole, which culminates in meeting Santa and getting to see their name and photo pop up on a screen showing Santa’s “nice” list. This all takes holiday shopping from a chore done by the parents, to an experience and an event for the whole family.

Avalon, located in Alpharetta, Georgia, expands on this by attracting consumers to its mixed-use shopping center by offering programmed experiences, such as comedy nights, yoga classes, fireworks shows and more. Avalon has built itself around being more than a shopping center. Instead, being a community gathering space focused on not just extending dwell time, but making sure it is time well spent.

It isn’t just the owners of brick-and-mortar retail spaces trying to draw the crowds back to their properties, though. Retail brands are investing in experiences for their shoppers to streamline and enhance the shopping experience from the moment they step through the door.

Lululemon, the yoga-inspired apparel chain, offers yoga classes in its stores as well as relaxation pods where customers can listen to self-guided meditations, presumably as a comedown from that yoga-high. At Whole Foods, customers can take a cooking class and hit the aisles right after to pick-up the ingredients needed to make the dish for their family that night. And, at the House of Vans in London, shoppers can purchase a new pair of hi-tops and immediately try them out at the skate park located below the sales floor.

But experiential retail can be as simple as making the shopping experience more convenient. Like how Nike installed digital lockers at its new store in Los Angeles for customers who wanted to buy their shoes online and pick them up in-store. Or The Home Depot, whose app allows customers to find the exact aisle and bay the product they’re looking for is located in. So they can spend less time wandering and more time working on their projects.

As it becomes easier to buy goods at the push of a button, brick-and-mortar retail needs to invest in new ways to get customers through the door. Experiential retail and consumer engagement spaces are slowly becoming the future of retail, and the best tool to get shoppers away from their screens and back into the stores.

Resizing the Retail Footprint

For those of you who split your shopping time between shopping on the computer and going to the store, you are not alone. There are more and more folks pre-shopping than ever before. So what does that mean for retailers and landlords?

For office managers or parents of kids returning to school

know, Staples has all of your office/school supplies that you will ever need. Their typical stores carry around 7000-8000 SKUs or different items in stock. They are considered a “Junior Anchor” in retail real estate speak with around 18,000 to 24,000 square feet per store. Their new model, introduced last year, will be about 12,000 square feet and carry about 15% fewer SKUs.

How can a store shrink their footprint and inventory and be successful? Like so many retailers… follow Apple. The major retailer’s stores are beacons for innovation. Shopping is an experience, with kiosks and a touch and play ability of their products.

Apple have the success to show for it. Each store, at 7900sf, earns about $5600 per square foot per year in revenue. The closest competition, Tiffany & Co., is half of that with Coach rounding out the top three. For those of us not shopping at Tiffany or Coach; Best buy has around $800 per square foot in revenue. In order to mirror Apple’s success of a shopping experience and its revenue per square foot, Staples is looking to have new kiosks and online shopping within their new stores.

Other types of retailers are getting into the mix. When was the last time you saw a “red roof” Pizza Hut under construction? The older model was in and of itself its own signage. However stand alone “pad” stores cost more money than their inline brethren on a per square foot basis. The new look Pizza Huts are not only taking advantage of these lower in line costs, they are also shrinking the foot print by 30-40%, for less overhead.

With shrinking footprints, what does this mean for property owners? For many owners it may be about diversity. Are there ways, over time, to add more suites to your space if you have downsizing of tenants. Rather than look at the negative, think of the diversity of income and the experience for shoppers. Who are complementing retailers for your existing base? Furthermore retailers will be demanding a better experience for their shoppers, so expect façade and ground improvements to be key among tenants.

Written by Chris Norwood, NAI Norwood Group

For more information about commercial real estate, please visit our website: www.nainorwoodgroup.com 

Reflection on NYC ICSC 2009 - By Chris McMahon

On December 7^th and 8^th over 6,000 shopping center industry professionals converged upon New York City for the International Council of Shopping Centers (ICSC) 2009 New York National Conference and Deal Making event. The ICSC holds this two-day national conference annually, for which professionals travel from all over the country to participate in. In attendance this year, from NAI Norwood Group’s Portsmouth New Hampshire office, was Managing Broker Brian O’Brien and I.

The two day conference was comprised of several different important events and sessions. I found that the most notable event of the conference was Deal Making where over 400 exhibitors occupied nearly all of the Hilton Hotel’s exhibition halls and the Sheraton Hotel’s Metropolitan Ballroom. It was in those exhibition halls that retailers, developers, real estate brokers, engineers, and other industry professionals congregated. A 35,000 SF retailer looking to expand into the Northeast, Ultimate Electronics, could be seen showing interested developers and brokers their expansion plans for 2010 and their site requirements. Developers and brokers could be seen showing retailers their newest development projects and available retail space. I noticed that there was a lot of energy in the air on the deal making floor this year with renewed excitement and enthusiasm for 2010. When attendees weren’t busy finding their way through Deal Making they had other high profile events they could attend such as the Retail Runway.

It has become a common place for the volunteer Program Planning Committees to organize an event called Retail Runway where popular national retailers are given the opportunity to showcase their business and expansion plans for the upcoming year. This year, participating retailers included Auto Zone, Dollar Tree, Game Stop, Hobby Lobby, Planet Fitness, Halloween Venture, Kiddie Academy, Muscle Maker Grill, REI Sporting Goods, Rosa Mexicano Restaurants, ShopRite, Sonic, and Wingstop Restaurants. The ICSC Planning Committee placed a unique twist on the event this year by also showcasing a one minute clip of each of the above mentioned retailers “favorite fans” prior to the retailer’s presentation. The “favorite fan clips” were a huge success as most of them had all of us roaring in laughter.

Planet Fitness, a National Franchise of Fitness Clubs whose headquarters is in Portsmouth NH, was well represented by the Director of Real Estate, Brian Kunkel. Kunkel explained how Planet Fitness got started in New Hampshire and quickly grew to a chain of over 300 stores in 33 U.S. States. Planet Fitness is currently in expansion mode with plans to open 85 to 100 locations nationwide in 2010. Kunkel discussed Planet Fitness’s real estate requirements which include 15,000 to 25,000 SF, 100+ parking spaces, and 14’ ceiling heights in suburban locations. He also explained that Planet Fitness requires 15,000 to 25,000 SF which can be on multiple levels, with 9’ ceilings in urban locations. By being a customer of Planet Fitness and also living in Portsmouth NH, I was able to relate to the real estate requirements of the company and why they have been so successful with their business model.

Overall, the event was well attended and there seemed to be a greater amount of activity in comparison to the New York National Conference and Deal Making event that took place in 2008. This was my second time attending the New York Conference and my sixth ICSC National or Regional Conference. NAI Norwood Group is typically represented at the Boston ICSC Regional Conference, the New York ICSC National Conference, and the Las Vegas National Conference. I continue to experience the benefits of being a member of the International Council of Shopping Centers and volunteering on committees such as the New Hampshire Next Generation Event committee. Thanks to everyone who helped make the 2009 New York Conference as success. See you next year!

Chris McMahon

Commercial Sales and Leasing

NAI Norwood Group