The Retail Shopping Centre Asset....The next great Extinction Event?
So much commentary has been made about the future of the retail Shopping Centre as a viable asset. It is threatened by generational and technological change through the rise of on-line shopping and giants like Amazon over the last few years.
Have no doubt there is a great threat coming, and certain assets will become extremely vulnerable, but as with all great events others will thrive in this new era, provided they have a few essential ingredients in place.
The following are some of the key elements I see to surviving the coming Retail Shopping Centre Asset extinction. Each one is a whole debate and analysis on its own, but there is no doubt they need to be addressed.
Convenience or Social Engagement – Is your asset focused on inelastic products (i.e. products that are seen as daily needs not wants and as such are less subject to price point competition. Fuel is the classic example of this type of product but it also includes daily food and living essentials).
Or is your asset focused on the social engagement of the customer rather than on the actual product itself? It’s the social engagement that the customer is buying….not the actual dress they bought.
You must be clear on what your asset is designed to achieve. Forget about getting tenants to fill spaces…..get your asset aligned with what the market wants and your tenants will follow.
What is Social Engagement? – There is a lot of talk about what this actually means and to date it seems to be limited to ‘let’s put in cinemas’. In my opinion those who embrace technology to provide the experience will be at the forefront of attracting customers in the new era.
Embrace the on-line revolution, don’t fight against it - Retail outlets may become smaller with less physical stock held in-store, but they focus on the experience. This will involve the development of technology including such things as the ‘Augmented Reality Mirror’ currently patented by Amazon.
Smaller Shops is actually a Positive - The impact on lettable area of these changes means smaller shops, however on the back of creating a socially engaging asset, this will mean increased demand for smaller areas, which in turn will ultimately mean more rent per square metre across the board.
3D Printing – This is not far from being a commercial reality and that is when the requirement to have stock in store will reach a critical threshold. You order the stock in store via the Social Engagement factor and by the time you get home it’s printed out on your home 3D printer.
Discount Department Store (DDS) – With the coming technology how will the DDS survive? Well I don’t believe it will in its current format. It will be a critical part of the change process and whilst floor areas and stock on hand will reduce, technology will provide opportunities for income growth. The DDS will expand its offering of products into areas they currently don’t engage with, and their standard large format footprints will be unrecognizable in 10 years.
Autonomous transport by 2030 – Car manufactures are well advanced in the autonomous car revolution. Like it or not it’s coming, and faster than we think. Shopping Centres that work on Social Engagement will have vehicles that pick up and deliver customers to the centre, just like the old RSL and Casino bus pick-ups from the aged care facilities today.
Tenant mix will evolve and change – With the traditional product based tenant taking less space, shopping centres will engage with very different and diverse tenancies that are currently not often contemplated. This will be a challenge for Town Planning Schemes to keep up with.
The key to take from all this though is….The Future is NOW. Some of these changes seem a long way away but never forget that property is a slow and cumbersome beast, it takes considerable time and considerable capital. Changing an assets position in the market place is like turning a large container ship, you have to take action well before the change in direction is actually needed, and if you don’t your asset will sink.