During the 2020 holiday shopping season, U.S. online spending for November and December reached a record $188.2B. This represented a 32% increase over last year, with daily online sales during that period exceeding $1B. Cyber Monday alone generated $10.8B. Conversely, store traffic declined 48% on Black Friday and 40.9% on the final Saturday before Christmas from the previous year.
So, what role does the shopping mall play in a world where the consumer preference for e-commerce is growing?
While many say the future of retail is online, e-commerce represented just 21.3% of total retail sales in 2020. This means there are still significant transactions occurring in physical stores. While the e-commerce shopping experience is convenient, consumers are still interested in interacting with their favorite brands to try new products and have new experiences. In fact, a study by WD Partners highlighted that consumers want to return to the mall post-pandemic to explore new brands and restaurants, and to spend time with family and friends. The most forward-thinking brands understand that the best consumer experiences are not online or in store, but rather, a blend of both, with a focus on the consumer regardless of the channel.
Malls will need to adapt to this new experiential eco-system. Going forward, the brand, the consumer and new experiences will merge to create customer engagement. Malls need to remix their tenants to address customer trends including digitally native brands, fitness and medical. Driving footsteps will be the result of new curated brands, great restaurants and food halls, and new experiences. The success of these assets is important both in terms of the portfolios they support and the communities they inhabit. Financially, the tax revenues generated by malls support schools, police and fire departments, and enable communities to make investments in infrastructure. Socially, malls provide a place for community members to gather, eat, enjoy entertainment, and of course, shop.
With these opportunities in mind, it is time for retail developers, investors, and owners to ask: How do I reinvigorate my mall for future success? The following outlines the steps Cushman & Wakefield incorporates when advising clients on mall redevelopment or repositioning.
Redevelop or reposition?
The first step is to determine if the property needs repositioning or redevelopment. Look for the warning signs. The following factors can help identify an asset that needs reinvigoration:
- Declining foot traffic
- Lack of consumer engagement
- Increasing vacancy rates
- Loss of anchor tenants
- Difficulty attracting new tenants
- Declining revenue, profit and tax contributions
Analysis, imagination and flawless execution all play a role in redeveloping or repositioning an asset. Cushman & Wakefield breaks the process down into three steps: assess the asset, envision the potential, and execute the plan.
Assess the asset.
Determining the highest and best use of a property requires assessment of data and analytics including demographics, customer trends, consumer demand and requirements at the state and local level. This research provides the developer/owner with a clear understanding of community demand and what use is likely to be most successful. Other considerations include the age of the asset, capital requirements, return on investment, and voids in the community. Once the data is gathered, a formal plan should be created to help envision the full potential of the asset.
Envisioning the potential.
The next step focuses on the specific opportunities for the property and provides a pathway for innovation and creativity. Potential opportunities for a property can be as simple as replacing retail and restaurant tenants to more complex plans, including introducing new sports and entertainment facilities, converting big box to residential or office space, or adding healthcare facilities. One of the key considerations when envisioning the potential is to understand consumer demand and to ensure that the mix of tenants drives frequent and recurring footsteps to the property. To achieve this, some properties have incorporated gyms, grocery stores, and food halls. Owners and developers need to collaborate with architects, designers, valuation and capital market professionals, and brokers to envision a truly unique customer experience.
It is critically important to redefine the tenant mix, moving forward from the 90’s apparel-focused tenants to a mix that includes digitally native brands, new experiential brands, and new emerging sectors—think Warby Parker, Camp and Polestar! A recent survey by WD Partners found that younger consumers will visit malls if there is an improvement in tenant mix resulting in enhanced social and entertainment experiences. As Cushman & Wakefield collaborates on mall redevelopment and repositioning, new concepts such as farmers markets, sports and entertainment venues, and food halls are all considerations. Medical retail (med-tail), daycare, education centers, and veterinary and pet care centers are examples of new mall tenants. As these plans are executed, considerations including zoning, co-tenancy clauses and capital investments are also important.
Executing the plan.
This final step takes the transformation plan and creates a time and action calendar to drive execution. Cushman & Wakefield has an integrated approach to retail that engages valuation and advisory services, capital markets partners, debt financing, project and development services, architects, leasing professionals, marketing, business incentives and more. Bringing the right team together ensures that the outcome drives revenue and success.
What’s next for malls?
As e-commerce continues to accelerate and shopping patterns change, mall owners and developers need to address these trends with transformational solutions. In the future, brands will have a new purpose. Their stores will serve as a showroom for brand exposure, a host for pop-up experiences and a hub for e-commerce order fulfillment. This means the mall of the future must be ready to take on these new retail tenants with the right facilities and flexibility to meet their needs. The selection of tenants and new experiences has never been more accessible and the collaboration between landlords, tenants and municipalities has never been more important. Owners and developers must grasp this moment to continue evolving into the future. In the 70s and 80s, the mall represented a magical place with endless possibilities. It is time to work together to reinvigorate the mall experience and bring back the magic!
Click here to learn more about Cushman & Wakefield’s Mall Repositioning and Redevelopment services.