With parts of the world putting forward action plans to reopen their doors again, landlords must now start focusing on curating vacant retail spaces which meet the newly evolved social and experiential needs of consumers.
Over the course of the pandemic, its adverse effects within the retail sector have become apparent with over 1,000 chain outlets closing in the first 6-weeks of 2021 in the UK. In last quarter of 2020, vacancies in UK shopping centres increased from 16.3% to 17.1%, 13.3% to 13.7% in high streets, and to 10% in retail parks. In Europe, Carmila, owners of 215 shopping centres in France, Spain and Italy, stated that in the first quarter of 2021 their gross rental income fell by 6.6% from €84,737.00 to €90,735.00. In USA, regional mall vacancy rates climbed to 11.4% in the first quarter of 2021 from 10.5% in the last quarter of 2020, according to Moody Analytics.
Furthermore, as our homes started to become the only location for dining, shopping, and entertainment, the online shopping landscape became more enriched. In the UK, it is predicted that this year consumers will spend £141.33 billion online, a 34.7% rise from 2019, making e-commerce account for over 30% of total retail sales for the first time.
With the rise of digital retail beginning to surpass physical retail and popular retail chains closing, landlords must now start thinking of curating their spaces into unique destinations to meet the changing needs of customers as they re-enter these places. Although the number of vacant spaces increased, the demands for unique social experiences in these spaces have simultaneously increased alongside it.
So, what should landlords do with these empty spaces?
1. Renting to Local Businesses
Rather than landlords renting spaces to a mass-market retail chain for a fixed number of years, landlords should take a more flexible approach of having more short-term leases to suit smaller, local businesses. Research published by Mastercard during the final quarter of 2020 stated that over 65% of people in the UK founded a new appreciation and preference for using local businesses. More specifically, the younger generation are especially invested in supporting more independent retailers with 63% of 18–34-year-olds stating they actively seek out locally owned businesses when shopping. In comparison to chain retailers, local businesses offer a more personal, tailored approach with each one having been on a unique journey to create their idea, product or service – a story that consumers are wanting to invest in and be a part of.
Landlords can thus bring in local businesses to provide exciting leisure offerings from tasting and microbrewery experiences to pottery and painting activities. For example, Joy City North Mall in Shanghai has a large space dedicated to leisure workshops for customers to experience including a painting studio, jewellery workshop, DIY carpentry workshop with multi-level classes, crafts workshop to create clothes and other handmade goods, and a terrarium workshop. They have developed a creative experiential hub to give customers the opportunity to try something new and socialise with others in a creative and stimulating environment.
With the importance of community values rapidly increasing among consumers over the last year, it is therefore important to bring in these local businesses for a fresh and unique offering. This will in turn bring in a higher and more diverse demographic as you are bringing in local flavour in a mix of standard retail chains.
2. Food Halls and Markets
With the retail industry becomingmore digitised and our “big plans” previously consisting of ordering food in, consumers now want to visit places for unique dining experiences rather than just for shopping. Spaces for food retailers doubled from 7% to 15% in 2019 and are expected to occupy 25% of GLA in 2025.
Therefore, landlords should offer opportunities for internationally inspired food start-ups and local businesses which provide a diverse mixture of locally sourced food and drinks. Landlords can also adopt different leasing approaches to suit the needs of different tenants to provide an ever-evolving, unique food market offering which you can regularly visit for a new experience each time. This provides landlords the opportunity to transform unused retail spaces into culturally vibrant experiential destinations to regenerate footfall and revenue.
We are social animals and miss the human interactions we have been deprived of for the past year. Curating a unique social hub within a large shopping centre will attract and ultimately build upon the development of a dynamic community environment.
3. The Era of Entertainment and Leisure
We are now seeing shopping centres rebranding and repositioning themselves from prime fashion destinations to being the best in class for leisure, entertainment and F&B offerings. For example, Respublika Park, a mall in Ukraine, has designated 30,000 m2 of space to a new age Entertainment Park with cutting-edge Virtual, Augmented and Mixed Reality experiences. They have further integrated the digital world with the physical by having over 15 party rooms, 50 dining spots, Instagrammable areas and the country’s first indoor theme park with a rollercoaster, Ferris wheel, and indoor skydiving experience to provide a next-generation entertainment and leisure experience which attracts the new Gen-Z target audience and social groups of friends and family.
Their primary focus when advertising this re-opening has been its entertainment offerings which are catered for all generations, ages, and personalities rather than solely emphasising their retail offerings. This shows how landlords and developers are altering their marketing and advertising strategies to make their focal attraction point of being a varied leisure hub which provides the opportunity to reconnect with the community and loved ones in a dynamic environment. Such diversity in leisure provisions increases revisitation rates as people are wanting to try the numerous offerings they haven’t experienced yet, which in turn has a positive knock-off effect on footfall, revenue and word of mouth visits.
4. Mixed-Use Spaces
Following the pandemic, customers’ needs have drastically shifted to align with the increasing developments of well-designed mixed-use spaces. Why is this? Firstly, customers want convenience-based retail to minimise unnecessary travel. Instead of travelling to different locations for dining, shopping, entertainment, and living, it will all be in one space. Secondly, consumers prefer places which emphasise community values by including elements of “blended living,” social walkable spaces such as biophilic areas, new entertainment areas combining physical and digital experiences, residential living and office areas. Thirdly, consumers now reject the traditional retail experience of working their way through the big box retail stores – they want a varied sensory palette of choice and experience.
Landlords curating vacant spaces in a thoughtful way will act as a creative catalyst to reconnect communities after a year of distance, to support smaller local businesses and to create unique and exciting experiences to meet our new evolving social needs. These tailored plans will in turn attract and branch out to new and existing customers to increase footfall, revenue and ultimately asset value.
Read our article in Retail Leisure International in which we discuss how landlords can transform spaces in leisure destinations:
Read our article in A1 Retail in which we discuss whether 2021 is the year of implementing temporary kiosks within retail destinations: