Experts address the changing face of retail

A national commercial real estate group, and its local chapter, brought a panel of experts together to speak on the changing atmosphere of commercial retail real estate during RECon—a large-scale conference that attracts real estate pros in the retail sector from across the nation and the globe.

NAIOP, the Commercial Real Estate Development Association, and the Southern Nevada chapter of the organization, presented a roughly hourlong forum during the International Council of Shopping Centers’ spring conference at Brooklyn Bowl, on the Las Vegas Strip.

Topics covered at what was dubbed “Rise & Redefine Retail” included health care, and the industry’s role in redeveloping real estate properties, along with last-mile distribution and other innovations.

Reed Gottesman, vice president, regional director of leasing, at Harsch Investment Properties, led the discussion off with a quote that he recently heard: ‘Retail real estate is undergoing an entrepreneurial moment like never before. It’s a blank slate. There is no cookie cutter,’ he said.

What this equates to in the market is change and disruption, Gottesman said, which, he added, brings opportunities.

On the topic of health care, Patrick Owens, senior vice president, retail and health care advocacy services, at Transwestern, spoke on how medical offices are pushing their way into the retail sector.

Owens explained that health care providers are reaching out to customers. Some 25 to 30 years back, health care providers were in medical office buildings that patients would travel to.

Today, health care providers “feel they can reach out and make their practices convenient,” Owens said.

This push has benefits for the commercial retail real estate sector.

“All of them have made a push for convenience and what’s convenient?: retail locations,” Owens said.

Ben Conwell, senior managing director and practice leader for Cushman & Wakefield’s e-commerce and Electronic Fulfillment Specialty Practice Group for the Americas, spoke on last-mile distribution.

Conwell explained that all types of retailers, from those that keep their storefronts online to those who are starting to integrate to the online world, are looking at last-mile distribution.

“Last mile is, I describe it sometimes as the holy grail, because of its complexity, because of the costs associated with it, because of the whole consumer experience, the whole customer satisfaction experience either succeeds or fails based on what that last exposure is; that last touch, that last activity is, before it reaches your door step or it reaches your office desk,” Conwell said.

According to Conwell, retailers that are not thinking about solutions to last-mile distribution are not going to be around very long.

Conwell went on to say that the repositioning or redeveloping of select retail assets can and will be a large part of how real estate developers solve for last-mile distribution. He made clear, though, that retail is not heading for an “apocalypse,” but a repositioning or restructuring, nationally.

Conwell said that, nationally, there has been two ways retail clients are looking at taking on last-mile distribution space. The first, being clients taking over older flex space or older industrial space — mainly multitenant spaces from about 10,000 to 15,000 square feet, all the way up to 50,000 square feet.

Another path is to take on spaces left behind by dead or dying retail, Conwell said.

Conwell said that many of the things that made the now-defunct space attractive to retail clients is making it attractive to those looking for last-mile distribution space. This includes proximity to customers, access to high-volume arterials, access to parking and other reasons.

Gottesman said that the average urban home gets 0.1 home deliveries per day. In a metro area, such as Chicago, where there are an estimated 2.7 million people, that would equate to 270,000 deliveries per day, he said.

The number of deliveries has been on the rise over the last few years with growth projected.

According to a report by Pitney Bowes, the U.S. was No. 2 in the number of parcels moved when compared to the world stage. China leads the world stage.

In 2016, Pitney Bowes tracked 13 billion parcels moved, up from 12 billion in 2015, an 8.2 percent increase. In that same year, China moved 31 billion parcels.

Increases are projected in the coming years for the number of parcels moved globally. The report stated that an annual rise of 17 to 28 percent globally, on the number of parcels moved across the world, is projected to occur each year between 2017 and 2021.

Overall, the report, which tracked 2015 to 2016, stated a 48 percent growth in global parcel volume. Pitney’s data showed 44 billion parcels moved globally in 2014, compared to 65 billion in 2016.

Health care also has its place in reinvigorating older Class B and Class C malls that might be struggling.

Owens said that some of these malls can be a potential location for a health care provider.

Many of these older, struggling malls don’t have a location issue, but an issue with its tenants. But they are still viable for health care clients.

Owens explained that the location of these malls are still close to interstates, are near major daytime populations, have ample parking and have infrastructure to welcome in a health care provider.

Once these health care tenants move in, employees, patients and others will support other businesses, such as restaurants.

“You’ll see an evolution of these (Class) B and C malls into these mixed-use campuses,” Owens said.

This is something that’s already been seen in the market, he added.

Other innovators on the panel talked about other ideas happening in retail.

Mark Kennedy, chief strategy officer at CoWorkatthemall.com and ShelfSpaceinaBox.com, shared some of his innovative strategies he’s using in brick and mortar. Kennedy’s group is just getting going with its 15,000 square feet of space on Michigan Avenue in Chicago.

But it’s not what you’d expect in a high-profile area.

Overall, the space incorporates many uses, including co-working, an event area and live beta testing.

The co-working portion offers collaborators to obtain membership packages, including virtual offices, day passes and monthly dedicated or hot desk rentals, according to the group’s website. With that comes several amenities such as high-speed Wi-Fi, kitchen space and other things such as a lounge area.

On the retail spectrum of the project, product sellers can lease shelf displays on a monthly basis to sell their product, just as an example of what is happening in the space.

How the process works is the shelf space being rented will contain an i-Pad that links directly to an e-commerce sellers website. These e-tailers, which have this portal to a brick-and-mortar location and associated shoppers, have the potential to sell at full retail price.

Innovation and new practices have been ushered in for the retail sector. But the event ended in similar fashion to how it began to remind the room that retail is not heading to its death, though it is changing.

“The biggest thing to remember is retail is not dying, retail is changing,” Owens said. “The operators that embrace that change, the landlords that embrace that change, are going to be the ones that thrive. And the ones that don’t are going to be the ones that die.”