Retail: Re-Imagined Summit Reimagined: The Future of Memphis is NOW! - Cushman & Wakefield Garrick H. Brown Vice President, Retail Intelligence ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Retail: Re-Imagined Summit Reimagined: The Future of Memphis is NOW! Cushman & Wakefield Garrick H. Brown Vice President, Retail Intelligence Garrick.brown@cushwake.com
Consumer Consumer Evolution Evolution Source: Cushman & Wakefield Research
What Gets Shoppers to Show Up…
The three driving forces behind bricks and mortar retail
Amazon: The 4,000 Pound Gorilla
What was the original value
proposition of eCommerce to the
consumer? Value
Convenience
What is it today? Convenience
Value Experience
Source: Cushman & Wakefield Research
The Evolution of the Third Place…
The third place fills a deep and abiding human NEED…
The Father of the American Mall
Viktor Gruen
First Place: “Good design equals good
Home profits. The more beautiful the
displays and surroundings, the
longer consumers want to stay in
a shop. The more time a shopper
spends in a store, the more they
Third Place:
Second Place: will spend.”
Where we
Work
Commune
Source: Cushman & Wakefield Research
Look Familiar?
Understand Live/Work/Play is a Product of Environment
Technology is Redefining ALL
Technology itself is changing at a
breakneck pace.
Live And it is changing how we want
to experience live/work/play.
But retailers, landlords,
developers and investors had
Work Play better be students not just of
technology but of psychology,
anthropology and culture if they
want to have a hope of truly
understanding the consumer
impacts.
Source: Cushman & Wakefield Research
Live/Work/Blur…
The real impact of technology
Beneath the New Urbanism
Walkability and urban
Live Work/Life Balance as a preferences are really about time
Major Concern: management and quality of life
issues in a society that gives
41% Millennials plenty of lip service to live/work
balance, but in fact undermines it
29% Gen-X
Play at every turn.
Work 20% Baby Boomers
If the underlying premise of
technology being about making
your life better, has it made
yours?
Do you work less because of your
devices?
No, we didn’t think so.
Source: Sanford Health News, Cushman & Wakefield Research
The Urban Growth Trend is Real
Urban share of household growth
Demographic Shifts to Watch
Urban Areas More Than Doubled
Their Usual Growth Rates from
2010 – 2015.
Source: John Burns Real Estate Consulting, Cushman & Wakefield Research
Though Suburban Still Captured Most the Growth
Suburban share of household growth
Demographic Shifts to Watch
Despite urban surge, we are still
a nation of suburbs… Rural
populations, however, continue
to dwindle.
Population Distribution 2015
Urban 15%
Suburban 64%
Rural 21%
2010 – 2015 Growth Capture
Urban 21%
Suburban 71%
Rural 8%
Source: John Burns Real Estate Consulting, Cushman & Wakefield Research
Millennials and Empty Nesters Fueled Urban Growth
Urban population growth by age
Demographic Shifts to Watch
Young and Old Fueled Urban
Growth
It wasn’t just Millennials!
Source: John Burns Real Estate Consulting, Cushman & Wakefield Research
Millennials and Empty Nesters Fueled Urban Growth
Urban population growth by age
Demographic Shifts to Watch
But Urban Growth Rate of 21%
Expected to Fall to 15% Over
Next Decade
Reasons:
Costs
Millennials Raising Families
Boomer Population Declines
Generation Z Likely to be Urban
Aspirational but Pricing Likely to
be Issue
Source: John Burns Real Estate Consulting, Cushman & Wakefield ResearchAmenities Arm Race
Other product types need retail more than ever before
The “Halo Effect”
Amenity Retail
Retail
Personal Needs
Drug Stores
Grocery Stores
Personal Services
Restaurants
Bars
Office Multifamily Hospitality
Food Halls
Entertainment
Medical Retail
Health/Fitness Clubs
Large Format Omni
Small Format Niche
But can you build the density? Go big or go home.
Source: Cushman & Wakefield ResearchRetail Retail Evolution Evolution Source: Cushman & Wakefield Research
eCommerce to newCommerce
How online keeps evolving…
1995 - 2000 2001 - 2009 2010 - Present 2015 - Present 2017 - ?
The Early Days Pure Play The Age of Amazon Omnichannel Age newCommerce Age
Years
Desktop Desktop Desktop Desktop
Desktop Mobile Mobile Mobile
Initial Launch of Mobile Tablets Tablets Tablets
eCommerce ?
Post Tech Wreck Ramp Up of Amazon Distribution Amazon Dominance
Rise (and Fall) New Pure Play Internet Strategy: Speed to Continues Seamless Integration of
of Early Players eCommerce Consumer over Tax Omnichannel (now
Retailers Still Building a GIVEN for Retail
Distribution Strategy: Amazon Dominance eCommerce Survival)
Tax Advantages Infrastructure
over Speed Retailers Rush to Build eGroceries
eCommerce Emergence of Bricks
Infrastructure to Clicks Movement ePharma
Source: Cushman & Wakefield ResearchWhat is Happening with American Retail?
Don’t you know there a “retail apocalypse” under way?
The Mainstreaming of Doom
There are real challenges, but the
perception is becoming worse than
the reality.
Unfortunately those perceptions will
contribute to the reality by harming
healthier retailer and REIT values.
Bloomberg launched an online interactive game in February 2018 where the goal is to
save a dying mall.
Source: Cushman & Wakefield ResearchSo Why the Gloom?
Is US retail really doomed?
Consumer Confidence
February reading of 130.8 was
the highest in 17 years!
Source: Cushman & Wakefield ResearchStructural Issues in Retail
What’s really driving today’s wave of consolidation?
Recent positive economics are
helpful, but won’t save many
troubled retailers.
1. Over-retailed marketplace.
2. Acceleration of eCommerce.
3. Race to the Bottom Discounting (Rise of Off-Price)
• The rise of off-price, growth of dollar stores, discounters, etc.
4. Shifting Consumer Spending Patterns.
• Millennials spending less than previous generations.
• Millennials spending differently (experience over stuff).
Source: Cushman & Wakefield ResearcheCommerce Acceleration Impact on Store Closures
Closures rising due to eCommerce, but other factors as well…
14,000 16.0% What’s Really Happening (it’s not
just about Amazon)?
12,000 14.0%
Convergence of Four Factors:
12.0%
10,000
1. Acceleration of
10.0% newCommerce
8,000 2. Over Retailed Marketplace
8.0% 3. Race to the Bottom
6,000
Discounting (Rise of Off-
6.0% Price)
4. Shifting Consumer Patterns
4,000 (Millennials Spending
4.0%
Differently than Past
2,000 2.0%
Generations)
0 0.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 (F) 2019 (F) 2020 (F)
Major Chain Closures Forecast Major Chain Closures eCommerce % of Total Retail Sales
Source: Company filings, Department of Commerce, Cushman & Wakefield ResearchClosed Square Footage 2008-2018F Source: Clarion Partners, Cushman & Wakefield Research
What’s Up With Pharma?
Will this be the next category disrupted?
Walgreen’s
+ Rite Aid (Half)
Albertson’s
+ Rite Aid (the Other Half)
DEAL DEAD
What Next for Rite Aid?
CVS
+
Aetna
Amazon
+
JP Morgan
+
Berkshire Hathaway
Source: Cushman & Wakefield ResearchMajor Retailer Bankruptcies
2017 thru 2019: Major retailer bankruptcies match Great Recession Pace!
Major Retailer Bankruptcies The bankruptcy and liquidation
40
of Payless will likely be the
largest single retail bankruptcy
35 this year in terms of unit counts.
30
A number of other challenged
25
retailers will declare bankruptcy
in 2019, but most of those that
20 we are tracking currently at
highest risk are chains below the
15 400 unit threshold.
10
However, strategic closures of
5 underperforming stores by
healthier chains will increase in
0 2019 as retailers gear up for
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 declining economics.
Major Chain Bankruptcies Forecast Total
Source: Cushman & Wakefield ResearchBankruptcies…the Hits Keep on Coming…
Remember, this is while AT THE TOP OF THE ECONOMIC CYCLE
2017 2018 2019 (So Far…)
Aerosoles Payless Charlotte Olympia Brookstone Beauty Brands
Alfred Angelo Perfumania Agaci National Stores Innovative Mattress Solutions
BCBG Max Azria RadioShack/General Bon Ton Gump’s Gymboree
Bob’s/Eastern Wireless Kiko USA Real Mex ShopKo
Mountain Romano’s Macaroni Walking Company Mattress Firm Charlotte Rousse
Central Grocers Grill Claire’s Sears FullBeauty Brands
Charming Charlie Rue 21 Southeastern David’s Bridal
Things Remembered
Gander Mountain Sheikh Shoes Grocers Taco Bueno
Payless
Gordman’s Sports Zone Nine West
Gymboree Styles for Less Rockport
HHGregg Toys R Us Bertucci’s
Limited Traffic Shoes Samuels Jewelers
Marbles: The Brain True Religion
Store Vanity
MC Sports Vitamin World
Papaya Clothing Wet Seal
Source: Cushman & Wakefield Research and Moody’s AnalyticsSource: QIC, Cushman & Wakefield Research
Retail and eCommerce Have Evolved…
Our financial models from Wall Street to Private Equity HAVE NOT
The Wall Street Influence
Overly aggressive growth
Retail destruction via
“efficiencies”
Leveraged buyouts
Destructive financial models
What happens when the
spreadsheet jockeys destroy
their own spreadsheets in search
of nickels and dimes, as opposed
?
to long-term dollars?
Source: Cushman & Wakefield ResearchDanger Zone
Bankruptcies will persist in 2018 and beyond
2019/2020 Bankruptcy Watch
99 Cents Only
Potential Vulnerabilities Ahead Academy Sports
Eddie Bauer (Everest)
Apparel & Department Stores Factory 2 U (National)
6,000 Fred’s
Fresh Market, The
4,878
5,000 GameStop
Guitar Center
4,000 Hot Topic
Hudson’s Bay
JC Penney
3,000
J. Crew
Lands’ End
2,000 1,667 Neiman Marcus
PetSmart
1,000 Pier 1
554 575
364 400 300 Rite Aid
86 187
Savers (Evergreen)
0
Spencer’s Gifts (SSH)
Fossil Forever 21 Ascena Tailored Neiman The New J Crew Le Chateau Calceus (Cole
Brands Marcus Sears Haan, Tom's Spirit Stores (SSH)
Shoes, et al) Value Village (Evergreen)
Steak ‘n’ Shake (Biglari)
Number of Units Vince
Source: Cushman & Wakefield Research and Moody’s AnalyticsThe Problem for These Retailers?
It’s leveraged buyout debt… not relevance or eCommerce
Over the past 20 years, we
Albertson’s Belk Guitar Center increasingly saw private equity
groups borrow money to acquire
retailers and then put that debt
JoAnn Fabrics Shopko 99 Cents Only
on the retailer balance sheets.
This risky practice, known as
Chuck E. Cheese Staples GNC leveraged buyouts, is creating
issues for many relevant retailers
Pep Boys PetSmart Calceus (Cole Haan) today.
Hudson’s Bay Company Petco J. Crew Many of the latest bankruptcies
(Toys R Us, etc.) have come
Hot Topic Talbots Lands’ End about from this practice.
The Fresh Market Academy Sports Neiman Marcus
Source: Cushman & Wakefield Research and Moody’s AnalyticsMajor Chain Store Closures
2017 and 2018: Both surpassed great recession levels
What’s Really Happening (it’s not just
Major Chain Store Closures about Amazon)?
14,000
Convergence of Four Factors:
12,000 1. Acceleration of newCommerce
2. Over Retailed Marketplace
10,000 3. Race to the Bottom Discounting
(Rise of Off-Price)
4. Shifting Consumer Patterns
8,000
(Millennials Spending Differently
than Past Generations)
6,000
4,000
2,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Major Chain Closures Forecast Major Chain Closures
Source: Cushman & Wakefield ResearchTop Retail Chains in Growth Mode
2018/2019: Announced new store openings
More of Same in 2018/2019
Major Chain Openings 2018/2019
Carter's/OshKosh Top Expansion Categories:
Tim Horton's*
Chick Fil-A*
Beauty/Cosmetics
Cellular Stores
Domino's Pizza*
Clicks to Bricks
Chipotle
Coffee
Jersey Mike's Subs Discount Grocery
Jersey Mike's Dollar Stores
Orangetheory Fitness Fast Food
Circle K*
Fast Fashion
Financial Services
Dollar Tree*
Fitness/Health Clubs
AT&T
Off-Price Apparel
0 200 400 600 800 1000 1200
Super Stores (but often in smaller
2018 Planned New Stores sizes—Target)
Source: Cushman & Wakefield ResearchRace to the Bottom
Dollar stores are growing at an unprecedented rate…
Dollar Dazed
Approximate Store Count
99 Cents Only 2013 v. 2017
The top five dollar store chains
have added approximately 6,500
new stores over the last four
Five Below
years.
That equates to a new dollar
Dollarama
store opening somewhere in the
United States nearly every four
and a half hours for four years
Dollar General
straight!
In 2017 alone, roughly 1,700 new
Dollar Tree (includes Family Dollar)
dollar stores opened in the USA.
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
YE 2013 YE 2017
Source: Cushman & Wakefield ResearchAmazon/Whole Foods Has Some Catching Up to Do
market share in 2016 was roughly 3%
Look for aggressive growth from
Amazon/Whole Foods likely to
begin 2H 2018.
We anticipate that as many as
500 new stores in different
formats may be opened in the
But will the expansion push be next five years…
Whole Foods
Or
Amazon Go!
Source: Kantar Worldpanel, Statista, Cushman & Wakefield ResearchThe New The New Retail Retail Source: Cushman & Wakefield Research
IT’S ALL ABOUT MILLENNIALS!
Millennial Generation Born Between
MILLENNIAL VALUES:
1980 → 1999
• Experiences Over “Stuff” ARE THE LARGEST CONSUMER GROUP
• Authenticity! Uniqueness! Choice! Variety! 100
80
• Intimacy in Shopping Experience!
60
MILLIONS
• Curated Retail - NOT COMMODITY! 40
• Non-Conformist! 20
0
• Cool is a Value! Generation Z Generation X Greatest
Generation
59% of Millennials Look for Physical Store Presence When Buying Online.The Millennial Consumer
Don’t worry… they usually don’t bite
Cool is a Millennial Ethos
Cool IS Experience
Cool is not frivolous.
Woe to the retailer or landlord
that underestimates the power
of cool.
Tolerant Societies =
Creative Societies =
Innovative Societies =
Cool Cities
Economically Dominant Cities
Source: Cushman & Wakefield ResearchSocial and Macro Economic Factors Driving Shift
The new consumer paradigm…
Evolution Across the Ages
Technology + Macro Economics
From To Driving shifts across all
generational consumer groups,
with Millennials leading the
charge.
Stuff Experience
Individual Community
Conformity Personalization
New New
Quantity Quality
Buying Creating
Owning Using
Source: Callison RTKL, Cushman & Wakefield ResearchFood Halls ON FIRE!
Food Halls: the shared economy for restaurants
Food Halls in the U.S.
450
400
350
300
250
200 Projected
Existing
150
100
50
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Cushman & Wakefield ResearchEataly… Hybrid, Single Proprietor Themed Food Halls
Prepared & artisanal options…
What’s Next?
Would an Eataly type concept
work for…
Japanese Cuisine?
Chinese Cuisine?
Mexican Cuisine?
American Cuisine?
French Cuisine?
Etc., Etc., Etc.?
YES, YES and YES
Source: Cushman & Wakefield ResearchWeWork to WeMrkt…
The sharing economy for convenience stores?
WeMrkt
WeWork opened first WeMrkt at
205 Hudson in New York in
Summer 2018.
The stores carry food, beverages,
office supplies, apparel and
products from WeWork
members.
The plan currently is to add 500
stores nationally over “the next
few years.”
We believe this timetable will
prove to be over a five year
period beginning in 2019.
Source: Cushman & Wakefield ResearchCoworking at the Shopping Center
The sharing economy for convenience stores?
CoWorking On the Way
CoWorking at the Mall Industrious + Macerich
Water Tower Place
Chicago The future of retail is mixed use.
Coworking office space is leading
the way.
In July 2018, Macerich inked a
deal with coworking provider
Industrious to add space in
multiple malls around the
country, beginning with the
opening of a 33,000 square foot
coworking facility in a former
Barney’s Store at Scottsdale
Fashion Square.
BeSpoke, Westfield
WeWork + Lord & Taylor
San Francisco Centre
Source: Cushman & Wakefield ResearchCraft Brewing Explosion
Trend is still not mature nationally
STATES WITH 100+ BREWERIES
Microbreweries Brewpubs Planned
MASSACHUSETTS 75 29 39
MINNESOTA
Craft Breweries in the United States
74 35 42
INDIANA 54 69 25 6,000
WISCONSIN 73 62 27 5,000
MICHIGAN 87 51 33 4,000
VIRGINIA 117 44 63 3,000
OHIO 100 73 47 2,000
ILLINOIS 99 74 44 1,000
NORTH CAROLINA 133 56 55 0
TEXAS 134 58 105 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
FLORIDA 141 51 76 Brewpubs Microbreweries Regional Breweries
PENNSYLVANIA 84 116 62
OREGON 133 93 26
NEW YORK 170 91 80
WASHINGTON 227 88 52
COLORADO 199 121 67
CALIFORNIA 388 204 156
Source: Brewers Association of America, Cushman & Wakefield ResearchZauo NYC… Fish For Your Own Meal
Heighten the experience
Family Friendly Japanese Dining
Zauo has 13 locations in Japan.
Opened in October in
Manhattan’s Chelsea
neighborhood.
Restaurant features three pools
stocked with striped bass, fluke,
flounder and rainbow trout.
Family
Source: Cushman & Wakefield ResearchThe Shed
Farm-to-fork local food creation on display
Food Creation as Show
Demonstration Kitchens
Open Kitchens
Food Preparation as Theater
=
Experience Generators
Food tourism isn’t just about
major markets
Source: Cushman & Wakefield ResearchElevated Chain Experience
From Starbucks to Taco Bell and beyond…
Value Chains + Experience
Starbucks Roastery, Shanghai
Keeping in mind the
Convenience, Value + Experience
nature of retail, fast food and
value players already have their
niches…
McDonald’s Tech Initiative Elevated concepts can lead to
new consumers and/or revitalize
tired brands…
Taco Bell Cantina
KFC “Big Chicken”, Marietta, GA
Source: Cushman & Wakefield ResearchOperation Lifestyle, Destination High Street
Luxury Retail & Food
Upscale Chains + Experience
Gucci Cafe, Shanghai
Rise of experience also means
luxury brands which already offer
an experience need to up their
game.
Iconic brands are about a lifestyle
beyond their hard goods…
Source: Callison RTKL, Cushman & Wakefield ResearchLifestyle, Lifestyle, Lifestyle
Retail & Hospitality
Upscale Chains + Experience
West Elm Hotels
Casa Camper, Berlin Indianapolis Rise of experience also means
Savannah luxury brands which already offer
Oakland an experience need to up their
Detroit game.
Minneapolis
Portland Iconic brands are about a lifestyle
beyond their hard goods…
Parachute Hotel
Los Angeles
Restoration Hardware Hotel
Manhattan
Source: Cushman & Wakefield ResearchExclusivity: From to Speakeasies to Members Clubs
Irony: the rise of exclusive concepts seems to be democratic in its appeal
Not Just for the Elite Anymore
The Violet Hour Midnight Cowboy Club 75
Wicker Park, Chicago Austin, TX at Rockefeller Plaza, NYC
PDT
NYC
The Gibson Noble Experiment Wilson & Wilson Private Detective Agency
Washington, DC San Diego, CA San Francisco, CA Room 13
Source: Cushman & Wakefield Research ChicagoRag & Bone + Jack’s Stir Brew Coffee
Former meatpacking warehouse turned retail + coffee hybrid
Store Within Micro Store
Cross Brand Leveraging
Upside:
Synergies driving greater traffic.
Downside:
Inevitable decline in space use.
Stores serving double or triple
duty…
Winners:
Best in class real estate
Losers:
Class B- and below
Source: Callison RTKL, Cushman & Wakefield ResearchMash-Ups Everywhere: Capital One Cafe
Would you like a decaf with that credit card?
Hybrid Concepts
Capital One Café is more than
just a rethinking of financial
services retail space.
It is a focus on “linger-able
space.”
Source: Cushman & Wakefield ResearchBirchbox + Walgreens… 9,800 Locations?
Strategic partnerships on steroids…
Store Within Drug Stores
One third of US citizens (over 125
million) are members of
Walgreen’s Balance Rewards
Club.
Will cosmetics prove the right
hedge against the inevitable
entry of Amazon into the space?
Drug stores will need to boost
shopping experiences to not face
same malaise as other
eCommerce disrupted retail
categories.
Partnerships and store within
stores are easiest way.
Source: Cushman & Wakefield ResearchCosmetics as Savior
JC Penney: Store within store and vulture strategies..
Store Within Stores
Arguably, JC Penney partnership
with Sephora for store within
store concepts is what kept the
lights on in the post Ron Johnson
era.
New vulture strategies (picking
up market share from failed or
failing chains) include:
Appliances
Toys
Look for more retailers to adopt
this strategy to benefit from
other retail failures. Addition by
subtraction.
Source: Cushman & Wakefield ResearchEven Zombies have a Pop Up
Toys R Us will be back this Christmas
Zombie Store Within Stores
This holiday shopping season will
see 600 Geoffrey’s Toy Box pop
up stores within Kroger grocery
locations nationally.
The pop-up concept comes from
the group that bought TrU
intellectual property rights out of
bankruptcy and that are reviving
the dead brand… zombie
retailers.
Source: Cushman & Wakefield ResearchPop-Up Permanence
For at least the next decade, these are permanent part of the landscape…
The Real Story About Pop Ups
Pop Up Stores Account for $10
Billion Annually in Sales
Upside:
New outlet for experiences,
happenings and ability for
retailers to “test-run” locations.
What do Consumers Want?
39% A Fun Experience Downside:
39% Unique Products/Services Symptom of erosion of
36% Localized Assortments permanent tenant base,
reflecting weaker landlord
34% Optimal Pricing
bargaining positions.
33% Convenience
Winners:
Consumers and Retailers
Losers:
Landlords
Source: Pop Up Republic, Cushman & Wakefield ResearchPermanent Pop-Ups
Mish Mash a Smash
Store Within Stores
Fourpost Studio Shop Cube
Launching in November 2018
At two largest malls in North
America:
Edmonton Mall
Mall of America
Pop-up concepts from local to
luxury, from high street to
incubator…
Source: Cushman & Wakefield ResearchNeiman Marcus & Rent the Runway
San Francisco, CA
If You Can’t Beat ‘Em, Partner
Neiman Marcus renting clothes?!
3,000 SF boutiques to offer
assortment of clothing and
accessories that consumers can
rent.
Rent the Runway stylists will also
help consumers select other
items from Neiman Marcus that
shoppers can buy to perfect a
look.
Rent the Runway sales system-
wide estimated to be as high as
$100 Million.
Source: Callison RTKL, Cushman & Wakefield ResearchMoncler: House of Genius
Concept Stores: Art Meets Fashion
Exclusivity + Art
Tokyo (Aayoma District) and New
York (SoHo)
Interactive Spaces
Customized Layouts
Curated Limited Edition Goods
Based on Local Urban
Surroundings
Think Art Gallery as Luxury Store
Source: Cushman & Wakefield ResearchSamsung 837
New York, NY
Marketing not Sales
40,000 square foot space carries
no inventory.
Cultural center for visitors to
experience products.
Technology driven programming
to tap into people’s passions; art,
music, sports, wellness,
entertainment, food, fashion and
technology.
GEARING UP TO DO 40 STORES
NATIONALLY!
Source: Cushman & Wakefield ResearchNike Concept Store
Los Angeles, CA
Brands Boosting Experience
Look for more iconic brands to
boost their direct to consumer
retail presence.
Brands like Nike are reducing
their wholesale presence while
opening more experiential
concept stores to boost the
shopping experience.
Protection of brand equity means
elevating the shopping
experience and escaping the
destructive cycle of race to the
bottom discounting.
Source: Cushman & Wakefield ResearchREI Co-Op Flagship Concept Store
Washington, DC
Design: Part of the Experience
The challenge?
Higher tenant improvement
costs, further driving bifurcation
in the experiential space
between have and have nots.
Source: Callison RTKL, Cushman & Wakefield ResearchLululemon Hub Seventeen
Toronto, New York and coming soon to a major market near you
Retail + “Life Space”
The Lululemon Hub Seventeen
concept features programmed
space for wellness,
entertainment and events.
Stores are wired for free WiFi
and offer expansive areas for
shoppers to work, socialize and
linger
Source: Callison RTKL, Cushman & Wakefield ResearchMenassaince
Dude’s are upping their game…
Men’s Apparel Bifurcation
Saks Fifth Avenue Men’s Store
Manhattan
While mid-price, commodity
apparel is on the decline (to the
benefit of value or upscale,
Nordstrom Men Store experiential brands) across the
Manhattan board, this trend is arguably
sharpest in men’s apparel…
Lululemon
The Local
Lululemon: The Local
Source: Cushman & Wakefield ResearchClicks to Bricks: Brand Embassies
Clicks to Bricks
The newCommerce Era
When eCommerce retailers open
physical stores, they experience a 45% Seamless Integration of
37% 36%
significant increase in web traffic. Omnichannel (now
a GIVEN for Retail Survival)
Average Established Established
Retailers Retailers
Apparel Department Home
When eCommerce retailers close
physical stores, they experience a 10% 8% 16%
significant decrease in web traffic.
Source: ICSC, Cushman & Wakefield ResearchClicks to Bricks
Brand embassies, returns savings driving more pure play growth in physical space
800
700
600 Amazon Go!
500
Birchbox/Walgreen’s…
Wayfair? Holiday pop-up in Boston and kicking tires for permanent stores…
400
300
200
100
0
Store Count Planned New Stores 2019
Source: Cushman & Wakefield ResearchAmazon: Go!
3,000 Stores?
Checkout-Free Shopping
Look for this technology to have
a massive impact on the value
sector where customer service
has traditionally been secondary
to price and selection (the Sam
Walton model).
Keep in mind that one of the
reasons for the struggles of mid-
priced, commodity retailers was
the adoption of the Sam Walton
model—which has worked for
value concepts, but which
degraded the experience for
those brands. Experiential retail
starts with customer service.
Source: Cushman & Wakefield ResearchEntertain Us!
Millennials spend more on experience than “stuff”
Golf/Sports/Arcade Entertainment Themes Athletics Space
BarCades/Mixed (Dave & Buster’s, Aquatic Parks
Punch Bowl Social, etc.) Trampoline Rooms
TopGolf/Miniature Golf/Glow Golf Indoor Rock Climbing
Baseball/Batting Cage Bars Indoor Skydiving
Axe Throwing Bars Velodromes (Indoor Cycling Tracks)
Ping Pong (Susan Sarandon)
Bowling Alleys (Lucky Strike, etc.) Culture/Performing Arts Space
Duck Pin Bowling Art Galleries
Indoor Go Cart Tracks Museum Space
Indoor Shooting Galleries (Real Guns Live Theater Space
Optional)
Dinner Theaters
Event Centers
Cirque Space
e-Sports Facilities
Stand Up Comedy Clubs
Live Music Venues
Experiential Theaters/Dine-In Theaters
IMAX
Float Rooms/Sensory Deprivation
Restaurant/Theaters
Rage Rooms
Bar/Theaters
Escape Rooms
Children Themed Theaters
Hipster/Art House Theaters
Source: Cushman & Wakefield ResearchIt’s All About the Experiences!
Be “Creactive”
Cirque du Soleil - Creactive
Cirque du Soleil will open its first
“family entertainment centre” in
September 2019 in an unnamed
Toronto mall.
The new concept, called
Creactive, will offer a range of
acrobatic, artistic and other
Cirque du Soleil-inspired
recreational activities, such as
bungee jumping, wire and
trampolines, mask design,
juggling, circus track activities,
dance, and more.
Source: Cushman & Wakefield ResearchVirtual Reality Experiences/Theme Parks
The Void, IMAX VR Center, HTC’s Viveland and others on the way…
Coming to a Mall Near You
The Void typically uses between
5,000 and 10,000 SF. Plans
currently call for as many as 50
new locations through the end of
2019.
Virtual reality gaming options are
tied into major Hollywood
releases. Current adventures
include Star Wars and
Ghostbusters themes.
HTC’s Viveland expects to open
as many as 5,000 global VRcades
over the next decade, starting
with 1,000 Viveland units in
China.
Source: Cushman & Wakefield ResearchMeow Wolf
Immersive Experience: Art Meets Entertainment
Art Collective Goes Retail
Meow Wolf is a Santa Fe, New
Mexico-based arts collective
(Game of Thrones author George
R.R. Martin is a backer) that is
going bricks and mortar with an
ever evolving, interactive arts
experience in a number of major
US cities…
Source: Cushman & Wakefield ResearchBrandless
Can a dollar store be an experience? Can it be Cool?
Home Item Hipster Thrift
All Items $3 or less…
Popups opening in NYC and LA…
Source: Cushman & Wakefield ResearchThe Mall of the Future…
Will offer dinner, movies… and a colonoscopy!
But Not Necessarily in that Order!
eCommerce is driving out
retailers…
But Boomers are aging!
Here come the doctors!
Source: Cushman & Wakefield ResearchCool Streets
Millennial-driven up-and-coming alternative urban neighborhoods still hot
The Evolution of Cool Streets
Edgy Cool Bodegas, Bars & Funky
Local… Cheap Rents
Up and Coming Boutiques, More
EDGY UP AND
COOL COMING Restaurants Arrive…
Rents Climbing
Prime Hipness Funky Local Priced Out,
Cool National Concepts
Arriving… Rents
Climbing
GONE
MAINSTREAM Still Cool, But Going Whole Foods Arrives
Mainstream Rents Climbing
Gone Mainstream Creatives Moving On,
STILL Replaced by More
PRIME
COOL, Affluent Crowd. Pottery
HIPNESS
BUT…
Barn!
Source: Cushman & Wakefield ResearchBut Haven’t We Always Had “Cool” Neighborhoods?
What’s Different This Time?
“Cool” is a Millennial value, heavily impacting
decisions on where to live and shop. As a
result, the timeline of the evolution of these
neighborhoods has sped up considerably…
• 2000 to 2014
Transformation of Brooklyn’s Williamsburg
neighborhood from “challenged” to “edgy
cool” to “mainstream cool”
• 2010 to 2015
Transformation of Chicago’s Fulton
neighborhood from “challenged” to “edgy
cool” to “mainstream cool”
• 2014 to Present
Transformation of Downtown Los Angeles’
Arts District neighborhood from
“challenged” to “edgy cool” to…Cool Streets: Rise of the 18 Hour City
Urbanism Not Just A Primary Market Trend
Stability Ratio
(Current Economic Volatility / Historic Employment Volatility.The Upstarts
Challenger brands active on the Cool Streets
EDGY UP AND
COOL COMING
PRIME
HIPNESS
Source: Cushman & Wakefield ResearchCool Street Contenders Privately-held hipster brands can take chances the big chains can’t—and they’re connecting with Millennials! Source: Cushman & Wakefield Research
The Next Cool Street Wave?
Foreign brands…
•French •English •Japanese •German •Australian
Poys & Pirls Dune London Sasquatchfabrics ACRONYM T2’s
Pigalle Palace Skateboards Bed J.W. Ford PB 0110 Scanlan Theodore
AMI Lazy Oak Freak’s Store Simon Freund Bluestone Lane Café
EDGY Magic StickUP AND
Entertainment Boulezar
Club 75 Grind
COOL
London COMING Gumption Coffee
Maison Kitsune a number of names* Wacko Maria Hien Le Ministry of Coffee
Monsieur Lacenaire Satta GUILTY PARTIES Mykita Cotton On
KENZO Nasir Mazhar Frisur Grace Loves Lace
Helas A Cold Wall •Scandinavian A Kind of Guise Convict
Carven Maharishi Acne Studios Kostas Murkidis Lovisa
Etudes Studio Cassette Playa Eytys Beastin
Andrea Crews Goods by Goodhood L’Homme Rouge Ucon Acrobatics
Cote & Ciel Roundel London Wood Wood Wemoto
Vetements Garbstore Armoire d’Homme
Magenta Nigel Cabourn Rascals
Cottweiler Norse Projects
Tretorn PRIME
CMMN SWDN HIPNESS
Polar Skate Co
Source: Cushman & Wakefield ResearchCan Commodity be Cool?
Maybe… but “authenticity” will be a challenge…
Cool Streets, “Survivable Class B Malls” May be the
Strategy for Mid-Price Point Apparel Players Priced Out of
Class A Malls…
EDGY UP AND
COOL COMING
But Will They Connect With Millennials?
Cheap Rents Won’t Help if They Cannot Connect
PRIME
HIPNESS
Source: Cushman & Wakefield ResearchLove, Bleecker
Can you manufacture hip? Not easy, but YES!
Art, Commerce, Culture Collective
Brookfield & Skylight’s hip new
venture…
Prabal Gurung
367/369 Bleecker
Slightly Alabama
350 Bleecker
Fleurotica & Bonberi
384 Bleecker
Skylight’s rotating gallery space
382 Bleecker
Source: Cushman & Wakefield ResearchBarneys & Bongs – This is How I Roll
A Place Where a $3,000 Prada Dress Meets a $1,500 Weed Grinder
High Rollers
Barneys is partnering with
cannabis brand Beboe to open its
own upscale head shop aptly
named “The High End.”
The store-within-a-store will
offer marijuana accessories
including gold rolling papers,
leather ash trays, pipes, $450
bongs, $1,475 pot grinders, and
storage boxes.
Simon Malls just inked a deal to
bring 108 kiosks to their malls by
end of 2019 from legal cannabis
product producer Green Growth
Brands.
Source: Cushman & Wakefield ResearchThe Real The Real Estate Estate Source: Cushman & Wakefield Research
The Neighborhood/Community Center…
Neighborhood/Community and Strip Centers doing fine…
Typical Anchors:
Grocery Stores
Outdoors Drug Stores
Mostly Suburban
Neighborhood
30,000 to 125,000 SF Typical Inline Tenants:
3-mile trade area Restaurants
Fast Food
Community Coffee
125,000 to Juice
400,000 SF
Dry Cleaning
6-mile trade area
Laundromat
Postal Services
Dental/Medical Offices
Financial Services
Retail Boutiques
Source: Costar Group, Cushman & Wakefield ResearchThe Power Center…
Neighborhood/Community and Strip Centers: the Most newCommerce Resistant Product
Typical Anchors (Big Box):
Superstores (w/Groceries)
Outdoors Home Improvement/DIY
Mostly Suburban
Off-Price Apparel
Power Consumer Electronics
250,000 to 600,000 SF Arts/Crafts
10-mile trade area Pet Supplies
Typical Inline Tenants:
Restaurants
Fast Food
Coffee
Juice
Dry Cleaning
Laundromat
Postal Services
Dental/Medical Offices
Financial Services
Retail Boutiques
Source: Costar Group, Cushman & Wakefield ResearchThe Regional Mall – Reinvent or Die
The Mall…
When Americans think of retail, they think of malls
Typical Anchors (Big Box):
Department Stores
Mostly Enclosed
Mostly Suburban
Regional Mall Typical Inline Tenants:
400,000 to 800,000 SF Apparel
15-mile trade area Accessories
Shoes
Super Regional Mall Jewelry
800,000 SF + Gift Shops/Gadgets
25-mile trade area
Books
Toys
Restaurants
Fast Food
Coffee
Juice
Retail Boutiques
Source: Costar Group, Cushman & Wakefield ResearchROI Performance Along Class Lines
Mall performance gap between best and worst assets…
The Retailer Logic Behind this
Gap:
Class A
If the goal is to reduce your
physical footprint, while looking
to boost your online sales… This
inherently means that your
Class C/D remaining physical locations are
more important than ever
before…
CHAINS STRATEGICALLY
REDUCING THEIR FOOTPRINTS
ARE LARGELY DOING SO IN CLASS
B AND C MALLS—NOT CLASS A.
Source: MSCI Global, Cushman & Wakefield ResearchNot All Malls are in Trouble
It’s all about class…
Class A and above malls
Approximate Number of Malls by Class accounted for more than 70% of
200 all mall retail sales in 2016.
150
100
There are roughly 670 Class B
and C malls in the US, but they
50
only accounted for 28% of all
0
mall sales last year.
A++ A+ A A- B+ B+ B- C+ C C- D
A++ A+ A A- B+ B+ B- C+ C C- D
Class D malls accounted for less
than 0.2% of all mall sales last
Approximate Share of Total Mall Value by Class year…
25.0
20.0
15.0
10.0
5.0
0.0
A++ A+ A A- B+ B+ B- C+ C C- D
A++ A+ A A- B+ B+ B- C+ C C- D
Source: Cushman & Wakefield Research, Fung Global, Green Street Advisors, BloombergTop Performing Malls
Super Regional Malls, Sales Productivity by Mall Grade
Sales PSF
Strengthening
$1,200 Position
$1,000
$800
Weakening
$600 Position
$400
$200
$0
A+++ A+ A A- B+ B B- C+ C C- D
Sales PSF
Source: Green Street Advisors, Cushman & Wakefield ResearchWhat Does the Wave of Consolidation Mean?
42% of U.S. Malls are Class B+ and Above
What Does That Mean for the Other 58%?
Number of U.S. Malls
180
15%
160
140 13%
120 10%
10% 10%
100 9% 9%
6% 8%
80 7%
60
40
4%
20
0
A+++ A+ A A- B+ B B- C+ C C- D
Number of U.S. Malls
Source: Green Street Advisors, Cushman & Wakefield ResearchRetail Investment
USA Current Cap Rate Asking Ranges
10.0%
9.0%
Up
8.0% Up
7.0% Up
Up
Class A
Up
Class B 6.0%
Holding
Class C Up
(so far)
5.0% Holding
Holding
(so far)
4.0% Holding Holding
3.0%
Malls & Power Centers Neighborhood & Outlet Centers
Lifestyle Centers Community Centers
Source: Real Capital Analytics, Costar, Cushman & Wakefield ResearchRetail Investment
2018 Retail Volume Looks to Surpass Prior Year Total
Annual Retail Transaction Volume
$100 100%
$90 80%
$80
60%
Transaction Totals (in billions)
$70
$60 40%
$50 20%
$40 0%
$30
-20%
$35.4
$20
$10 -40%
$0 -60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018
First Half Second Half Annual Change
It would be the first time in two years that retail transactions posted growth.
Source: Real Capital Analytics, Cushman & Wakefield ResearchRetail Investment Third Quarter 2018 ➢ Year-Over-Year Retail Volume Up 90% ➢ Mall Sales Accounted for 40% of All Retail Sales ➢ Mall Sales Range from $8 PSF to $637 PSF ➢ Sales of Individual Assets Grew 8% YOY ➢ RCA CPPI for the Retail Sector Increased 1.8% Source: Real Capital Analytics, Cushman & Wakefield Research
Retail Investment
Average Cap Rates
Capitalization Rates by Property Type and Asset Class
Property Type Asset Class Cap Rate Range
Mall A+ 4.00% - 4.50%
A 4.50% - 5.50%
A- 5.50% - 7.00%
B+ 7.50% - 9.00%
B 9.00% - 11.00%
B- 11.00% - 15.00%
C 15.00% - 25.00%
Neighborhood/Community Center A 5.50% - 6.50%
B 6.50% - 8.50%
C 8.50%+
Power Center 6.00% - 9.50%
Outlet Center 6.00% - 10.00%
Lifestyle Center 5.50% - 7.50%
Source: Cushman & Wakefield Retail Valuation Group
Source: Cushman & Wakefield Valuation & Advisory – Retail PracticeWalmart Is Redefining the One-Stop Shop Concept
Turning Its Parking Lots Into “Town Centers”
“Reimagined Centers”
Restaurants
Daycare Centers
Health Clinics
Bowling Alleys
Food Trucks
Bike Rental Stations
Driving Ranges
Fuel Stations
Entertainment
A conceptual rendering for a proposed Walmart Town Center in Garland, Texas
Source: Statista, Cushman & Wakefield ResearchParking Lots Opportunity in excess parking?! Oh yeah… Source: Cushman & Wakefield Research
Can Dead Malls be Repositioned for eCommerce?
The exception, not the rule
FedEx/Mesquite Mall
Mesquite Mall was one of the
Dallas area’s first enclosed malls,
built in 1959.
The mall lost ground to
competitors through the 1980s
and 1990s and was closed in
2001.
It was demolished in 2006.
FedEx just built a 334,000 square
foot distribution center on the
site.
Source: Cushman & Wakefield ResearchReinventing Vacant Anchor Boxes
Retail as Fulfillment Centers
Shopping Fulfillment Center
Case Equity Partners is introducing
this hybrid retail and fulfillment
concept that is expected to
increase sales while reducing
retailing costs and time to market.
This “all-encompassing suite”
includes online fulfillment, drive-
through pickup, regional
distribution to other stores, store
design and even operations.
Shoppers have access to a larger
assortment of products that are in
stock at all times, allowing them to
touch and feel a product before
making a purchase, thus reducing
order and return cycles.
Source: Case Equity Partners, Cushman & Wakefield ResearchChallenges & Opportunities
Yes, but you have to know what you are doing!
Every property must be looked at
Type Challenges Opportunities
individually for its fundamentals.
Few available and most owners unwilling to sell. This property type still stable and will strengthen as
Malls A Though risk is low, likely low cap rate may still not more Class C malls fail.
be commensurate with risk. The financial health of current
B Many will require extensive repositioning and re- This might be where the most jewels in the rough are tenants, possible re-tenanting
tenanting. A lot of innovation and unconventional found. Some B malls are in great locations and were
thinking will be required. either poorly tenanted or managed.. scenarios and an understanding
Here is where the most damage will be done. There will be great opportunities for redevelopment or of perceived risk vs. likely actual
C Tenanting these will require unconventional repositioning of properties once properties return to
tenants and means. Many will fail. lenders and can be had for dimes on the dollar or less.
risk is required.
Malls, especially Class B, raiding the traditional With investors focusing on core and urban and retail
Power A power center tenant pool to backfill vacancies already making many nervous, there may be some cap Due diligence is a must!
could have an impact, but it will be minimal for rates here that are far higher than actual risk.
Class A.
If tenant pool diminishes, here is where it will be Depending on property, could be some solid value add The current landscape s
B felt most. buys with high yields. increasingly becoming a buyer’s
C Weak already and getting weaker… Might make for good redevelopment plays or value add market.
acquisitions.
Drug store disruption may eventually have impact, The most eCommerce resistant and resilient of the
Neighborhood A but these will easily backfill. product types. Class A in secondary markets may
provide best yields.
Drug store disruption may eventually have impact, Largely a safe bet, look for good value adds to turn B
B could be a bit of a challenge here. into A and even greater yield opportunities.
Weak already. Not getting weaker, but will take Might make for good redevelopment plays or value add
C significant investment to improve. acquisitions.
Source: Cushman & Wakefield ResearchSo Where Does This Leave Us?
The story of retail development over the next decade will largely be a tale of mixed-use redevelopment
Challenges Opportunities Solutions
Dead/Dying Malls—Mostly Suburban Suburban Population Growth to Redevelop Dead Suburban Malls as
Increase Mixed-Use Lifestyle Centers
w/Substantial Housing, Office,
Medical and/or Hospitality
Department Store/Apparel Explosion of Food Retail, Shift Centers Towards Entertainment
Consolidation Entertainment Retail, Experiential Focus or Discount Focus
Concepts, Off-Price Apparel &
Discounter Demand
Rising Power Center Vacancies Mixed-Use Works Here Too Mixed-Use Works Here Too
Source: Cushman & Wakefield ResearchThe Amenitization of Retail
What’s Really Happening?
Future of Malls?
• We will no longer need the same number of standalone retail
destinations.
• But the number of retail properties “going away” will be far fewer While trophy and Class A malls
will continue to operate as
than most anticipate.
standalone retail destinations, all
• Embrace of mixed-use is the way out for struggling properties. mall classes will benefit from
• Demand for retail as “the ultimate amenity” has never been higher, embracing Gruen’s initial vision
particularly in urban environments. of malls being centers of the
• Amenity retail is focused on strong brands, personal needs retail, food, community, as opposed to
beverage and entertainment. merely retail marketplaces.
• The “halo effect” of best in class retail is REAL.
• Strong ground floor retail can allow landlords to charge more for
rents above in urban settings.
• Strong suburban retail will increasingly have this impact in those
settings.
• Mixed-use development and redevelopment will be the story of retail real
estate for at least the next decade.There is No Room for Mediocrity in Retail Anymore
Follow Viktor Gruen’s Original Vision
The Father of the American Mall
• You must give people a reason to come to your store or your shopping “I am often called the father of
center in the age of newCommerce. the shopping mall. I would like to
take this opportunity to disclaim
paternity once and for all. I
• If your shopping center is the center of your community, it will thrive.
refuse to pay alimony to those
bastard developments. They
• If it isn’t, then build a community around it. destroyed our cities…”
• In retail, change is NOT AN OPTION. It’s a job requirement. Viktor GruenGarrick.brown@cushwake.com ©2019 Cushman & Wakefield. The material in this presentation has been prepared solely for information purposes, and is strictly confidential. Any disclosure, use, copying or circulation of this presentation (or the information contained within it) is strictly prohibited, unless you have obtained Cushman & Wakefield’s prior written consent. The views expressed in this presentation are the views of the author and do not necessarily reflect the views of Cushman & Wakefield. Neither this presentation nor any part of it shall form the basis of, or be relied upon in connection with any offer, or act as an inducement to enter into any contract or commitment whatsoever. NO REPRESENTATION OR WARRANTY IS GIVEN, EXPRESS OR IMPLIED, AS TO THE ACCURACY OF THE INFORMATION CONTAINED WITHIN THIS PRESENTATION, AND CUSHMAN & WAKEFIELD IS UNDER NO OBLIGATION TO SUBSEQUENTLY CORRECT IT IN THE EVENT OF ERRORS.
You can also read
