Brick-And-Mortar Retail Isn't Going Anywhere But Seas Of Parking Are Out

Brick-and-mortar retail is here to stay. People want something to do and online shopping just won’t cut it, according to speakers at our recent Retail and Hospitality event. However, the retail market is certainly changing to reflect consumer demand.

“The demise of the physical retailers has been somewhat overestimated,” SimonCRE partner Jeff Carpenter said. “Some physical retailers have closed but some online retailers are opening physical locations as well, such as Warby Parker and Tuft & Needle. E-commerce as a percentage of retail sales is still in the single digits. People still want experiences and still need things to do.”

ViaWest Group president Heather Personne said two-thirds of all online sales still touch a physical store for a variety of reasons, including returns or in-store pickup. “When online stores add a physical location, they see a three- to fivefold increase in sales in that market. The reverse is true if they close a physical location,” she said. As for the entertainment aspect of retail, she’s heard Whole Foods is apparently one of the best places to meet singles.

When she started in this business, Heather said, it was about location and parking, but now it’s about creating walkability and experience. “We’re looking for places that aren’t traditionally ‘A’ locations and are now becoming ‘A’ locations because they have that walkability or redevelopment potential.”

Something else has changed, too. “It’s less about parking now and more about walkability, when people used to want to see a sea of parking,” Heather said. There isn't such a high demand for a place to park when people can walk from place to place.

Jeff is seeing the same demand changes. “As technology changes, parking requirements will change too,” he said. “We’ve already seen the effects of Uber and Lyft, so it will be interesting to see how self-driving cars impact parking as well.”

Western Vertical Holdings founder and Stockdale Capital partner Bob Agahi described a shift in retail with changing social media platforms. “If you can make somebody feel like they are in the know, that’s ideal,” he said. Instead of saying grace, he’s noticed, people are stopping to take a picture of their food before they dig in.

Another trend our panelists discussed is the movement toward eating more wholesome food. Riot Hospitality president Ryan Hibbert discussed Farm & Craft, his latest project. “Had I opened Farm & Craft five or six years ago, I don’t think people would have cared about the concentration on health and wellness,” he said. “Everyone is starting to realize that they can’t eat saturated fats and expect to live past 65. A lot of the health issues we deal with, including anxiety and depression, are connected to the ingredients in the food we eat. In five to seven years, people will look back in disbelief at the food they used to eat.”

Even if rents, now steadily on the rise, were plateauing, Ryan said half-jokingly he would be happy. Jeff noticed the same thing, but he’s just glad the economy’s recovering. “The vacancy rate is continuing to drop and rent growth continues to occur. We aren’t seeing the crazy spec development we saw in 2007, and a lot of that is because lenders have tightened the capital supply,” he said.

Bob is a bit concerned about this upswing, saying, “We need to make sure we don’t get too crazy with multifamily development and overbuilding.”

He’s noticed another interesting phenomenon happening in retail. “Even if I wanted to mix local and strong national tenants, I couldn’t,” Bob said of negotiating with tenants at The Colony. “The local tenants would rebel.”