As 2023 draws to a close, David Fuller-Watts reflects on the key trends shaping the retail real estate industry.
Against a challenging economic backdrop, the retail real estate industry has shown its resilience throughout 2023. Shopping centre operators and individual retailers have been quick to respond to market shifts and changing consumer behaviour. This agility has seen key trends develop, so here are my thoughts onthe most significant.
Tenant engagement is a top priority
Tenant engagement strategies are rapidly evolving across real estate becoming a critical component in property management. Transactional relationships are turning into more dynamic partnerships that prioritise tenants’ needs and build loyalty. In the long term, this approach is translating into higher retention rates and better performing assets.
Engaging multiple tenants is not without its challenges. To be effective, an engagement strategy must view a shopping centre as a connected community where all teams work together to empower retailers to do better. At the heart of this approach is the need for effective two-way communication that helps to increase, trust, transparency, and efficiency.
Actionable data is essential too. There is a growing move towards technology which can capture a clearer view of tenants’ preferences enabling managers to make better, more informed decisions.
Placemaking is more important than ever
For larger shopping centres, a hybrid approach, which blends different services and amenities, has been gathering momentum for several years. As competition increases, there are clear signals the retail mix will continue to transform to create more memorable experiences for shoppers across the world. As highlighted by JLL, several retail destinations across Europe are expanding beyond shopping to create community-focused destinations. Traditional retail is being complemented by impressive spaces for entertainment, wellness, dining and residential use.
In the US, there is a similar trend as developers seek alternative opportunities to boost housing supply. The footprint and location of some shopping malls makes them ideal for repurposing into mixed-use developments that will help communities to thrive. At the Westminster Mall in California for example, there are plans to transform the site into 1,100 homes, a 2.5-acre public park and 25,000 sq ft of space for shopping, restaurants and a food hall.
This notable shift towards placemaking will redefine retail spaces, encouraging more people to visit and stay. Innovative leisure offers will play a vital role in this aim and revitalising traditional retail sites, including shopping centres. This is a theme explored in a new leisure whitepaper produced by MAPIC organisers in collaboration with Leisure Development Partners. Its research revealed that 54% of 18-25 year olds and 40% of 26-35 year olds visit a city centre or shopping centre more frequently if there are entertainment and socialising opportunities. As retail spaces evolve, technology will play a vital role in fostering a sense of place helping to enhance the visitors’ experience both on and off site.
Small tech changes can make a big impact
Technology is advancing rapidly and transforming the way we all work. Retail is no exception with a host of new technology at the industry’s disposal. The role of AI in retail has been well documented and has huge potential to transform the industry especially in terms of productivity.
But sometimes less is more. For the owners of shopping centres and large retail portfolios, smaller scale changes can significantly boost efficiency. That’s because many are still relying on manual processes to manage everyday tasks such as maintenance requests. Similarly, multiple or inconsistent methods are used for communicating with hundreds of tenants.
Digitising these activities, which doesn’t have to be overcomplicated or expensive, can overhaul property management strategies. This will in turn, have a significant impact on productivity while improving tenant engagement and lowering costs.
Security risks are intensifying
As security and safety risks heighten across the globe, a growing number of retail organisations are seeking to enhance and refine their security strategies. The increase in retail crime, which is triggering more shoplifting, violence and anti-social behaviour, is a particular concern. The impact of more frequent and severe weather is another risk that’s shaping property management. Minimising the potential disruption caused by powerful storms and flooding can’t be ignored in robust security strategies.
Although many external risks are outside of anyone’s control, a proactive approach to security and safety will mitigate them. This requires effective communication channels which ensure critical information is distributed to key stakeholders at the right time. Digital technology has a key role to play in this respect, centralising key information, communication and data to streamline security processes.
The future is brighter – and more sustainable
Looking ahead, there is a feeling of optimism across the industry worldwide and a focus on growth. Parts of the market, such as the designer outlet sector, are showing strong sales driven in part by the revival of fashion tourism. This is also a sector which has swiftly adapted to changing consumer habits and realised the benefits. This customer-centric approach will be central to the wider retail industry’s success next year, creating opportunities to improve experiences and drive footfall.
Occupancy levels are on the rise too, especially in the US where rents are at record highs and there is a huge demand for physical retail space. The hope is that by the middle of next year, interest rates will begin to fall, which will drive further investment into shopping venues. As the industry sets it sights on growth, sustainability will be front of mind. There is a growing awareness among retail, leisure, hospitality and property players that more needs to be done to reduce environmental impact. At MAPIC 2023 this theme filtered through many of the discussions providing valuable insights that will shape a more sustainable and resilient future.
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