Beyond the shops: rejuvenating retail
With the rise of e-commerce and changing consumer demands, traditional retail has been forced to develop and adapt its offering. The impact of this on the global retail market has been massive: retail offerings have become more complex, providing shoppers with an experience rather than simply products, and straightforward retail developments have been redeveloped as mixed-use schemes.
City centre rejuvenation
In the face of e-commerce, city centres across the globe must offer consumers a wide variety of products to ensure their survival. Local governments must create more attractive retail offerings, so as to entice investors, as well as new shopping concepts and experiences. In Belgium, this has had the effect of bringing together local government leaders with property developers, to not only create new retail space, but also breathe new life into distressed retail assets. Consequently, we have seen the redevelopment of central shopping areas, leading to the renaissance of city centres more widely.
Preference for smaller stores
In the US, retailers have recognised a preference for convenience and accessibility, with retail giants such as Target, Best Buy, and Ikea investing in smaller-format stores to accommodate the consumer desire for more tailored selections.
This brings benefits to city centres, allowing shoppers to source big brand-named products on their local high street rather than from out-of-town superstores. This brings benefits to retailers and investors alike - smaller stores cost less money to open and operate, and take up less space in urban environments, allowing vendors to capitalise on the potential of a large, concentrated population centre.
In London, retail developments are already densely packed. Retailers must optimise their available space so that it can encompass a varied product offering, as well as an exciting shopping experience. For example, Topshop on London’s Oxford Street, which features hair and nail salons; Waterstones, which partnered with Costa to offer visitors in-store coffee houses; or Marks & Spencer’s with its own-brand cafés.
Contrary to what many might think, shopping centres are more popular than ever and they make up a large a part of the retail property market outside of towns and city centres. In order to stand up to the online retailers, shopping centres have adapted their offering. Increasingly, shopping centres encompass entertainment features, such as cinemas, music venues, sport facilities, restaurants and crèches.
The result is that several malls have become mixed-use schemes, with many also including commercial space, such as offices. Indeed, the UK and the US have seen a trend towards co-working space in shopping centres, with Regus and British Land partnering to offer serviced office space in shopping malls, and co-working space featured in San Francisco’s Westfield development.
Inclusivity is complex
In Belgium, another notable trend is that shopping centre developers are increasingly factoring in features that appeal to the elderly. With a global ageing population, retailers must take accessibility into account. As shopping centres become more accessible and multifunctional, they become increasingly complex for the developers. For example, a car park must take into account:
- Office workers, who will be parked for long stretches of time, and the impact this will have on the availability of space for shoppers;
- The need for spaces in close proximity to entrances and exits, so that elderly customers have convenient access;
- And safety concerns, as centres must stay open later to accommodate cinema-goers and concert attendees.
The role of proptech
Of course, evolving technology is instrumental in enticing customers into physical stores and shopping malls by creating seamless omnichannel shopping experiences. For example, advances in augmented and virtual reality allow for the development of smart dressing rooms, and touchscreen technology enables interactive shopfront components. Technology will also see the online giants make a move toward the high-street. Take Amazon Go, for example; the online retailer’s physical grocery shop in Seattle allows shoppers to quickly grab-and-go, while their chosen goods are automatically billed to their Amazon Prime account via the Amazon Go app.
Technology allows retailers to personalise customer experiences, targeting consumers in stores through their online purchase histories, and using location-based technology to push personalised offers to customers’ mobile devices.
What does this mean for BDO’s clients?
Much like the technology that it must employ, the retail sector is faced with fast-developing trends. The upshot is that it is difficult to anticipate the lifespan of a retail asset beyond ten or twenty years; and as such retail leases are becoming much shorter. In Belgium, for example, the average store lease has decreased to nine years, and ultra-short lease pop-up style stores (i.e.; less than one year) are becoming ever more common.
In the light of such short-lived certainty, permits to build or redevelop distressed assets are increasingly hard to come by and developers must prove that their retail schemes will function long term. Accordingly, new retail developments must be shown to add value to an already crowded market and also have the potential to adapt to changing consumer demands.