Shopping Center Development In The 2020’s

With so many retail shops closing these days, it may seem ridiculous to assert that new shopping centers are still going to be developed. Configurations, locations, specifications and customer profiles may all change in the future, but the basic reason for having a shopping center in the first place is still valid. Where new housing developments are being built, residents need access to a whole range of goods and services in close proximity, and such centers are important assets to the community. Shopping centers aren’t going away; they will, however, evolve and look different over the next 5 to 10 years.

In my career, I have done several million feet of shopping center development, and the factors that went into making one successful then, as now, are:

  • Why would someone want to pull off the roadway?
  • What would someone want to do once they get to a shopping center?
  • Who are the likely shoppers, and what do they need?

I once developed a small shopping center that was geared towards meeting the needs of local residents. The typical customer was an office worker who lived nearby who might be working late and would want a place to stop on the way home to pick up a pizza, a six-pack of beer, and a video to watch. It turned out to be one of the most successful projects I ever did around that concept! Today’s Millennial shoppers might not need a video store, but they might want a health club or perhaps a high tech gaming option.

Before embarking on a new shopping center, I would advise any client to do their homework. Understand the demographics of the area and drill down into the data. At the same time, talk to people directly – don’t send them a survey in the mail that they’ll never answer. Get to know the likely shoppers and think about the kinds of goods and services they need, but which they don’t have. Are they frustrated because the nearest grocery store 10 miles away? Are they unhappy because there are no good casual dining options? If you ask, they’ll tell you.

Smart retailers and savvy developers who understand their customers can still create winning shopping centers.

Repurposing Dark Retail Stores To Create Housing

When I was in the service, the Air Force repurposed warehouses into offices and enlisted quarters, so I have personally lived in repurposed housing. The challenge is that it’s like being in a prison – you have very little sunlight.

The places where repurposed commercial or industrial buildings work well is when the developers cut holes into the ceiling and create a courtyard so you can have sunlight. Then you’ll have a variety of residential units arranged around a fountain or a sitting area. That solution works pretty well.

I think we’re going to see so many more stores closing that a certain number of retail locations probably will be made into repurposed housing. To make this happen, however, the owners are going to need to be very innovative. Adaptive reuse is going to be a huge issue.

The rest of retail is going through an evolutionary process where stores that sell items that can be found online for less are going away. New opportunities for destination retail, especially food and entertainment, and retailers who establish efficient delivery and supply chain systems, will thrive.

The retail landscape is changing dramatically, and there are huge big box stores sitting vacant. My hope is that people start getting creative so that most of those giant warehouse type stores will become housing and not parking lots.

Mixed-Use Projects

The term ‘mixed-use’ is a short-hand for “Mixed Use, New Urbanism,” which I believe was an idea that originated in London relative to Tube Stops. As I understand it, the English didn’t drive as much as Americans, instead preferring to take the Tube into London from suburban locations, so the City of London decided that there should be more development around Tube Stops. In order to accomplish that, they decided to go to “Form-Based Zoning” which was designed to produce an interesting environment of retail around each stop.

Mixed-use also turns out to be a form of social engineering. By creating such developments, people walk more, and various different economic groups may live in closer proximity. Another side benefit is you also reduce your carbon footprint, so those are some of the reasons why mixed-use developments have become popular. From a developer’s standpoint, mixed-use turns out to be extremely difficult to execute because it is so intensely based on the community that surrounds it.

As a developer of mixed-use projects for many years myself, one of the big obstacles I’ve faced is the fact that the needs of each use are often diametrically opposed. For example, in a mixed-use office/retail development, parking becomes a big challenge. Office buildings often rely on underground parking, where it can be a very efficient use of space, but underground parking seldom works well for retail.

Even the general design needs of retail and office are diametrically opposite. Office buildings are generally built to look imposing and massive, which sends a specific message to prospective clients visiting the site: “I am the Great and Powerful Oz, be intimidated by my presence!” While retail needs to say, “I am the friendly sandwich shop; come on in and have a Coke.” How do you accomplish both at the same time?

Mixed-use projects are usually interesting and fun, which is why a lot of architects love working on them, but don’t go into creating a mixed-use development project thinking that it will be easy. That said, there are few development projects which, when completed, will provide more long-term satisfaction to all: the city, the residents, the businesses, the patrons, and the developer.

Retail Apocalypse? Maybe Not

As a consultant to national and international retailers for more than 25 years, I’ve been involved in building and leasing a million square feet of retail space. During that time, changes in the retail landscape have been truly profound. Internet sales of merchandise continue to grow, and with each year more retailers are feeling the pressure. Some of the categories we used to think were exempt, such as clothing, are going the way of Toys R Us and Fred’s Jewelers. Companies like Trunk Club and Stitch Fix are beginning to figure out the algorithms, and are likely to cut further into the market shares of major clothing retailers.

It’s easy to look at the retail landscape and predict that most retailers are likely to get decimated. But that’s not necessarily true. Consider movie theaters back in the early 2000’s when streaming video, mostly Netflix, came along. They were all special purpose properties, with tiered and raised seating configurations, which most retail experts predicted would need to be torn down. Why would anyone go to movie theaters when they could stream movies in the comfort of their living room?

It turned out that the theaters didn’t all go dark. Why? Because theater owners discovered that young people, who disproportionately make up the movie going public, still liked the venues for dates. Instead of being just places to watch movies, if theaters became entertainment venues that had better food and beverage options, more comfortable seating, and ancillary revenue streams like video games, they could still attract customers. And they did.

Retailers who are willing to explore new strategies, who aren’t wedded to methods that worked 20 years ago but which are slowly dying, can still have life. Retail isn’t dead but it’s surely evolving. Consider that Amazon, aside from its acquisition of Whole Foods, has opened its own retail stores, and is likely to purchase the assets, primarily valuable retail locations, of companies who refuse to adapt to changing market conditions.

Retail survival and rebirth starts from understanding the customers, and which services and products uniquely meet their needs. Align with your customers’ needs and grow, or disregard what your customers are telling you and die. Ironically, there may never be a better time to start a retail chain than right now. Just ask Amazon.

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