Where Do You Retail?
April 10, 2019 | By John Cumbelich
Retail brands that embrace the Omni-Channel approach to selling their wares seek to create unique silos beyond the retail store where merchandise can be delivered to customers. Catalogues, on-line stores, gift cards and partnerships with credit card companies are among the channels that retail brands use today in reaching customers.
Yet within the old-school world of physical bricks & mortar real estate, an even more aggressive, creative and evolving array of channels continues to evolve. Let’s consider:
- STREET RETAIL: The original and still classic home of retail, which works everywhere from Main Street to Wall Street.
- SHOPPING CENTERS: Country Club Plaza in Kansas City claims to be the first. Defined by anchor tenants and parking lots.
- REGIONAL MALLS: The post war emblem of American prosperity and innovation, which created the enclosed, regional shopping experience.
- POWER CENTERS: Driven by Big Box retailers like Home Depot and Wal Mart, these open-air centers serve communities with a typically discount feel that juxtaposes them to the fashion anchored mall.
- TRANSIT HUBS: Union Station in Washington DC is today a giant shopping and dining venue, as are many train and transit stations across the map. While that may not be how they were originally conceived, retail and dining brands saw a repeatable flow of customers and redefined how these hubs function.
- OFFICE BUILDINGS: While the suburban office building is still an island, its urban peer is usually a logical location for a café, restaurant or bank.
- AIRPORTS: Travelers far from home need to eat, drink and be merry. The added benefit of duty- free shopping has created a profit center for the airport, its’ municipality and the retailer.
- MEDICAL CENTERS: The bigger, the better. Regional medical centers in particular are self-contained ecosystems unto themselves that operate 365/24/7. And there’s no better place to buy a card, flowers or box of candy.
- MULTI-FAMILY PROJECTS: Apartment and Condominium projects in urban markets create opportunities for landlords both to monetize their ground floor traffic, and densify the airspace above.
- HOTELS & RESORTS: Since people who are travelling and vacationing are already accustomed to paying for everything, why not indulge their generosity?
- THEME PARKS: The biggest and best manufacture millions of guest visits annually. The shrewdest of their operators keenly understand how to monetize the traffic that they generate. Downtown Disney has set the bar.
- STADIUMS: In a globally sports-charged culture, outdoor stadiums and indoor arenas have frequently replaced the mall or movie theatre as the go-to guilty pleasure. And the patrons come 50,000 to 100,000 at a time.
- CONVENTION CENTERS: The best ones can move bodies through by the hundred of thousands per week. A perfect target.
- THE BOX WITHIN THE BOX: You can do your banking inside your grocery store or get your Big Mac inside Wal Mart. More of these partnerships are sure to come.
It would be foolhardy to believe that our favorite retail and dining brands are going to sit on their laurels, satisfied with the list above. Retail evolution creates a dynamic that constantly seeks new venues.
Which ones might be next? Let’s consider:
- GOVERNMENT BUILDINGS – CITY, STATE & FEDERAL: To say that the use of these properties is politically charged is, um, an understatement. But given the ever-growing governmental footprint at every level, it sure seems to make sense for retail.
- NATIONAL PARKS: While folks like you and I hope and pray for one last bastion of unspoiled nature, mark my words – someone is going to try.
- BOY SCOUT JAMBOREES: What if your tent starts to leak or you didn’t pack your sleeping bag? All those kids are already carrying smartphones.
- AIRPLANES & CRUISE SHIPS: Virgin Airways has a cool bar in upper class that sells brand name beer and cocktails. Might Coors or Anheuser-Busch lease the floorspace and operate them? Why not?
- TRAFFIC JAMS: Seriously. Have you ever waited in line for four hours at the border? I would pay up big time for a burger and chocolate milkshake.
- SHIPPING CONTAINERS: They are already starting to pop up in the darndest places and they can fit just about anywhere. Evolutionary brands like Dunkin now have a container prototype.
- MEGA CHURCHES: God forbid!
Scores of today’s REITs are struggling, in part because they have siloed themselves into a single class of assets, while the ground beneath them continues to move, and the ongoing disruption of retail continues to play out before our eyes. Perhaps they can learn a thing or two from their very own retailer tenants, which have embraced the reality of constant reinvention and evolution.
Optimistically, the list above reminds us that the real estate investor has an ever-growing menu of places to capture retail rent dollars, and that proven retail and dining brands are leading the way. Perhaps a bold and evolutionary REIT will be the first to cobble together a portfolio of these “other” places. Doing so would represent a fundamental change in the premise behind how properties are aggregated. Whereas today’s investor builds his portfolio based on product type, perhaps tomorrow’s investor will embrace a user-driven model that goes wherever the credit tenants wish to spend their rent dollars. Perhaps aligning a portfolio with the varied places that expanding credit tenants seek to find customers would insulate the investor from the jarring jolts that have occurred as assets such as malls and power centers have fallen out of favor. Perhaps.
No one ever said this business wasn’t interesting.
About John Cumbelich & Associates
John Cumbelich & Associates is a San Francisco Bay Area based firm that provides commercial real estate services to Fortune 500 retailers and select owners and developers of retail commercial properties. The firm's expertise is in developing store networks for retailers seeking to penetrate the Northern California marketplace and the representation of premier Power Center and Lifestyle developments.