We are retail real estate professionals of the millennial age group who recently had the opportunity to spend three days at the International Council of Shopping Centers (ICSC) National Next Generation conference in Miami. Being relatively new to both real estate and the retail industry, we were all eager to absorb valuable advice from our peers on the Four Under 40 panel, who advised us to: Find great mentors, ask lots of questions, and not be afraid to fail in a high-risk industry. But probably the most interesting insights were around the impact that we, as millennials, are having on the future of retail and the physical store itself.
Our generation is frequently cited as a potential killer of retail real estate – the industry we are just entering – as we supposedly shift en masse from bricks-and-mortar shopping to living online. So it might be surprising to hear, as we did at the conference, that while millennials are changing the dynamics of retail, we are not putting it out of business.
Three primary trends stood out. The first was the urbanization of America. Millennials are buying into this new lifestyle in which mobility is paramount. We want to be in live-work-play environments. Retailers are adjusting strategies to adapt to this urban migration. Examples are Nike’s shift toward stores that emphasize their brand experience and Macy’s commitment to urban locations. Miami showcased this perfectly with several catalytic mixed-use projects including Miami Worldcenter, American Dream Miami and Brickell City Centre, which combine a curated mix of retail along with residential units, hotel rooms and public-transportation access. Stores aren’t going away – they’re just being put in better locations.
A second trend, underscoring the first, is the pending shift in retail rental rates. With rents on Miami’s Lincoln Road reaching $330 per rentable square foot net, conference pundits believe we’re closely approaching a time when retailers are going to push back by saying that rental rates are too high – and decrease their store footprints in order to survive.
The third key trend discussed at the NextGen conference is a paradigm shift, already in effect, from Internet back to in-store sales. Part of this shift is due to retailers’ omni-channel strategies and the ability of some to companies to think outside of the box. Examples range from Warby Parker to Bonobos and the new Scan-It-Yourself concept at Walmart. Starting with the high school class of 2010, the shift has begun from Internet back to in-store retail sales. At this point, only 13% of total retail purchases (excluding grocery purchases) are made online, with the typical U.S. family spending an average of $1,710 in store compared to $247 on line.
The truth is: We’re an experiential generation as well as the first truly online one, and that bodes well for both bricks-and-mortar retailing and our career aspirations.