What We Learned From ICSC 2018

  • June 1, 2018
  • CRE

By Ben Graham, CCIM & Chase Cangelosi

The retail industry as whole is going through a huge transition. We recently learned at Trends 2018 that the closings and bankruptcies of big-box stores such as Sears, Toys R Us, and Macy’s, have shown consumers and investors that boring retail is dying off. To ensure a store will be successful, it needs to be an experience.

Nobody knows that better than the experts who presented at the International Council of Shopping Center’s RECon 2018 convention. The event is the world’s largest gathering of retail real estate professionals, where many of the nation’s most successful retail brokers shared their opinions on the future of the industry.

Discussions were focused on three key components: diversifying the tenant portfolio, use of technology to enhance consumer experience, and the growth of restaurants leasing retail space.

1. Diversifying the Tenant Mix

Tips from ICSC about malls and tenant diversityMalls and shopping centers are changing shape. The past concepts included a few department store anchors, a bunch of retailers and a small food court. At RECon 2018, experts suggested diversifying the tenant mix by bringing in new categories of tenants. That includes new ideas such as co-working offices, hotels, entertainment, and medical services, and in the new concepts, grocery stores are becoming the standard for anchors.

Tenants will soon be changing their requirements for space, changing the current stocked-showroom floors to a smaller, e-commerce-suited concept. Other stores may be partnering together and sharing space, boosting foot traffic. As we move forward, experts said we should expect these types of creative arrangements to become more common.

2. Technology Creating Customer Experiences

Physical stores are required to either fight or find ways to coexist with the popularity and simplicity of e-commerce. It’s simple; people will get out of the house and come to the store if they believe it is worth their time and effort.

One way to enhance the experience is to change the physical stores to “Phygital” stores and integrate technology into the shopping experience. Another way is by merging shopping into entertainment venues. Vacant spaces are becoming virtual reality consoles, art exhibits, miniature golf, rock climbing, trampoline parks, and arcades. Each of these are able to absorb the thousands of square feet of space formerly occupied by big-box soft goods retailers.

3. “Stay Hungry”

Restaurants were a conflicting topic throughout the conference. Many professionals believe that food offerings were a vital part of any retail center. Yet many experts believe that restaurants should not make up more than 20% of the retail center’s square footage.

Restaurants are always popular and drive foot traffic to any retail center, but an overload of food choices can lead each restaurant into profit sustainability problems. Too many choices mean fewer customers per store, unlike soft goods which can easily feed on each other’s customers in the same shopping trip. Although, this often works for market-style “food hall” concepts; for example, the brand new White Star Market on Government St here in Baton Rouge, which bases its entire center on restaurant tenants.

Although there wasn’t a sure agreement for the number of restaurants that should be present in a retail center, it’s safe to assume that they will only grow in retail space popularity.