In the final segment of our 3-part series we talk about site locations and the role the advisor plays to ensure landlords and retailers partner on the best space for their project.
Why is it such a critical time for landlords?
As I said, landlords have become highly strategic when evaluating merchandising mix. If they have a good “A” project, they can pretty much choose whom they want from some of the strongest brands available. And as you can imagine, negotiations are heating up as multiple tenants vie for the same premium space within “A” projects.
Let’s not forget that external factors like the project’s surrounding areas, walkways, and foot traffic all come into play. For example, Macy’s Herald Square, one of the most well-known retail corridors, is a prime example of what some retailers consider a front-runner location based on co-tenancy. Although, it may not be a prime location for others who see their brand better aligned elsewhere, such as luxury brands and Madison Avenue.
And what about retailers?
Retailers are requesting help finding second-generation real estate close to their delivery requirements. As an advisor, our job is to get a more robust understanding of the retailer’s brand, brand affinity to the consumer, market, and score various categories/metrics, among other things. Then, we work closely with clients to ensure we’re on the same page about market demand and whether we need to adjust or accelerate the pipeline. Once we have the right information, we negotiate with the landlord, exploring their economics.
Do you think landlords are creating new opportunities for their tenants?
The physical retail environment plays a critical role in how consumers shop—landlords who invest in their sites as ‘destinations’ to encourage longer dwell time and cross-shopping have seen an increase in foot traffic. Extending the physical space further, retailers continue to evolve by creating memorable, compelling shopping experiences. Experiences that consumers can share back with friends and family, something they can’t get anywhere else.
On a recent trip to New York, I had planned to visit Sezane, the French fashion house’s first U.S. store, a brand I discovered while in Paris, but I ran out of time. So, you better believe that the next time I go to New York, I will check out the store and do a little shopping. But, of course, if Sezane were to open a location in San Francisco, I’d be more likely to visit them there, too.
How, if at all, are landlords and retailers using data and tech in their decision-making?
Brands use tech and data to define their core buyer personas, the North Star, that informs their growth strategy. For example, a food and beverage client collected data from its existing locations to identify its top consumer demographics and source the top cities where it should expand. We liaise with brokers in each market to source, vet and rank each site’s attributes to align with the client’s overall business goals.
The best strategies make meaningful decisions about leases and locations by melding AI and local human expertise. There is insurmountable data available, but the person scouting will always bring first-hand value and expertise to any client.
If you seek guidance on the projects in your pipeline, we’re happy to help. Find me on LinkedIn and follow along for regular updates and musings about commercial real estate and the retail industry.