Tommy Edwards is retail director for Louisville-based Hagan Properties, a commercial development and management company. At 33, he’s already been involved in approximately $200 million in commercial real estate deals. The nearly 1 million s.f. of properties stay almost 98 percent occupied. Earlier this year Edwards gave a presentation about current real estate market conditions and the changing face of retail, including “clicks vs. bricks.” He answered a few questions for The Lane Report about how demographic changes and consumer preferences are changing retail and real estate.
TLR: How are the changes retail is undergoing impacting the retail real estate industry?
TE: E-commerce has been transforming the market for a while now. A big demographic shift also has been taking place where millennials now outnumber baby boomers. Most of the retail world, specifically specialty apparel retailers, was slow to react. Some have taken a big hit, and others have closed. Fresh opportunities are popping up with some new, inventive retailers and service providers. In commercial real estate development and management, we’re working with creative companies that are thriving in a time of strong consumer spending. It takes a pro-active approach to thrive in the new economy.
TLR: What are the main differences you see in the retailers and commercial centers that are succeeding versus the closings and vacancies?
TE: The retailers that are succeeding have taken an “omnichannel” approach, meaning they do both “clicks” (online selling) and “bricks” (physical stores). Integration of the two is extremely important. For shopping centers and other retail centers, location is becoming more important than ever before because many anchor tenants are also evolving into fulfillment centers as well as stores. You see it with Kroger’s “Clicklist” service. For commercial real estate developers and managers, landing the savvy retailers is crucial. They won’t be looking to your properties unless the locations are exceptional.
TLR: How do you see millennials and their buying and spending preferences and habits influencing retail and retailers? How do they differ from baby boomers?
TE: Obviously generations aren’t monolithic, but there are general trends that stand out in deep consumer research. Millennials are more brand loyal, and they want goods and services faster than their generational counterparts. At the same time, three in four millennials would choose to spend money on an experience as opposed to buying something desirable. One of the components of retail is now entertainment because stores can’t bring in the traffic to sell goods without classes, events, interaction and socialization. And partly through harnessing data, successful retailers are training their focus on personalization to make things stand out for the consumer.
TLR: What are your thoughts on the “pop-up” shop phenomenon, and do you view it as a viable long-term strategy for retailers and property owners/managers?
TE: It’s still shaking out. Some property owners and managers are going to any length to land tenants and stay afloat. Pop-ups and short-term leases are overused because of it. Pop-ups should be strategic. They can be seasonal draws or to test the waters on a permanent location. Brands are also using them for storytelling purposes to make a connection with the consumer that can’t be made otherwise.—Abby Laub