Retail strategies to survive, and thrive, in 2018
In the time it takes you to read this sentence you could have Googled “the power of innovation” and your search would have produced 3.82 million results in just 0.87 seconds.
Collecting data has never been easier but knowing what to do with the information remains the challenge for most companies. A long-term strategy (and by long-term, I mean anything more than six months) requires having a comprehensive understanding of likely trends and potential tipping points.
For those of us in commercial real estate, 2018 is expected to be a challenging year but there are some bright spots on the horizon.
Malls, retail are changing
As I’ve written earlier, covered malls are at risk unless they entice shoppers through their doors to spend money rather than shopping online. That means major retailers have to be willing to change their business models to survive. There is no holy grail waiting to be discovered but being innovative is a starting point.
For those of us involved in community plazas, it is paramount to focus on retailers and services that cannot be offered online and require walk-up traffic.
Until recent years, that included banks as a key anchor tenant but that may be changing. As lease renewals come up, banks are now considering smaller premises or stand-alone pads as they become less about bank tellers and more about online services. It is likely the traditional 15-year tenancy agreement will be shortened as the banks try to figure out their future in each community landscape.
Filling the gap
As the banks try to reposition themselves, we are seeing new companies emerge as principal players in local communities – the most notable has been those offering child care services.
The key to success is becoming more than a single-service outlet. Instead, they are facilitating evening and weekend courses, such as English as a Second Language and cultural awareness nights.
These outlets are operating more like old-fashioned community centres. As a result, they increase foot traffic in the plaza, which in turn boosts potential sales opportunities for other outlets.
Where there’s smoke
The federal government’s decision to legalize cannabis is another issue we are all having to grapple with. This is an industry that is expected to be popular but it’s one without a retail track record despite attracting support from some reputable names.
Landlords will have to balance the concerns of existing tenants with the needs of a new industry. There are some rules governing the location of the cannabis stores but each province is still trying to work how to incorporate the outlets and how the business model will work. Will the stores be merely retailers or will they be connected to a grower?
With such a controversial product, landlords cannot develop a strategy on a trial-and-error basis, instead we will need to remain cautious and vigilant.
The power of the neighbourhood
During 2018, it is paramount not to lose sight of any important trends emerging in the industry.
The most notable is likely to be the re-emergence of retail outlets that are neighbourhood-specific. They only work when the demographics around the plaza are matched to the appropriate service.
What is highly successful in one area could be a hard sell in another.
This could be an ethnic restaurant, games cafe, breakfast-focused restaurant or cybercafé. These will only thrive when the tenant and landlord have done their homework and have a comprehensive understanding of the immediate community – success will often be based on word-of-mouth recommendations.
Meet the market
Some say we will look back on 2018 as a year of slow-and-steady growth as we deal with interest rates inching higher.
For some tenants, this could be the best time to lock in a lease as it will provide cost certainty. For landlords, having plazas near to capacity, or full, is the best advertisement to attract new tenants.
This year will be great for those who pay attention to details and are prepared for the next upturn. What we are experiencing is a “New Normal” that remains cyclical, but with fewer extremes.
As always, the best measure of your decisions and hunches will be hindsight. On that, some things never change.
About ReDev Properties Ltd.
The asset management company, ReDev Properties, was founded by Richard Crenian in 2001. Its expertise is in carefully and diligently locating existing commercial real estate properties and providing the necessary stability and future growth to ensure the assets increase their value.
The company works to closely partner with high net worth individuals, family offices and institutions for joint venture opportunities, and is always looking for future projects to assist with developers and acquisitions on equity, financing and business expertise.
To learn more about Richard please visit redevgroup.ca