For the second half of their discussion, Chuck Steelman, Trademark’s VP of Experience and Al Urbanski, Real Estate Editor of Chain Store Age, discuss prominent trends emerging in retail real estate, including the prioritization of experience for brick-and-mortar retail. Al offers advice for retail developers as they navigate the evolution of retail real estate. Al also shares his favorite retail experiences with Chuck and describes what attributes made each property stand out among the masses.
Leaning In is published every second and fourth Wednesday of the month. You can find the first half of Chuck and Al’s discussion on your preferred podcast app, and be sure to follow the show to hear our next episode with Professor Ellen Dunham-Jones, co-author of Retrofitting Suburbia.
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Transcript
Chuck Steelman: This is Chuck Steelman, and I’m back with Al Urbanski, Chain Store Age’s real estate editor and manager, to wrap up our conversation on experiential retail real estate. Al explains the recent increased demand for experiential retail and even sheds light on his own favorite retail experiences. Stay tuned to the end of the episode to hear Al’s advice to retail developers.
Why do you think experience in retail is so important right now? Do you think this has increased because of the pandemic? And do you think experience as a trend is going to stick around?
Al Urbanski: It was around before the pandemic with forward thinking companies, such as yourself, North American Properties, Bob Stark up in Cleveland, where they said things are getting boring. But it’s I think – this is just my own opinion, I’m not a sociologist, I did no study – I’m 65 years old, I try to keep- I like working with young people to see what they’re doing. They’re doing things, like my kids do things, understand things that I have no idea about, but you have to know about these things if you’re building centers. The experience portion, yes, is going to be around forever and it’s about survival because it has to constantly change. As I said, I lived in Manhattan, I was divorced. When my kids, I have three of them, graduated from college, they all moved in with me in Manhattan because that’s where they grew up. And my youngest daughter who grew up, left Manhattan when she was five and lived in the suburbs, said, “You know, Dad, I like New York, it’s great. But I’m a suburban girl, I like having a car, I like driving to the mall, the one I went to, or the golf course,” or whatever. And she ended up moving to Cincinnati. And I think that that is the idea of a lot of young people. It is very expensive to live in cities, but they want an urban lifestyle. I think that’s a huge trend. And not only them – empty nesters dumped the house, I want to be in a place where I can walk to the gym, walk to the barbershop, walk to a coffee shop. I’ll just mention one other side trend to that that I think is important. Younger people are much more interested than empty nesters in climate change and green issues. And I think not getting in a car or being able to take a bike somewhere, it is important to them. So, I think that those are all experiential trends that are going to continue for a while.
Steelman: I agree. And I can see at Trademark Property and what we do in our centers is really create this environment of a one-stop shop where you live, work, play, eat, everything in one area, which I think is what’s so important for the future. It’s great to hear you say that that’s what you feel consumers in a wide range of generations are really looking for and enjoy. Now you mentioned some of the experiences that you’ve had individually, so what’s the best retail experience you’ve ever had and what made it so memorable?
Urbanski: Yeah, it’s funny, as I told you, I was not a big fan of hanging out in retail, but since I’ve had this job and been to a lot of centers, often with the people who built them, I’ve had many great experiences. I’m just going to mention two because one’s on a large scale and one’s on a small scale. The one on a smaller scale has been around for a while. Matter of fact, it just changed hands. It’s a mixed-use center called Blue Back Square in West Hartford, Connecticut. And the reason that that one impressed me so much was I was familiar with that town. As a matter of fact, I started as a reporter many years ago at the Hartford Times. And so, I knew West Hartford; West Hartford is a very affluent town. But this center surprised me because it was built right in downtown West Hartford. I can’t remember what was there before it was there. It is a mixed-use center but done very deftly with different architecture and different buildings, some looked like they might’ve even been built earlier than others. It melds with the town. There’s this one spot which is really funny where it’s like a cross street. And on one corner is a small Barnes and Noble bookstore, one of their smaller format stores, and right next to it is the West Hartford Library entrance. It was just like, hey, let’s put the Barnes and Noble bookstore next to the town library. It just impressed me what they did there. And it’s been successful ever since. I think it’s been there twenty years. The other one I wanted to mention is Brickell City in Miami, built by Swire. I went there when it first opened years ago, five years ago. It’s a place that if you’re in the mall business, you need to check out the space. I don’t know if you’ve seen it, but it’s an incredible place. They’ve built basically a suburban neighborhood in Brickell. But it has a roof that is not really a roof, it’s kind of open, and it’s an artwork in itself. I think they have name for it. But it actually is a cooling system that catches rain, collects sunlight, and runs their own plant generation for the center. And it’s just a spectacular place. So, anybody out there that is watching this, go to Miami and check out Brickell City.
Steelman: What do you see as the biggest current trends in retail real estate?
Urbanski: We mentioned a lot of them, but if I had to give you a list, it’s going to be mixed-use. You need to keep people there more than just a couple hours a day. It’s got to be 12, 18 hours a day. Activation, what we were talking about before. Yes, have an art exhibit, have workers from out of town that have shops come in and sell their wares. The other of these is for developers to look at retail real estate as an amenity. That’s kind of what it has become. When you start adding residential, when you start adding office, now this is not just, hey, we got the Sears and we got Macy’s down at the other end, and just sign up all your guys in our other malls in the middle. No, you’re now providing amenities to the people who live and work there and have to rethink the tenants and the length of terms of the leases. And the other I think is omnichannel delivery. How does physical retail fit into that and how do I work that into my business plan for my entire company?
Steelman: So, you think like a curbside pickup program is something that I think is a great way to say this is a great transition from buy online pickup in store. So, we’re still sending a little bit of attention to the brick-and-mortar location, but the customer from a convenience standpoint can order online and just drive up and pick it up at curbside. Are you seeing curbside delivery as something that we’re going to see moving forward?
Urbanski: Oh, absolutely. I think you’ll see, and I talked to some people about this who were thinking the same things, in some big centers, there’ll be a separate building that’s the pickup building and probably a bar waiting area. But yeah, it’s crucial – do I have a smaller store in a zip code where a lot of people shop online just to have people be able to come in and try on things, go home and order, do a fulfillment center inside a mall? Some malls have done that. PREIT is doing that.
Steelman: Yeah, I think it sounds like a good idea to me. Al, we could meet, have a glass of champagne, have a conversation, and we are just in curbside pickup while we’re just waiting on our package and then we just keep going. So, we still had a really cool experience. We had a great experience, but we didn’t go into the center and shop because we did it before we got there. But still, the brick-and-mortar location was still very relevant in our overall retail experience.
Urbanski: Yeah, I don’t like buying shoes online because it’s too much of a pain in the neck to mail them back if they don’t fit.
Steelman: I’m not an online shopper because of that. I live right in the middle of the city, so packages can disappear off your front porch. And sometimes they get delivered on trash day and they disappear. And then it’s like it didn’t fit so you have to return it. So, I like going in, I like going to brick-and-mortar locations. I like having interaction with the sales team. I like them to tell me what the trends are. So, I see that brick-and-mortar is still very important when it comes to the overall experience for someone who really likes to shop.
Urbanski: For that reason, it’s just another great reason, what we were talking about before, people not wanting to drive somewhere, I think physical retail will increase your online presence by giving you more relationship with your customer when they just want to come sell you something or give something back.
Steelman: I believe it’s all about the relationship, honestly. You have to know who the customers are, you need to know them by name, and then you make them feel welcome and like they’re part of the organization. So, then they want to come back because they liked that interaction, they like being in the know, and they like having access to something in the store that maybe their neighbor doesn’t because they had a relationship, and they had a foot in the door.
Urbanski: You hit on a big thing there that’s a positive of physical retail and that’s building brand loyalty. It is very hard to do online. Online is “catch as catch can”, but if I have you in my store and I’m saying, well, you know what, you didn’t like that, maybe you want to try this. It’s a big opportunity for developers to make that kind of environment happen.
Steelman: Now, some research indicates that Gen Z prefers in-store shopping experiences. Do you see malls of the eighties continuing to struggle as we move further into the 2020s?
Urbanski: It’s kind of two different questions. Let’s just talk about the- because I have seen studies also on the Gen Zers – I forget who did it – oh, you know what it was, it was one of those online rent your apartment here companies. They did a national survey, found that Gen Zers were moving to, as they got out of college, moving to small towns. Whereas a lot of the millennials went to big cities. They’re either going back to their hometowns or nearby. And I was interviewing a developer about this and mentioned this, and he said, well, it could be that they’re wanting to live in a small town, but it could be that they’re just moving back home because they can’t afford to go anywhere else. So, I don’t know if they do, but I think all people do in certain product areas, whatever it may be for them. And that’s why I say the online, having a store as a try-on place where people can see products and purchase online later. Bonobos, from the time they started, they were online, but they had a catalog and then they started going retail because they knew a lot of their customers read that catalog and then bought online. Five times more than anything, they just went to the site.
Steelman: Now from your position, what advice would you give us at Trademark Property, as well as other developers, as we navigate the evolution of retail stores?
Urbanski: They’re doing a lot of the things that they should be doing already. As far as let’s look at the mall sector where a lot of them went away. A lot of big companies, Simon Brookfield gave malls back to the bank that they didn’t think were going to work. Talking about my friend Joe at PREIT, he has the last mall standing idea. It’s like make sure you have the best mall in a good market because all the rest of them are going to go away, but if you do the right thing, you’re going to stay. So, those kinds of owners are doing things like putting residential in malls. But in their case, for instance, they are only putting residential where it’ll work, which is in Philadelphia and DC where housing is a challenge. But I would say, the one thing that I would focus on doing more of is more intense marketing, more intense digital marketing with companies that can help you with data. I believe developers today, where before they got the anchors and said, okay, there you go, guys in the middle, here’s your 15-year lease and pay your rent on time, now you’ve got to get involved directly with their businesses, who they want to see, what kind of events they need. Can you help them with their marketing? Can you get a digital, a system that’s going to help them get noticed and social media that binds it all to the mall? So, I think it’s knowing the demographics that you need to reach in your centers and doing a little bit more to just get them to your centers, instead of just saying the Grateful Dead is playing; show up.
Steelman: Okay Al, I read in Chain Store Age Magazine in the article that you actually wrote called Mall Resurgence Begins about Placer.ai’s data that they were providing, that the traffic is coming back in shopping centers, which is very exciting. Can you touch on that a little bit more, maybe expand from what you shared in the article?
Urbanski: Placer.ai came out with a report just this week, which I had written up, and malls lagged at the beginning of the year as far as their traffic numbers versus ’19. So, they were 30% off in February. They’re now even. And people, they found in this study, during the pandemic, more of them stayed home and tried to stay local, now they’re back to their normal shopping habits.
Steelman: Placer.ai is such a great tool because the data that they provide to us at Trademark Property and many other companies, it’s valuable. And it’s interesting to see, and it’s great to analyze it. And you can take that information and really be able to create things that either increase the traffic or move the traffic from one area of the center to another area. So, I think Placer.ai has a great system in place, and I think it’s very exciting to see.
Urbanski: I’ve been dealing with them for a few years; I have to tell you they’re great people, too. They really, really work hard, want to get you guys the information you need.
Steelman: Well, Al thanks so much for joining us and being a guest on the Trademark Property podcast, Leaning In. Thanks for sharing your information. We look forward to seeing you and working with you in the future.
Urbanski: Same here, Chuck.