Maybe you follow commercial real estate news as closely as we do. Or maybe you’ve just been reading the writing on the walls of your local shopping mall. According to Forbes, “In 2019, store closings reached historic highs, with some 9,200 major retailer stores shuttered, following 5,437 closed in 2018.”
And that was before the madness that has been 2020.
Retail success is a clear sign of local economic health. Unfortunately, long-term shifts to online shopping have compounded this year. The result is one of the most difficult years for major retailers and small businesses alike. If you lease commercial properties to retail tenants, there are a few things you can do to help ensure their success this holiday season.
In this article, we’ll cover how the national retail market has been trending in recent years, as well as the state of Asheville MSA’s market right now. That information will guide you as we discuss how to support your retail tenants this holiday season.
Are Shopping Malls Dying?
Several major “anchor” retailers—from Sears to Macy’s to Sephora—have moved out of shopping malls in recent years. Some changes have retailers pivoting to a stronger online business model, a la Amazon. Others, unfortunately, closed their doors for good. This year, in light of social distancing due to COVID-19, much of the retail sector has been stretched thinner than ever. So, what does this mean for brick and mortar retail stores, especially within shopping malls and other shopping centers?
Well, shopping centers won’t be leaving the American landscape anytime soon. However, it’s quite possible they will house businesses other than retail. According to CNN, “mall developers say they’re scouting for businesses other than retailers to replace shuttered stores, anything from schools to doctors offices and short and long-term storage facilities both for residential and commercial customers.” Ironically, “Amazon is in talks with the biggest mall owner in the U.S. to turn retail space [left vacant by Sears and JC Penney] into Amazon fulfillment centers,” according to Business Insider.
What’s the State of WNC’s Retail Market?
Like many other sectors of our local economy, commercial real estate has not escaped the fallout of the COVID-19 virus. COVID-19 restrictions are still hindering in-person transactions and impeding the future of many small businesses. All eyes are on the pending stimulus package to provide renewed relief to consumers, tenants, and struggling real estate sectors. To that end, Asheville MSA saw 39 retail transactions in Q3 of 2020 for $66.9 million. There were also 40 retail lease transactions, ending the quarter with a vacancy rate of 2.8%.
However, like the rest of the country, alternative sectors, such as cold storage facilities, warehouse space, and data centers, are also surging in demand to meet e-commerce needs. Local commercial real estate brokers are reimagining available spaces as potential harbors for these newly popular sectors. For instance, there has been much talk in recent years about what should replace Sears in the Asheville Mall. Ideas have been floated from housing and a movie theater to a Dave & Buster’s.
4 Ways to Support Retail Tenants this Holiday Season
If you are struggling to aid and manage your retail tenants this year, know that you are not alone. There are many ways and resources to support your tenants—and in turn, your commercial real estate endeavors—during this tumultuous time. Here are four effective ways to support retail businesses, no matter the season.
1. Communicate Regularly (and in Person)
The first step to supporting retail businesses is to make sure they are comfortable and confident in your commercial space. If possible, make a point to visit your retail tenants at least once a month in person. Regular visits allow for more open lines of communication. That means you are able to both solve existing problems more quickly and anticipate any upcoming issues. By mitigating small issues before they become big ones, you will likely save yourself on costly repairs, as well as lowering your long-term tenant turnover rate. Meeting tenants in person will also help you gauge how well various tenants interact and engage with each other. And it will help “ensure that upcoming lease expires, options, and market rental negotiations are well planned and implemented.”
2. Rethink the Customer Experience
Whether you manage a huge indoor mall or a small community shopping center, it pays to think about your customers’ experience. Brick and mortar retail will never again be able to compete with the range of products and low-low prices available to online shoppers. “Instead, malls need to move in a different direction, away from commoditized shopping experiences and toward a broadened value proposition for consumers,” says McKinsey & Company. “The Year of Zoom,” has taught us that leisure and entertainment cannot be fully replaced by a screen. From spas, fine dining, and farmers markets to indoor ski slopes and underground aquariums, successful shopping centers around the world are focused on becoming destinations, instead of just convenient stopping points.
3. Focus on Health and Safety
Shopping centers have evolved into town centers in many cities. Take, for instance, Biltmore Park Town Square in Arden, which has a rich mix of retail, office, service, and residential spaces. As such, they have become public gathering places for people of all types and ages. Security has always been important in community spaces such as these. In a post-COVID world, safety takes on additional meaning. After all, holiday shoppers want to focus on finding the perfect gifts, not catching a potentially deadly virus.
Make sure your shopping center has swift measures in place for any parking, waste, and public security issues that arise this holiday shopping season. While we’re still mitigating the effects of COVID-19, make sure your retail and other businesses also have consistent rules in place around public health and social distancing. Should a tenant leave a retail space, have a plan in place to professionally clean the property before a new tenant moves in.
4. Incentivize Community and Customer Loyalty
Safety and health measures are great passive ways to support the businesses and community within your shopping center this holiday season. But there are also more active measures to consider. By leveraging multi-channel technologies, you can help your retail tenants extend their relationships with customers beyond the brick-and-mortar space. Centralized loyalty programs, social media buzz, and other coordinated and customized efforts will incentivize new customers to visit and buy. They will improve customer satisfaction, as well. Programs like real-time parking availability and small, private events that span the businesses in your shopping center are especially effective in this era of social distancing when people need reason and reassurance before they venture outside the home.
Do You Have More Questions about How to Support Your Retail Tenants?
NAI Beverly-Hanks agents are available to address questions or concerns about tenant and landlord relations. It is our fervent intent to continue providing excellent service in the face of evolving circumstances. Guidance on how to support your retail tenants, as well as information about unique investment opportunities, are just a phone call away.
Reach out to an NAI Beverly-Hanks commercial real estate agent today.