The keynote addresses delivered by retail and commercial real estate experts at the International Council of Shopping Centers (ICSC) annual RECON conference in Las Vegas last month can be boiled down into three major themes:
1) The oversupply of single purpose retail space is causing the repurposing of large under performing retail properties to other uses
The United States has the highest amount of single purpose retail space in the world. Per recent census numbers, for every man, woman, and child, the US has more than twice the retail space per capita than any other developed country. The market in developing countries is driving the construction of ground up retail centers to narrow the gap. Thus awards for ground up, cutting edge designs, with the exception of California, seem to be centered in South America, Eastern Europe, energy-rich Middle Eastern countries, and the Far Eastern Asian countries. Ground up, new retail space construction in the US is trending downward. However, the re-purposing of large existing retail properties land uses other than retail is on the rise.
2) Pure internet sales are not siphoning retail sales from traditional “brick and mortar” retailers as many may think
The percentage of overall pure internet retail sales not affiliated with traditional retail stores hovers at roughly 5% of the total of all retail sales in the US. The impact of internet sales has been to further freeze the ground up construction of enclosed malls and large open air centers. The US has an oversupply of retail space from over development in years past.
3) Repurposing of existing large, single-purpose retail centers to mixed use developments is increasing
The value of under performing developed retail centers into new vibrant mixed land use themes include:
Residential multi-family complexes. Rental garden apartments typically require at least 7-8 acres in order to yield at least 160 units. Anything less will not be economically feasible in most markets.
Hospitality and short term stay facilities. Both Marriott and Hilton representatives at RECon are looking for high value retail centers to place hospitality venues in order to provide more services to their guests, such as retail shopping and food and beverage consumption opportunities within walking distance of the hotel for guests. In turn these guests can drive more retail and dining sales revenues.
Medical outpatient surgery centers and affiliated medical offices. Medical providers are seeking space to place more outpatient service centers and physicians are seeking to collocate their offices with these facilities that offer a variety of procedures.
Corporate and government office "work place" developments. These segments have historically been slowly integrated into retail spaces as they became vacant due to the relocation of anchor stores. Expect this tendency to continue or accelerate.
Food, beverage, and entertainment venues. These spaces are those that compliment live-work-play mixed use communities. While traditionally they have been located in retail centers, expect this trend to increase over the next several years since various casual dining venues continue to appeal to middle income families without time to cook meals at home.
The message of the speakers at RECon to brokers, retail developers, architects, attorneys, and other retail professionals is the following: In order to attract the interest of these diverse users and potential lessees, become more familiar with industry terms outside your normal comfort zone such as "dwellings units per acre", "Agency for Health Care Administration (AHCA) criteria”, as well as remaining cognizant of the value of retail "front footage".