The face of retail is changing—but Amazon isn’t the lone culprit, a retail real estate expert told Baton Rouge area brokers and developers Thursday.
Don’t think of malls, which only make up 10% of retail in the United States and have already closed 75 million square feet of space this year. Instead, it’s mixed-use developments that also feature office, multifamily and hospitality components—as well as a growing Amazon presence—that encompass what’s now considered retail.
“We don’t need as many standalone shopping centers that are purely retail anymore,” said Garrick Brown, vice president of retail intelligence at Cushman and Wakefield, a global commercial real estate company with 400 offices in 70 countries.
At an event co-hosted by the commercial investment division of the Greater Baton Rouge Association of Realtors and the Baton Rouge Growth Coalition, Brown explored what is and isn’t working in physical retail and the impact on commercial real estate in our market.
Generational preferences are fueling the change in retail trends, says Brown, and millennials spend less money than generations before them, making them more selective shoppers.
In order to survive, then, a retailer essentially has to either provide a luxurious experience or offer dramatically discounted prices. In fact, the top five discount stores have added 6,500 stores across the U.S. over the past four years, meaning one opens in some part of the country every four-and-a-half hours.
The stores in the middle, with middle-of-the-road prices and mediocre service—think JCPenney, Sears and Macy’s—are those that ultimately fail, he said.
“There’s no room for mediocrity in retail anymore,” Brown says.
And what’s hurting retail isn’t necessarily the so-called “Amazon effect,” he said. It’s the Wall Street influence, characterized by overly aggressive growth, retail destructions via “efficiencies,” leveraged buyouts and a destructive financial model.
A leveraged buyout—which happens when private equity groups borrow money to acquire a retailer and then put that debt on the retailer’s balance sheet—killed Toys R Us, for example.
Baton Rouge appears to be riding the wave of several other trends Brown mentioned, including increasingly popular food halls (such as White Star Market) and smaller square footage for anchor stores.