Drive through any city in the U.S., and you’ll see a mall with too much empty space. Retailers that have traditionally been the anchor store in malls across the country – Sears, Macy’s, BonTon – are closing and going out of business. While many analysts are claiming the mall will become a thing of the past, malls can survive by embracing innovation, reinvention, and evolution.
New Lease Structures
While the Hudson in New York City may end up being the prototype of the future, what I’m seeing in malls across the country is a willingness to forgo the traditional lease. Shorter-term leases, leases with no percentage of sales, and leases with flexible terms and space requirements are helping landlords keep the space occupied. The successful mall of the future will redefine how they occupy space as well as how they keep it occupied. “[F]or many malls, their revenue models are going to change entirely,” explains Storefront Chief Executive Officer Mohamed Haouache.
Individual cities have a unique competitive edge.
The cities that are most successful are those that have a distinctive reputation. Size does matter, but it certainly isn’t the only stimulus for achievement in retail. The enterprising mindset of the city itself, regardless of industry, will drive the innovation and unique experiences that consumers want. Peer groups have a significant influence on how a city grows and the retail that thrives, ranging from tourist hubs to entire neighborhoods driven by sustainability practices.
It can be challenging to balance efficiency and innovation, but different cities will demand completely different stores and retail strategies. What functions well in New York City is not guaranteed to launch similarly in Tokyo. A flagship store may do well in the suburbs of Chicago but sink completely in the neighborhoods of Toronto. The demographics of an area can be so specialized that two stores within the same city limits cannot market themselves the same way. Retail real estate must spend less time defining who they are and more time strategizing how they fit into a city’s existing strengths.