Open to any and all. Any markets, any type of retail, any thoughts. TLDR: Where are the value opportunities you still see in today's current market climate and in the coming years?
A few years ago I would have been pretty skeptical getting into the retail business. To be fair, I still am, but not as much depending on the market and type of retail (grocery anchored centers vs. small strip malls). Just want to get thoughts on retail specifically as we see a shift in re-purposing/re-positioning of assets at a quicker pace than before.
Small-shop retail is pretty healthy across most rent ranges except at the highest-end where heath ratios have declined due to ridiculous rents. I personally want to get into creative boutique neighborhood center redevelopment in high-growth suburbs with 3/5 mile HH incomes 1.5x+ the MSA median. Shoppers demand inspiring experiences when they visit brick and mortar now which must include thoughtful landscaping, design schemes, and art work. Smart retailers understand this, and are targeting those properties that have a sense of place.
How to DISRUPT and REVITALIZE a RETAIL SPACE:
Step 1) Buy a DISTRESSED old mall Step 2) Gut it THOROUGHLY Step 3) Fill it with COCAINE Step 4) Get high off your own supply, knowing that you have successfully DISRUPTED and REVITALIZED the retail space
Overpriced retail is dead. Boring retail is dead. Retail that doesn’t differentiate itself from online shopping in any way is dead.
The corner store that sells staples like milk, bread etc that you need NOW is fine. The lower priced retailers, they’re doing great. The trendy lower price retailers are doing even better.
There’s four tranches of B&M retailers that are going to become dominant: 1. Specialty stores. Example: Amazon will never carry the full spectrum of imported meats that a boutique deli will 2. Mainstream low price. Target, Walmart, Costco, Zara, they’re only going to increase market share. 3. Experiential Retail. All the smart kids want to play in this space but everyone should realize the concepts here can be extended to the other two groups. 4. Anything convenience. Bodegas always make buttloads of money. Liquor stores and 99 cent stores generally make a killing. Can you buy this stuff elsewhere? Yeah. Do you want it RIGHT NOW?....yeah, so you need these stores. I suppose they can apply experiential retail innovations here but they generally don’t have to
Hear, hear! And true of more than retail...
I always wonder about these stores. Lots of expensive pop-ups in Manhattan, but while the Instagram crowd visits them in droves (specifically thinking of the Google pop-up store on lower Fifth Ave last year and the flagships in Midtown), do they ever actually move product? Maybe revenue is a second- or third-order effect weeks later?
I know they're there to build brand awareness, but has anyone ever been privvy to a retail's plan to monetize flagships?
I've always seen flagship stores as a marketing tool, especially ones in midtown. Rent is $100K/month, there's no way to ever recapture that. It designed to be a marketing focal point, with photo and video ops "live in our midtown concept store" targeted at everyone who isn't there.
A lot of the "concept" and "experiential" stuff is totally overthinking it. If you're selling a cool baseball cap on the street for $5 you're going to sell out. I think what people have to realize is that these types of stores almost always originate in an enriched environment that doesn't really match up with the rest of the market (as in, some board room decision or some NYC trend hub, but certainly not bumfunk Alabama). True innovation on a mass scale is pretty rare at this point, it's just a refinement competition (as in, Zara does essentially what every other retailer does...just far better).
To be really frank, a lot of the "experiential" stuff is too gimicky to be applied in a way that will scale. Should become better over time though, but still is a small part of overall market.
The issue with retail is that you have a lot of vanilla people making decisions.
The more value you put into placemaking, the greater the return on investment. The retail (tenant) doesn't need to be experiential, but the property does.
Unfortunately, investors care more about costs rather than design because "the spreadsheet said so". It seems excel junkies/investors don't appreciate aesthetics as much as the consumers they want to appeal to.