With over 30,000 attendees and 1,000 exhibitors attending the 2012 ICSC in Las Vegas on May 21-23, Velocity Retail Group and (RE)storeD decided to conduct a survey while we had a captured audience at the conference. The most interesting results came from those participants in our survey that were owners of a shopping center with at least one big box store.
- 71.4% of the owners had vacancies with one or more large space
- 66.5% of the owners admitted that the big boxes were not returning as viable tenants
- 61.9% of the owners persisted in continuing to talk with big box retailers about the vacancies in their centers
- 52.3% have considered alternative uses
- 42.8% were not interested in non-retail uses
- 90.4% of the surveyed owners did not know what the big box vacancy rate was in their metroplex
Our results show that many of the owners of big box retail centers are not looking forward. Their focus is in the rearview mirror. It is a difficult time for owners of retail centers to know which direction to head. The questions that need to be asked are: How long do you hold onto a business plan that is outdated and being impacted by forces outside of your marketplace? (See previous blog on Innovation.) When is the right time to change and adjust your business plan moving forward? How do we approach changing our business plan? How fast do we need to act before other retail shopping center owners become aware of the situation and decide to act first?
Our suggestion would be to gather your people and start asking those hard questions. First of all, you should begin by reviewing what is happening within the industry. Then ask your team to design a new business model based on the digital world that exists today. Design a business plan that eschewed the past and focuses on new technologies. Your task is to “get to the future first”.
Look for niches for each property. These niches should be sustainable or capable of growing. A store like Best Buy may have limited your pad development but mini storage facilities and data centers do not. As you go through this process, you should ask yourself “If I were starting this business today with today’s customers and today’s technology, how would I structure each property going forward?”
We also suggest that you physically drive the markets you are interested in. Pay close attention to the types of tenants in the market especially those that occupy small tenant space. You may find that these smaller tenants are service focused: local restaurants, nail & hair salons, dog grooming, pool services and insurance. And as such, these tenants are not typically impacted by the internet and provide services to customers within a 3-mile radius.
Be creative! Retail centers can be some of the best real estate in the city. They are typically on section line corners of prominent roads and streets with access to mass transit and stop lights. They have abundant parking, excess power and are centrally located. Most shopping centers can be re-tenanted with different uses and a mix of uses that appeal to the consumer. If you are able to add a call center to the vacant space, how many existing retailers in that center would benefit from the added foot traffic?
Once you go through this exercise, you might just find yourself liberated and invigorated as you start to “Rethink the Box”. And while your business may never be the same again, it is not because of a bad economic condition but because mobile technology is changing everything. Even when the economy improves, there is a good chance the retail big box industry will never be the way it once was. So what is your response? Reinvent your business to survive the changing industry or hang on as long as you can?
(RE)storeD was created to “Rethink the Box” in retail stores and bring new life to big box retail by exploring innovation and alternative uses for old retail stores.
For more information about (RE)storeD, contact Mike Fitz-Gerald at 602-682-8140 or Dave Cheatham at 602-682-6060 or via e-mail at firstname.lastname@example.org or email@example.com.