The physical retail environment plays a critical role in how consumers behave. In this next installment of a 3-part series, I share insights into the importance of the retail experience and the challenge it poses for retailers today.

Earlier this year, we explored the sixth sense of the retail experience. Do you think landlords and retailers are on board? 

Some retail landlords understand that creating memorable experiences keeps the consumer top-of-mind. And as customers become more comfortable and emotionally safe to step back into stores, retail landlords will need to appeal to their senses to create a compelling experience from the curb in and throughout the common areas. That could mean enhancing common spaces or stepping up the tenant merchandising mix of retailers, restaurants and food offerings to drive foot traffic.

A project that has done this well is the Long Beach Exchange. The Exchange maximizes its outdoor areas to accommodate post-pandemic customer behaviors like social distancing. Architecturally designed to represent an airport, the Exchange features an open-air food hall and marketplace. Retail anchors include Old Navy, TJ Maxx, Nordstrom Rack, Whole Foods, and a couple of other popular brands. The food and the placemaking of its outdoor areas are the main draws. Visitors buy food and sit outside on the turf, and some folks make an outing of it, bringing a picnic blanket.

What is the biggest challenge for landlords and retailers right now?

Honestly, this will sound ridiculous, but it is finding the ideal site. There is such a demand for space, where everyone wants a Class “A” location, and retailers are willing to pay a premium to get it. And only when they have exhausted every effort to secure an A site will they even consider a B site. The representation of tenants is very different across categories, with both traditional and non-traditional, and all of them are looking for space. That is in addition to the existing retailers creating new concepts after evaluating their businesses. Other retailers make calculated decisions, switch from a mall location to a lifestyle center, or have both. The scarcity of “A” locations within the current real estate inventory cannot meet the sudden demand. In the last two years, Class A retail space absorption has doubled since 2020, reaching 6.6 million square feet last year. And the desire for Class A continues to be strong. The year is not even half-over yet, and retail absorption has already reached 5.4 million square feet.

It is a landlord’s market, then?

Yes, exactly. And as I said earlier, landlords have become highly strategic with their tenant merchandising mix. So, if they have a good “A” location, they can pretty much choose whom they want from some of the strongest brands available.

Look out for the final segment in our three-part series when we discuss the importance of the CRE advisory role.

Are you a retailer challenged with finding the right space? Maybe you are a landlord trying to find the right tenant mix? Colliers National Retail Services is here for you, find me on LinkedIn.