Crunkleton’s Retail Team Shares A Recap of ICSC 2018

Recently, two of our brokers traveled to Las Vegas to attend the annual International Council of Shopping Centers (ICSC) conference in Las Vegas. Anusha Alapati and Zac Buckley specialize in retail leasing here at Crunkleton and took the opportunity to share a recap of the event and discuss all major updates affecting the retail leasing industry.

RECon in Las Vegas is the largest commercial real estate conference in the world focusing on deal-making and the discovery of new, exciting concepts. This year, an estimated 37,000 retail specialists and industry leaders met for the annual three-day event to showcase trends in the market. Despite what one may hear in regard to concerns about the uncertainty of retail, the conference was packed with attendees, fresh ideas, and a positive atmosphere. It is clear that the retail real estate industry is going through major changes, many of which will affect the face of retail and the shopping experience for years to come.

Here are a few key takeaways from the event:

Restaurants are Becoming Anchor Tenants

Historically, restaurants were considered an added amenity in shopping centers and were limited in proportion of the property—mainly due to the parking requirements and the inherent issues involving prep and disposal of food. Now, restaurants are often considered the anchor tenants of developments, occupying 20-40 percent of shopping centers compared to 10-15 percent ten years ago.

Landlords now consider restaurants the ideal tenant because they are historically strong traffic drivers to centers, meaning guaranteed regular customer visits. It’s interesting to watch restaurants themselves shift to providing experiential elements: unique aesthetics, Instagram-worthy food, communal seating, and other interactive features that millennials crave.

Experiential Retail is Key

Retailers have to adapt to remain successful and competitive in the e-commerce era. However, customers are still searching for social and experiential elements, which can typically be found in visiting the physical store. Retailers are recreating stores to provide one-of-a-kind experiences, such as classes, events, demonstrations, etc.

The overall mindset is shifting from simply moving a product to developing an experience. It’s clear that today’s customer needs to feel as if the store is adding value beyond simply providing the merchandise. Landlords are also getting into the experiential game by backfilling vacant spaces with entertainment concepts and using vacant land, not for another building, but for a park, playground, putt-putt, etc.

Pop-Ups to Test Concepts

Pop-up locations are gaining popularity in developments due to smaller, local retail brands that are looking to grow. With the rise of local vendors from Etsy, Instagram, and Shopify, more concepts want to experiment with brick-and-mortar but are hesitant to make a large investment. Pop-ups allow these retailers to test out their concept or idea in a brick-and-mortar environment before entering into a longer-term lease. The landlords benefit because pop-up tenants create excitement and something different regularly for the development.

If properly curated, pop-ups can draw more traffic or new traffic to the center, which in turn creates additional traffic for the permanent tenants. In many cases, pop-ups are so pleased with the turnout they decide to open up a brick-and-mortar location.

Online-only Retailers Opening Physical Stores

Although retail has become increasingly digital, most shopping still takes place in stores. Online-only retailers are opening brick-and-mortar stores to interact with their clientele and to enhance the customer experience. For example, Warby Parker and Bonobos, both historically online-only retailers, opened physical stores so customers can actually try on products. This allows them to focus on customer service over inventory management.

Going Local

Lastly, in speaking with landlord and developers from across the country, one thing was clear: the make-up of tenants in their developments are becoming more and more local. Typically called “mom-and-pop” retailers, these local concepts and owners are becoming the backbone of successful shopping centers. Less and less focus is being placed on large, national “credit” tenants as landlords strive to credit a strong tenant mix that appeals to all types of shoppers in their trade area. Local tenants often bring a fresh look, brand, and experience to developments that national retail can’t provide. We believe this trend will continue into the foreseeable future.

For more information on ICSC, be sure to visit the official website here. What changes are you noticing in the retail industry? Let us know in the comments!

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Zac Buckley
VP of Leasing
Crunkleton Commercial Real Estate Group
ZAC@CRUNKLETONASSOCIATES.COM

 

Anusha AlapatiAnusha Alapati
Associate Broker
Crunkleton Commercial Real Estate Group
ANUSHA@CRUNKLETONASSOCIATES.COM

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New Stovehouse Renderings Released, Revival Underway!

The historic Martin Stove Building on Governors Drive is the site of Huntsville’s next destination for dining, shopping, and entertainment. Stovehouse was first announced last September along with early sketches of the coming development. But now, the latest renderings reveal the full breadth of the project and showcase the much-anticipated food garden, rooftop wine bar, entertainment stage, and abundant courtyards.

(Click here to read the full press release.)

The future view of Stovehouse when looking on from 9th Street.

Stovehouse owner/co-developer Danny Yancey purchased the building in 2016 along with his wife Patti and they immediately recognized the historic property’s potential. The goal quickly became to create a new kind of adaptive-reuse project that blended history, innovation, and urban energy—reflecting the character of Huntsville itself.

“From the first time I walked through the huge building, I saw huge potential,” said Danny. “We’re working with Centric Architecture to preserve the past while building a destination that serves Huntsville today. Where Rome Stove and Martin Stove produced durable goods, we’ll be manufacturing leisure.”

When studying the renderings, it’s easy to see the many leisure activities available. A balance of office life, fitness, food, and entertainment make Stovehouse a one-stop shop, creating a seamless transition from a productive workday to a carefree evening.

The future view of Stovehouse when looking on from 9th Street.

Stovehouse will offer tenants access to high-quality amenities and a vibrant community hub suited for everything from networking events to family-friendly activities. And its ultra-convenient location near I-565, Memorial Parkway, and Downtown puts it in the center of major Huntsville attractions.

“We already have firm commitments from tenants who will make Stovehouse a unique, high-traffic destination,” stated Stovehouse co-developer and leasing agent Wesley Crunkleton of Crunkleton Commercial Real Estate. “Curating the proper tenant mix at Stovehouse is vital, and we are focused on finding the ideal entertainment, retail, restaurant, and office combination to ensure the development thrives.”

If you are interested in becoming a part of Stovehouse, contact Crunkleton Commercial Real Estate at info@crunkletonassociates.com or call 256-536-8809. Or fill out a leasing inquiry on the Stovehouse website here.

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haley_squareHALEY CLEMONS
MARKETING COORDINATOR
CRUNKLETON COMMERCIAL REAL ESTATE GROUP
HALEY@CRUNKLETONASSOCIATES.COM

Going Offline: Why Four Online-Only Brands Expanded To Brick-And-Mortar

In the past few years, the subscription box industry has exploded in popularity. Forbes magazine reported that in the month of April 2017, subscription company websites had around 37 million visitors, and that number has grown 800 percent since 2014. Whether it’s grocery items, lifestyle, apparel, or pet toys, chances are you can find a box that fits your flair.

While online shopping—particularly subscription services—continues to grow, even the biggest brands see value in taking business offline to enhance the customer experience, offer more flexibility, and engage with its customers face-to-face.

Here are a few online-only brands that have traveled off the web to attract new customers and retain its existing base by incorporating physical retail into long-term plans.

Birchbox

One online company that has fully embraced the brick-and-mortar concept is Birchbox. If you are unfamiliar with the subscription service, Birchbox sends curated samples of beauty products to its customers to introduce them to new brands.

The idea is simple. Subscribers take time to fill out a personalized beauty profile that provides data to the company about their preferences. Then, the customer is sent samples of beauty products that fit their style. After four years of business, Birchbox recognized the need to add physical retail stores to its plan.

In 2014, the brand opened its first brick-and-mortar in Soho, New York City. The retail shop “brings the Birchbox experience to life,” according to company reps. Consumers can quickly get their hands on product offerings, shop by category, and test out trends at a Try Bar—a special in-store area that houses the hottest products on the market.

Customers are also able to build their own Birchbox and earn points toward future purchases, both online and at the store. And finally, there are options to book hair, makeup, and beauty services that feature all of the products you might find in your box.

Birchbox found the setup so successful that they plan to open more physical stores in the future. In fact, the company confirmed its plans to open a second retail location in Paris last year.

Although Birchbox co-founders admitted that they never expected to manage a retail store, they also said that the experience has been extremely valuable. The company reported that shoppers at the retail location have a 3X higher lifetime value with the brand. And by collecting data from their customers at the store, they are able to tailor the brand to meet customers’ needs.

BarkBox

That’s right! Even pets can enjoy their own monthly subscription box. BarkBox is a monthly box of dog toys, treats, and goodies sent to dog owners who want to pamper their pup. The collection is themed every month with past boxes including Knights of the Hound Table, Chewrassic Bark, and The Good—The Bad—And the Pugly.

Recently, BarkBox made the announcement that the company’s treats and toys would be available at Target shopping centers. This is the first time that BarkBox items have been offered in a retail setting. This partnership makes it much easier for consumers to interact with the brand while offering more opportunities to get their subscription service in front of new clientele.

Target is continuing its efforts to partner with subscription brands.  Senior Vice President of Essentials and Beauty at Target, Christina Hennington, said that offering “new and exclusive pet brands” would help set them apart as the “ultimate pet destination.”

Rent The Runway

Lovers of fashion have been flocking to Rent The Runway to enjoy what the New York Times has called “a Netflix Model for Haute Couture.” A service that provides accessory and designer clothing rentals, Rent The Runway promises customers a “dream closet on demand.”

Clients can choose from an array of designer options—giving them a chance to dress in the newest fashions without paying high retail prices. Even with the company’s online success, co-founder Jennifer Fleiss said that it was clear customers wanted a physical retail store.

Although it wasn’t in the brand’s initial plans, they decided to test out the concept in 2012 at the company’s corporate headquarters. Rent The Runway has since opened retail shops in New York City, Las Vegas, Chicago, and Washington D.C.

Customers claimed they wanted an in-store experience with the ability to browse, try on items, and get advice from one of the company’s professional stylists. Rent The Runway responded by delivering a convenient experience where consumers can access the brand in-person, online, and even via app. This type of adaptation is key to pleasing a customer base.

HelloFresh

Today’s retail landscape calls for flexibility—even with monthly subscription services. HelloFresh, a company that sends recipes with quality ingredients to its subscribers, saw the need for the brand to become more accessible and less restrained by scheduled delivery dates.

In response to customer feedback, HelloFresh opened its first physical retail pop-up shop on the busy streets of London in March 2017. This four-week experiment aimed to please its subscribers who said they would prefer the option of picking up a kit on the way home from work. While the pop-up shop didn’t offer the brand’s full menu, it did give commuters a chance to purchase from a select list of popular recipe kits.

The pop-up shop was a way for HelloFresh to test how they would operate in a physical retail space, while evaluating customer interest for the long-term.

Click here to see images of the London pop-up shop.

 Have you ever purchased a subscription service? What other online-only brands would you like to see in physical retail locations? Let us know!

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Make sure you’re staying on top of the latest trends, newest developments and hottest new stores in Huntsville by subscribing to our weekly blog updates!

haley_squareHALEY CLEMONS
MARKETING COORDINATOR
CRUNKLETON COMMERCIAL REAL ESTATE GROUP
HALEY@CRUNKLETONASSOCIATES.COM

Trend Report For 2018: A Pivotal Time for Brick and Mortar Retail

Possibly not since the first enclosed mall opened in 1956 in Edina, Minnesota, has brick and mortar retail experienced such a pivotal point in its history. Most would attribute the changing retail environment to the effects of e-commerce and the Goliath that is Amazon; however, we believe there are more powerful factors at work.

In-store brick and mortar retail sales accounted for more than 89% of total retail sales in 2016, and early indications seem to point to 2017 being the best holiday shopping season in 4 years. So, if people are still shopping at brick and mortar stores, why do we hear the term “retail apocalypse” every time we turn on CNBC or pick up a Wall Street Journal?

The End Of The Department Store Era—Not Brick And Mortar

What we are seeing is not the demise of brick and mortar retail, but more the end of the department store era. Department-store-anchored malls that sold everything from apparel and electronics to furniture and home appliances dominated the 60’s, 70’s, and 80’s. But specialized big-box retailers have steadily eroded the department store model over the last three decades.

Eventually, we were left with malls anchored by department stores that focused on just a few categories centered on apparel. Does this mean that we will soon see the end of department stores and enclosed malls? Yes and no.

We will continue to see enclosed malls struggle to compete with convenience/grocery-anchored centers, experience-based shopping destinations, open-air lifestyle centers like Bridge Street Town Centre, and local specialty destinations such as The Garage at Clinton Row. Many malls will be able to adapt and survive with the addition of entertainment venues, hotels, and even office space. Others will simply disappear from the landscape to be replaced by a more modern retail and entertainment experience as we are seeing take place at the site of the old Madison Square Mall.

As far as the old department store is concerned, we are already seeing the same type of adaption into a more mixed offering of services and experiences. Many department stores are starting to reduce the size of the sales floor to make room for cafés, salons, pop-up shops, and even fitness concepts. Not all department stores will survive, but the ones that do will be more focused on the high-end specialty categories and customer experience. Instead of existing for exclusively for retail sales, they will provide a total experience and numerous services in one convenient location.

What Does The Future Look Like?

What can consumers expect the retail environment to look like in the future? Currently, the trend is what is called omni-channel retail. This is a combination of brick and mortar stores with online and mobile sales. As evidenced by Amazon’s acquisition of Whole Foods, e-commerce retailers are getting into the physical storefront game. It appears they understand the value of physical storefronts and their impact on the bottom-line. Sure, online shopping is convenient, but does it result in sales?

Research has shown that over 40% of items purchased online are returned. Furthermore, consumers make a purchase at a rate of 20% of the time when they walk into an actual store. That rate drops to 3% when visiting a website. The successful retailer of the future will be able to combine online, mobile/social media, and physical locations to create a positive experience for the customer.

One issue that is flying under the radar is the new tax reform bill and its impact on retailers. A reduction in the corporate tax rate could have a significant influence on the ability of brick and mortar retailers to compete with e-commerce retailers. With the reduction of the corporate tax rate, the savings experienced by the retailers can be used for an investment into omni-channel/mobile platforms, upgrading stores, or simply lowering prices to compete with e-commerce.

A Theme Of Adaptation

In conclusion, we continue to believe that the future is bright for both retailers and landlords. Once again, the theme continues to be adaptation. Traditional retailers are building their online presence and e-commerce retailers are getting into the bricks and mortar game. This environment creates opportunities for landlords that have the vision to meet the changing demands of consumers and the needs of the omni-channel retailer. It’s certainly an interesting time in retail, but one that can bring exciting changes to the benefit of everyone.

 Have questions about the changing retail market? Wondering how you can adapt in 2018? You can contact Zac at zac@crunkletonassociates.com or by calling 256-536-8809.

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Originally from Tennessee, Zac studied business management at Samford University. After moving to Huntsville in 2001, Zac started out his career in banking, wealth management, and financial planning. In 2010 he joined Crunkleton and has since become the VP of Leasing for the commercial real estate group where he focuses on retail leasing and development.

Zac Buckley
VP of Leasing
Crunkleton Commercial Real Estate Group
ZAC@CRUNKLETONASSOCIATES.COM