If you look back on the history of retail real estate, the department has typically been managed by an EVP-level executive that reported directly to the CEO of an organization. The retail real estate department was the primary source of strategic market knowledge critical to positioning new brick-and-mortar locations to promote growth. Even for third-party exchanges developed to generate strategic market plans, such as site selection models or sales projects, retail real estate executives were the main point of contact. Although real estate executives remain the experts, the dynamics have shifted drastically and changed the roles of all involved.
Retail real estate has been downshifted within organizations
Data analytics are now considered an elevated resource, as the tasks delegated to the real estate department have expanded from new store growth to portfolio renewals. Therefore, real estate strategy has downshifted from an EVP C-suite role that was primarily strategic in favor of a director-level role responsible for the execution. Such tasks are then reported to the CFO, resulting in a complete disconnect between real estate executives, an effective marketing strategy, and the CEO. Rather than a focus on the long-term strategic vision, retailers are focused on short-term rent reduction tactics, such as rent relief. Unfortunately, in a changing retail industry that exists in a multi-channel world, retailers should be focused on the number of their stores and how location impacts their overall success and ROI.
Real estate requires a specific investment
The real estate executive must implement a sophisticated planning process to re-position their role within an organization, which is why it is so important to demand a seat at the executive table. A successful real estate strategy requires both store capital and an investment in technology, data, and analytics specific to the nuances of real estate. Current trends demonstrate that revenue generating initiatives, such as reducing rent, are preferred over improving long-term brick-and-mortar performance. This hardly considers a more in-depth analysis of why ROI is floundering, such as marginal and declining real estate locations. There is no quick-fix within real estate, and strategic planning requires executional strategies that support long-term goals.
The real estate landscape is transforming rapidly
Organizations must understand that the initial drive of brick-and-mortar locations is no longer the current trend of consumers. Shopping centers that were once dominant are now struggling to stay afloat, and it is projected that their numbers will halve within the next few years. However, this is not to say brick-and-mortar locations do not have the potential for success. The landscape is changing, and real estate executives must rely on strategy to capitalize on the needs of the new generation of shoppers. Analytics are impacting location strategy, as well as the experience that a brick-and-mortar store can offer combined with omnichannel metrics. Traditional retailers are losing ground, demanding that real estate executives understand and communicate market trends. Real estate departments need to direct the analytics of retail marketing, not be the recipient of the latest decisions.