Justin Taylor, Head of Cushman & Wakefield EMEA Retail, discusses structural change in the retail sector and what’s next.
What is so interesting, is when we talk to clients and colleagues in the Americas, Asia and Australia, many of the trends we are seeing in Europe are replicated in those markets. There is a convergence of societal trends, such as more people living in large urban centres at increased density, with digital trends which are causing an unbundling of the retail value chain, meaning a shop’s original purpose as a place for transactions and distribution of goods in some cases is weakening.
The consequence of this convergence will mean existing assets will need to be repurposed and transformed and new urban places will need to be more relevant, vibrant, and engaging to customers and communities.
The real estate agenda is moving steadily away from a singular focus on retail mix towards how many uses can work together for mutual benefits. There is growing recognition that the physical lines which once rigidly separated the functions of living, working, entertainment and shopping need to be almost entirely removed.
How well urban locations adjust to the changes already and irreversibly underway, will be defined partly by how they respond to that most fundamental of human drivers: the desire and/or need of people to be in a certain place and to capture that “Instagramable” moment with colleagues, family and friends.
Pleasure and purpose as core of experiential retail
As the “armchair economy” (everything available on digital request) trend grows we are also witnessing counter-lifestyle trends emerging. These include the need for belonging, health and wellbeing and a desire for visitor attractions/experiences. The behavioural drivers for customers in the future will be an experience which delivers ‘pleasure’ and ‘purpose’ and these need to be core to the offer of a physical place. We see one great example of this on the Funan redevelopment in Singapore, where the former IT mall is now being re-positioned as an “experiential playground for the senses”.
To reflect these changing global trends and how they will impact real estate, at Cushman & Wakefield we are moving away from historic property sector definitions of retail, offices, residential towards a language which reflects customers’ missions and emotions. We envisage these future mixed-use destinations being termed “Social Spaces”; better reflecting the underlying human purpose and emotion.
Foot Locker’s flagship store in Hong Kong, for example, is one shopping destination that takes experiential retail to the next level with leisure areas that encourage its customers to linger in the store. These social areas include comfortable seats, selfie mirrors, lockers and a gaming zone.
We are seeing similar trends in the office and co-working sector where increasingly the employer needs to locate where the talent pool lives and is available. The employee is increasingly looking for a more vibrant, engaging and changing place to live and work.
Social spaces such as Foot Locker’s Hong Kong store will be increasingly important for retail and manufacturing occupiers as the purpose of a shop transitions increasingly to a place for brand engagement, product awareness, intention to buy and aftersales service, rather than simply transactions. In turn, this is likely to lead to a need for a different or variable rental/income model which better reflects the value of a store to both owner and occupier. To achieve this, there will need to be more alignment of interest between the owner and occupier where there is shared risk and reward, based around the success of the physical asset.
As we look at the future, we see a positive trajectory for retail in a changing world. For the ‘right retail space in the right location’, when organised with high-quality public realm and with an appropriate mix of other uses, these locations will be a magnate as social spaces. This is because it will deliver pleasure and purpose to the user and create the places where people want to spend their time. As we all know, time is the most precious of commodities and it is our choice how and where we spend it.