This year, luxury retailers and big brands worldwide snapped up stores on major urban shopping thoroughfares, agreeing to pre-pandemic rates, according to Cushman & Wakefield. “The industry has been through one of the biggest stress tests imaginable over the past few years, but best-in-class retail real estate has remained robust,” said Robert Travers, Cushman & Wakefield head of retail for Europe, the Middle East and Africa. “While we now face new economic challenges, the conversation has shifted from pessimism to retail’s omnichannel evolution.”
ALSO CHECK OUT: Where Foot Traffic Stands in U.S. Urban Shopping Corridors
Since the pandemic nadir, global retail market rents have recouped approximately 50% of their losses, according to the firm’s Main Streets Across the World report. Globally, rental rate growth in prime corridors averaged 2% over the past year, but the hikes have varied immensely based on geography. The climb could be slowing down soon, though. Much of that improvement occurred in early 2022, before global economic headwinds started to negatively impact markets over the past six months.
Most-Expensive Districts
Rents across all the prime global retail destinations Cushman & Wakefield studied had declined 13% on average by the peak of the pandemic and subsequently have rebounded to just 6% below pre-pandemic levels. The three biggest standouts:
1. New York’s Fifth Avenue between 49th and 60th streets has reclaimed its position as the world’s most expensive retail street, with average rents of $2,000 per square foot per year. Rental rates in prime U.S. shopping corridors are recovering faster than they are in the rest of the world. Rents on U.S. urban shopping boulevards tumbled 4% during the pandemic but are now up 29% from the pandemic low and up 24% from pre-pandemic levels.
2. At $1,436 per square foot per year, Hong Kong’s Tsim Sha Tsui displaced Causeway Bay as Hong Kong’s representative in the rankings. The pandemic impacted the Asia-Pacific region the most, as rents on prime retail corridors there plunged 17% on average, owing mainly to border closures.
3. Milan’s Via Montenapoleone, at $1,380 per square foot per year, is Europe’s most expensive shopping street for the first time, climbing above New Bond Street in London and the Avenue des Champs Élysées in Paris. In Europe and the Middle East, rents declined by an average of 11%, compared with 7% in the Americas, where fiscal policies and domestic migration patterns boosted buying power.
Wanted: Big-Boxes Ripe for Redevelopment
Among active retail property investors, most are targeting their dollars at projects with tremendous upside potential. These include former big-box department stores near thriving shopping centers on the West Coast. For example, JLL Capital Markets recently brokered the sale of four development sites in California’s Fairfield, Florin, Ventura and Salinas, all former Sears. These transactions bring JLL’s transaction volume of similar West Coast property trades the past 12 months to $81 million and the square footage to more than 1.5 million. Private California investors, none affiliated with the adjacent malls’ owner, bought the properties. The new owners all have unique plans to redevelop into new retail uses.
Four former Sears properties in California have traded to private investors who plan to redevelop them into new uses.
Demand for infill development sites in the West is expanding rapidly as investors look for opportunities to redevelop these former boxes into higher-density residential uses or to backfill the space with stronger retail tenants, said JLL Capital Markets senior director Daniel Tyner, who worked on the deals. “Each of these properties presented unique opportunities for investors to acquire infill redevelopment sites that will allow them to re-create a new experience at the property.”
8 Tips for Staying Ahead of Consumer Trends
How can the marketplaces industry capitalize on evolving consumer trends like working from home and conserving the environment? For CBRE’s Global Live-Work-Shop Report, more than 20,000 people worldwide were polled earlier this year to determine how they will live, work and shop and how this will impact the real estate they use. CBRE researchers identified these actionable items for investors, landlords and tenants pursuing growth in the next few years.
1. Prioritize accessibility.
Occupiers and investors should give greater priority to buildings with proximity to public transit and/or parking. For buildings lacking these attributes, landlords should explore enhancing building connectivity services to ease the burden on tenants and employees.
2. Carefully calibrate the tenant mix.
Not all retail categories function the same. How consumers buy and pick up merchandise from different types of retailers has changed dramatically since the pandemic began. Asset managers must ensure their leasing strategy not only considers location demographics, but also aligns with consumer preferences around shopping channels.
3. Ensure consumers can see and buy products in-store.
Landlords and retailers therefore should shore up supply chain and inventory issues where possible. Initiatives may include on-site storage solutions, investment in inventory, and sales management tracking systems to enhance their ability to forecast demand.
4. Drive the evolution of brick-and-mortar retail.
E-commerce sales can be expensive for retailers in terms of both customer acquisition and delivery of product. Brands therefore should use their physical spaces to increase efficiencies and enhance the omnichannel experience for the consumer. They can introduce click-and-collect facilities, showrooms and in-store returns. Investors should consider how store and mall design can support these nontraditional uses.
5. Strengthen occupier-landlord dialogue.
To track and manage asset performance, landlords should ensure they regularly engage with retailers as part of their customer relationship management initiatives.
6. Be flexible with leases.
To increase asset resilience in the short-term, asset managers should consider flexible leases for occupiers that are relatively insulated from economic downturns.
7. Augment product sustainability credentials.
Retailers must explore ways to improve the sustainability credentials of their products to ease consumption concerns.
8. Strengthen environmental features of real estate.
New on the Menu: A Meat-Free Food Hall
Ikea’s parent company is serving up its first food-and-beverage concept, and sustainability is the main course. Saluhall will serve predominantly plant-based and 100% beef-free fare.
Ingka Centres’ new concept aims to merge the convenience and variety of the traditional food court with the fun of a food market. “Saluhall revolves around food and drink, but it is a lot more than eating and drinking. It is inspired by the New Nordic Food Manifesto movement that began nearly 20 years ago,” said Ingka Centres F&B concept development leader Stéphane Keulian. “Through lectures, cooking experiences and a cookery school, Saluhall will be a natural location that brings people and local businesses together.” The on-site cooking school’s kitchens will be available for guests to use after hours.
All vendors must favor plant-based options, regenerative agriculture and seasonal and local ingredients. The menu will be 80% plant-based at launch, and the operator aims to evolve to 100%. The concept will contribute zero waste to landfills and will use no single-use plastic.
Though Ingka Centres has not revealed where and when the first unit will open, the company said Saulhall units will anchor some of its existing and under-development “meeting place” shopping centers in China, India, San Francisco and elsewhere. Ingka Centres owns and operates 47 such retail centers.
More Plant-Based Retail
• Plant-Based Burger Chains Mushrooming
• Meet the Tenants Changing the Food-&-Beverage Landscape
• Native Foods and Stalk & Spade Among Growing Plant-Based QSR Chains
• 28 Vegan Businesses Backed by Celebrities
• Neat Burger Co-Founder Wants to “Agressively Expand Our Store Footprint”
Judi Lapin Has Died
Former ICSC trustee Judi Lapin has died. After a successful career in broadcast journalism and as a marketing executive for her family’s shopping center business, Lapin joined development firm Donahue Schriber in 1994 as executive vice president for marketing communications. She then founded public relations and marketing firm Lapin Consulting Group in 2001, working for such clients as The Irvine Cos. and Donahue Schriber. After years of volunteering on the MAXI Awards committee and the ICSC PR task force, which she chaired, Lapin served as an ICSC trustee from 2005 to 2011. Helping other women succeed in the industry was important to Lapin, who also volunteered for CREW Network.
By Brannon Boswell
Executive Editor, Commerce + Communities Today