Presented By: Unibail-Rodamco-Westfield
The Future of Physical Retail: 5 Trends to Watch
We have all heard that malls are becoming things of the past. While it’s true that physical stores are changing, I don’t believe physical retail is going anywhere. It’s just evolving as it always has, albeit at a much more rapid pace in the wake of the COVID-19 pandemic.
At Unibail-Rodamco-Westfield (URW), we are at the forefront of our industry, and I’m seeing many positive opportunities on the horizon within our company that the pandemic has accelerated. Here are five trends I’ve noticed that keep me optimistic:
1. Less is more when it comes to physical footprint. In every market where URW operates across the U.S., there is more physical retail space available than there is demand. Ten years ago, stores may have had up to 10 or 20 locations across a metropolitan area. Now, with changing consumer behaviors post-COVID and the proliferation of online shopping, brands need fewer physical locations.
Retailers are consolidating stores, and those remaining will be more important than ever, as they’ll function as omnichannel retail hubs for order fulfillment and BOPIS (buy online, pick up in-store), in addition to their traditional retail outlet role. At URW, we anticipated the current retail industry upheaval, and our focused business strategy has been to ensure that we have the best assets in the best markets. We embrace the consolidation.
2. Developments are offering a fresh mix of tenants, giving customers more reasons to visit. Retail developments are not just focused on shopping anymore. At URW, we’re always looking for ways to make the most efficient use of our customers’ time, reducing friction in the shopping experience. We do that by bringing the right mix of tenants and sticking to our vision of building trendsetting, mixed-use and lifestyle destinations that enhance the way people shop, live, work and play.
We are continuously evolving our merchandising mix to be more diverse, offering everything our customers need in a given market. We know our space is our biggest asset, and what we do with it and how we rework it with the right combination of tenants is key to our success. We’re beginning to incorporate everything from new residential neighborhoods, coworking spaces and mixed-use, commercial office space to more restaurants, fitness studios and entertainment concepts in our centers. We’re also working to include more greenspaces and areas for communities to gather.
We’re already bringing this to life in centers like Westfield UTC in San Diego, where we recently opened our first residential tower in the U.S. with 300 residences among the existing development.
3. Buyers are more intentional. Right now, shoppers may not be going to the mall as much as they did prior to the pandemic. But the good news is, when people do head out to shop, they step into stores with serious purchase intent, leaving with a higher-than-average purchase ticket. Many of these shoppers first do their research online, and when they show up to shop, they are buying.
4. Landlords and tenants are partnering to innovate. What the consumer wants and needs is constantly changing, and by working together, developers and retailers can meet those evolving needs more effectively. Traditionally it’s been hard to pivot quickly in this industry, but the retailers and landlords who are executing small changes fast are winning.
At URW, we are rethinking the accepted norms of the tenant/landlord relationship. We are making short- and long-term investments to rework our shopping center infrastructure to support retailers’ omnichannel evolution, accommodating third-party service delivery pickups, and creating best-in-class digital infrastructure at our centers.
Take the expanded curbside pickup trend that exploded during COVID-19. By making simple, small changes, retailers have been able to capitalize on this way to purchase and pick up during the pandemic. When landlords have stepped in to make curbside pickup logistically possible for their tenants, it is a win-win for everyone.
The evolutionary changes spurred by COVID-19 certainly don’t stop there. Landlords will need to find quick, inexpensive ways to accommodate new consumer desires for more space and less contact — like bigger, outdoor patios at restaurants for al fresco dining. It’s all about identifying and tapping into the next wave of consumer interaction and patterning a property to accommodate them quickly.
5. Physical space still has a place. One of the tenant trends we are seeing is an increase in direct-to-consumer brands looking for physical space.
To grow and scale, digitally native brands must expand beyond online-only; they need customers to touch and feel their products, to experience them in person. As a landlord, we’ve worked to make the leasing process turnkey for these brands, with a plug-and-play, set-up experience and flexible leasing terms.
We are bringing this to life at Westfield Valley Fair in San Jose, Calif., where we created The Digital District, an exclusive collection of storefronts designed specifically for direct-to-consumer brands making their brick-and-mortar debut.
2021 and beyond
In the post-COVID world, we look forward to welcoming more in-person visitors to our centers. We’ll continue to creatively transform retail space to meet consumers’ desires, creating destinations where friends and family want to meet any time of day, several days a week.
We envision people spending time in beautifully designed settings filled with welcoming, walkable plazas and abundant gardens, while also getting daily tasks done like grocery shopping, working out at the gym, or stopping at the bank or pharmacy.
Despite what you may have read, physical retail isn’t dying. It is transforming in some of the most creative ways we have ever seen. As for me and my team, we will keep looking to the future needs of the communities where we operate and keep on evolving.
Colin Shaughnessy is executive vice president of U.S. leasing at Unibail-Rodamco-Westfield.