NEW YORK--(BUSINESS WIRE)--There is no doubt that consumer needs, wants, and desires have changed in the 21st century, and the retail real estate industry has risen to meet this challenge head-on. The International Council of Shopping Centers (ICSC) has gathered a group of industry researchers to study the facts, figures, trends and strategies currently present in the industry to determine the vitality and innovativeness of brick and mortar retail in the 21st century marketplace.
The paper is set to be released in May, during ICSC’s RECon Conference, and will explore the following themes that are currently happening in the retail real estate industry.
- Net addition of retail space has slowed; annual pace of 0.2% from 2011-2013 – Less new space in the pipeline has dramatically improved occupancy rates at existing properties. In the fourth quarter of 2013 average occupancy stood at 91.9%, up from the low of 88.7% in the third quarter of 2010. Rental rates are also rising as a result.
- Population growth in the U.S. is now outpacing new retail supply growth – With the slower expansion in the industry’s retail stock, population growth is outpacing the addition of retail space by 3½ times. As a result, shopping center space per capita – which peaked in 2009 at 24.2 square feet – now stands at 23.7. This correction will make way for demand in new retail space once again.
- Retailers are expanding – According to ICSC Research, announced store closings in 2013 saw a decrease of 43% versus 2012. In 2011 – the latest data available from the US Census Bureau – the net change in retail establishments was positive, adding 144,643 new stores. When new Census Bureau data becomes available we are likely to see that both 2012 and 2013 were also a net positive in terms of new retail establishments.
- The industry has made pre-emptive changes to the tenant-mix – In the fourth quarter of 2010, the share of total shopping-center space that was non-retail, non-restaurant was 20.6%. By the fourth quarter of 2013 that share had risen to 22.4%. “The ‘shopping center’ of yesterday is transforming into the ‘consumer center’ of tomorrow, and rightly so, with over two-thirds (66.4%) of consumer demand coming from services in 2013 compared to 54.4% in 1980,” said Michael P. Niemira, chief economist and director of research for ICSC. “The industry continues to add services into the tenant mix to broaden the appeal of centers as consumer destinations.”
- Customized distribution has increased consumer convenience – Major mall operators in the U.S. – Macerich, General Growth Properties, Simon Property Group and Westfield, which collectively own more than 600 malls – all rolled out a same-day delivery service for shoppers beginning this past holiday season. These services are offered both at the store and online, the latter option being particularly of interest as it could drive more sales to the mall itself. Retail chains would add the choice of having an in-stock item from their mall store delivered same-day to the consumer. Of course, pick up at the store is always an option too.
- Pure online retail firms are now looking for physical space – General Growth Properties’ CEO Sandeep Mathrani recently observed that, “Some of the traditional online-only retailers are beginning to establish bricks-and-mortar routes to grow their brands, especially as search marketing and customer acquisition costs and a cost per-click basis continues to rise. For example, Boston Proper, a women's fashion retailer now owned by Chico's, opened four locations last year and plans to open more in the future. JustFab, a retailer specializing in women's accessories, opened their first store in Glendale Galleria. Piperlime, owned by The Gap, is now opening stores. Athleta, also owned by The Gap, is a great example of an online retailer that has achieved scale through bricks and mortar. Athleta has over 65 stores in 27 states.”
“We are excited to explore the current state of shopping centers and their role in the 21st century retail environment,” said Michael P. Kercheval, president & CEO of ICSC. “Anecdotally, it would appear that fundamental changes are taking place in the shopping center industry and we aim to explore those further through this white paper.”
Founded in 1957, ICSC is the premier global trade association of the shopping center industry. Its more than 63,000 members in over 100 countries include shopping center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. As the global industry trade association, ICSC links with more than 25 national and regional shopping center councils throughout the world. For more information, visit www.icsc.org.