Earlier this month, the Englewood team headed to Las Vegas for RECon, the global retail real estate convention hosted annually by the International Council of Shopping Centers (ICSC). Attending this major event is always a terrific opportunity for us as a national commercial construction firm to meet with our national retail developer clients, network with new connections from across the country, and really take the temperature of the retail construction sector. Here are some of our key takeaways, trends and insights from this year’s RECon:
Positive Buzz for the Year Ahead
Across the board, the atmosphere at RECon was incredibly upbeat despite recent news coverage of major brands folding and the negative impact of e-commerce on brick-and-mortar retail. Those in attendance were overwhelmingly optimistic about the economy, and many agreed that retail’s contraction in recent years has been a good thing for an overbuilt market sector.
There was also a lot of positive conversation about retail opportunities in the coming year, particularly in the way of exciting concepts and growth in specific sectors. The family entertainment sector, for one, continues to be red hot, with many shopping centers courting concepts that combine arcade-style gaming and other recreation options with family dining. Not only do these large, family-focused venues help drive traffic to the mall by being a destination in and of themselves, but they are also a natural fit for the empty anchor stores many malls are trying to fill.
Big Discussion Around Repositioning Vacant Retail Space
Speaking of empty anchor stores, another hot topic at RECon was what to do with large vacant retail spaces. Retailers have scaled back their footprints significantly since 2008, some even cutting store size in half. That means in addition to empty big box locations and anchor tenant spaces – some measuring upwards of 120,000 square feet – there are also a number of vacant stores in the 30,000- to 40,000-square-foot range that owners and developers are trying to reposition. One popular solution is dividing these properties into spaces for multiple concepts with smaller footprints, from pet grooming to medical and more. There’s also a focus on entertainment concepts taking hold. For example, higher-end movie theaters that offer food service and premium seating are growing in popularity and becoming the norm, and many of these brands are finding a home in empty big box or mall space.
Finally, some owners are making the decision to simply raze bigger stores and sit on the land until something comes along or they can change the zoning to fit another project – often with an eye toward the hot multifamily sector. By and large, no one is lamenting having a vacant big box space, because owners have been able to recoup land value from what was lost during the recession.
One interesting trend that was more evident than ever during RECon 2018 was the presence of municipality representatives. These days, just about every municipality has a development director charged with attracting new businesses to their town and reaching out to brands, landlords and existing businesses to foster relationships and help guide the development process. While these development officers don’t have a direct role in real estate deals, municipalities are finding real value in sending them to events such as RECon in order to make connections, identify opportunities and keep their finger on the pulse of what’s going on. In the past we’ve seen just a handful of these municipality representatives at RECon, but this year that number grew significantly.
Restaurants Feed Sector Growth
Across the board, restaurants are still hot and a big topic of conversation at RECon. We heard about restaurant concepts that have been around a long time putting significant dollars into refreshing, repositioning and even relocating for better real estate. This is a trend Englewood’s restaurant division has experienced firsthand, particularly with several of our national restaurant clients tapping us to build out a new space when they move within a market to improve location.
Another trend we noticed at RECon – and have witnessed with our own clients – is national restaurant groups transitioning a space to a different brand in their portfolio. And in addition to refreshing, remodeling and renovating existing restaurant spaces, there’s plenty of buzz about ground-up restaurant construction, too – all of which points to another strong year for our firm in this busy sector.
The Online Effect
We would be remiss in not mentioning the ongoing impact of e-commerce on brick-and-mortar retail as a big topic at RECon. From our perspective as a national commercial construction firm, one of the most interesting effects is that online retailers are forcing the Wal-Marts and Targets of the world to start offering a whole new level of service to compete – particularly in terms of home delivery. That has fueled a huge boom in industrial warehouse construction, with that segment anticipating a big uptick in storage needs as retailers meet consumer demand.
We came away from RECon 2018 energized and excited. Even with changes afoot in the retail sector as it adjusts to shifts in the market and consumer preferences, we agree with the positive perspective of our fellow RECon attendees, and are looking forward to many new opportunities and challenges ahead for our retail and restaurant construction groups.