What’s in a shopping center redevelopment?
By Richard Birdoff
Even small improvements can surprisingly lead to big results with the proper strategic planning. That is especially true for shopping center owners and developers who can read the tea leaves and spot future trends that set them up for success. How will consumer style changes affect the bottom line next quarter? What cyclical themes are coming back around now?
While it’s prudent to think to the future, the right planning is needed. Shopping center owners should consider how much thought actually goes into design trends and new consumer attitudes in advance of a shopping center redevelopment. Sure, you may think of a retail center redevelopment as a once-in-a-generation event, but now new trends are taking form faster than ever. It may just be the time to really examine what’s happening in redevelopment construction and design for the retail space.
The image of a shopping center can quickly age and be seen as outdated or past its prime if it’s not staying on trend. The reality is that today’s modern shopping centers are more diverse than ever. They stand as entertainment plazas, where movie theaters are drawing new crowds as anchors, and boutiques shops, salons, fitness centers, and big box stores sit side by side to drive traffic. Luxury apartments and office space are bedfellows in these modern mixed-use shopping centers.
Now is the time to think ahead and consider the consumer trends that ultimately impact retail real estate. It’s time to talk retail redevelopment.
A Targeted Retail Approach
If there is one thing that retail shopping center owners want, it’s a strong anchor tenant — maybe even two, depending on the size and scope of the center. What’s common today is these anchors are not necessarily traditional retail tenants, like a grocery store. Rather, movie theaters and big box stores are seen by owners as strong anchors that act as a compliment to the other tenants in a center.
That is following the mindset of consumers who see the shopping center as an entertainment destination, and not just a marketplace of business. In appealing to this, shopping centers can draw consumers in for an extended amount of time. The centers thriving today shed the old idea that retail will bring in customers; now, shopping centers are lined with service tenants, like fitness studios, salons, medical offices and logistics centers, in addition to its retail businesses.
Property owners are reconsidering their tenant mix and adding tremendous value by creating destination centers that are one-stop-shops for fun. With the aim to appeal to broader consumer groups, analyses of the area’s demographics, economic levels and spending habits are helping tailor what that mix of tenants will be.
In the eyes of most retailers and shopping center owners, the most important consumers are Millennials. It may come as a surprise, but after hours of researching products online, many Millennials still prefer shopping in stores. After Millennials shop in a bricks-and-mortar store, they’re likely to stick around and eat, and shopping center owners and restaurants/eateries have taken notice: openings by food retailers represented nearly 40% of store openings in the next 12 months. An example of this is retailer Urban Outfitters’ recent acquisition of the Vetri Family group of restaurants, which includes a pizzeria chain.
More Than Just Shops and Boutiques
There’s more to this approach than experimenting with a new mix of tenants. According to the Envision 2020 report, shopping centers are evolving from simple retail properties into cultural hubs that are central to, and fully integrated with, the communities that surround them.
Shopping center owners are dipping into other segments of commercial real estate to build value. This includes expanding existing centers with new mixed-use development and upgrading amenities to lure tenants, and therefore attract new customers. Through the improvement of center infrastructure, retail owners are satisfying tenants and appealing to new ones. Creating a more attractive property consequently drives rent increases and improves a property owner’s bottom line.
Even the concept of redevelopment in this space is evolving. Every segment of the commercial real estate spectrum is on the table when management companies consider redeveloping a property – adding retail space onto an existing site, developing new buildings with different uses like housing, and upgrading existing buildings by improving signage, façades, parking lots and lighting.
An example of this is what’s happening in Evesham, New Jersey, at The Shoppes and Residences at Renaissance Square. This retail center is being re-imagined to include some of the features mentioned earlier: new retail space, more than 300 luxury apartments, additional site upgrades to improve its amenities, plus the construction of an open space park that features jogging paths, walkways and a pond. It’s certainly breaking the mold of an old shopping center, and it’s right in line with the new trend of an entertainment hub with more than just shopping.
These trends are especially taking off in urban areas, where new construction can be close to impossible because of a lack of space and costly land prices. The renewal and revitalization of these urban shopping centers is improving the overall experience of customers, as well as building tremendous value for shopping center owners that historically have struggled to find new avenues of rent growth. Building up, rather than out, is the answer to unlocking value.
Redefining Retail Expectations
Shopping centers, large and small, are still fixtures in local communities. For decades, shopping centers have represented a common space for a community to gather with tenants that fit the needs of the area.
But now they’re transforming to be even more closely integrated into that local community. The creation of mixed-use spaces, in addition to retail, is ushering in a period where shopping, living and entertainment all co-exist side by side. That’s long been a fixture of urban living, but it’s one that is now finding its way into the suburbs as well.
Today, shopping center owners are eyeing the prospect of redevelopment, and they’ve focused their gaze upon the modern trends. Better signage, lighting and parking lot design are continuing to improve the shopping experience for tenants and consumers, but it’s the inclusion of mixed-use developments and a more diverse tenant mix that is turning shopping centers into true community spaces.
— Richard Birdoff is principal and president of RD Management LLC, a commercial real estate owner and operator with more than 40 years of experience. Headquartered in New York City, the company owns more than 200 properties comprising over 18 million square feet across 24 states and Puerto Rico.