Two retail real estate experts believe open-air shopping centers will be one of holiday’s biggest winners.
“I’m cautiously optimistic for the holidays. I am more concerned about the repayments and student loans,” David Spawn, vice president at Brixmore Property Group, said. Millennials who purchased homes when they didn’t have to repay student loans could find themselves in some trouble, although he acknowledged that people seem to figure how to make ends meet by trading down.
“I think open air centers are going to continue to outperform the sector as a whole,” Spawn said of the general hometown favorite in many markets.
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Alanna Loeffler, managing director, business strategy, Americas Retail Services, Cushman & Wakefield, expects a steady holiday shopping season this year. “Consumers do have a lot that they’re dealing with. I think one thing that’s unique to this year is that the holiday shopping season has been elongated [as they] spread that holiday budget over a longer period of time,” she said.
Loeffler believes retailers will focus on “great in-store experiences” and that open-air centers are “probably faring best” this holiday season. If consumers aren’t not shopping online, they’re likely in stores having a “fun day at the mall or at that open air center,” she said.
The two shared their insights in a webinar on “Shopping Center Myths and Facts,” moderated by Placer.ai’s senior vice president of marketing Ethan Chernofsky.
Here are six key trends they outlined for the year ahead.
Consumers want value
With Dollar General, Family Dollar and The Dollar Tree opening 1,100 new stores this year, or one-third of gross retail store openings, value is a key focus in retail for the foreseeable future.
“We see where consumers might be headed for 2024,” she said, noting rising credit card debt and potential labor market upheaval. And with an increase in both value and private label product, that “focus is really going to be in a higher demand next year,” Loeffler said.
Beauty
Loeffler said there’s significant growth ahead for Sephora and Ulta, citing Kohl’s work bringing the former into more of its stores.
“I think the shopping experience is evolving. We’re seeing so many exciting innovations and I think that that’s just here to stay and we’re going to see that keep moving forward in 2024,” she said.
Three-day hybrid office schedule
Spawn said many companies in major markets such as New York, San Francisco and even Miami want workers in the office three days a week. For “retailers who are supported by that office population, that’s going to be the new normal as well,” he added.
Smaller markets might have different dynamics at play. For the “secondary markets where there’s a less compelling reason for anyone to be back in the office,” this means there’s little incentive to socialize nearby after business hours are over, Spawn said, which is why there’s “a lot of vacant retail storefronts there.”
Theft vs. site selection
Though theft and particularly organized retail crime has hurt a lot of retailers, many merchants are closing stores because they’re losing incentives and tax abatements.
“Suddenly, what was a profitable store when you had a tax abatement is no longer profitable when you don’t have the abatement [and now] you have heightened levels of store theft,” Spawn said.
Spawn said most retailers have a plan to deal with high-theft stores.
Loeffler chimed in that retailers will always want “quality” locations, adding that the “best spaces are always going to be snapped up.”
But retailers are thinking about the “consumer journey within the space and on the floor,” she said, describing conversations with retailers who don’t want to be in double-height malls because of security concerns such as locking up high-theft products.
Athleisure always
Ever the “eternal optimist,” Loeffler sees staying power for active apparel. “Everyone’s grown to love these comfortable, trendy athleisure clothes,” she said.
Consumers continue to spend on athleisure while brands are branching out into outerwear, sweaters and adjacent categories to support a broader lifestyle strategy.
However, the bigger credit-worthy brands will fare better next year than the smaller, privately owned digital natives. That’s because of increased costs and the capital needed to finance their growth, she said.
Retail goes hard on new formats
Retailers are rethinking their formats and going with new approaches.
“We are seeing smaller [box sizes], but I think it’s really retailers’ ability to take a look at their portfolio across across the markets and across destinations and understand really what the purpose of their store is,” Loeffler said.
Given the cost of opening new stores, retailers must understand what that store will do for a given market, she said. Loeffler said merchants should consider the experience and assortment they want to provide and customer they’ll target. Calculating productivity per square foot is key.
Loeffler said that retailers such as Foot Locker, Skechers and Gap are “moving towards open air shopping centers and taking smaller scale footprints.” Department store companies including Macy’s and Nordstrom are shrinking down too when it comes to new stores.
