Scott Holmes, National Director of retail in Marcus & Millichap’s Phoenix office, sat down with Retail Insight to discuss the value of a well-rounded omnichannel strategy and how it is influencing shopping center spaces.
What are the biggest retail trends on your radar right now?
E-commerce and omnichannel strategies seem to be the most talked about. E-commerce has been growing and, for the first time in U.S. history, is expected to break 10 percent of total retail sales this year. Retailers are quickly adopting technology and online resources, including mobile, to adapt to the changing environment. Overall retail sales continue to grow and the fundamentals remain very strong for retail.
Do you think we’ll continue to see shopping centers add more service and entertainment — essentially internet-proof tenants — to their properties in the coming years as they combat e-commerce?
Yes, that is already happening and is expected to continue. Retailers that provide higher service and a unique experience are highly sought after. The days of retail simply being a place to go and pick things up are trending away.
What types of retail categories are popular with landlords in the current market?
For local neighborhood centers, grocery is still most important, but organic, health-conscious and higher-service grocers are preferred.
In the clothing sector, the “treasure hunt” discount model utilized by TJ Maxx, Burlington, and Ross is most preferred and resistant to threats from e-commerce.
Convenient and healthy quick-service restaurants are also popular. Restaurants are being seen as anchors since they drive traffic.
Health and fitness is another tenant category being sought after for the same reason. Health includes doctor and dentist offices, as well as other healthcare-related uses. Fitness includes yoga, smaller gym formats and full-fledged health clubs for larger spaces. Landlords see these as positive, since they bring regular loyal customers back again and again.
What is your vision of the mall of the future?
There will still be room for some larger anchors, but there will be fewer of them. The trends I mentioned earlier will occur in malls as well.
Restaurants and food uses will be seen as additional anchors. The trend is away from chains and more toward unique, local offerings. Top chains will still be represented, though. Creating a sense of community through more public space, events, etc., is also a trend here.
Are there any specific areas of the country that seem to be the most active when it comes to retail leasing?
Markets typically associated with technology — Seattle, Austin, the Bay Area — seem to be the “hottest” when it comes to this. However, the national vacancy rate is at an all-time low for retail and is expected to hit or break the 5 percent level this year. This is largely due to supply constraint in retail over the past 10 years.
This article originally appeared in the Retail Insight newsletter by Shopping Center Business. This is a six-week publication created in conjunction with our content partners, which sponsor the newsletter, leading up to ICSC RECon and including post-conference coverage. Click here to subscribe.