California Centers

MAY 2017

California Centers Magazine serves retailers, developers, shopping center owners, investment sales brokers and tenant representation firms throughout the state of California.

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Page 54 of 56

48 California Centers Magazine | May 2017 C C REVEALING RENT RATES Another emerging trend, albeit a slow moving one, is that of landlords disclosing rates for short-term spac- es. In North America, almost all spe- cialty leasing opportunities are listed with rates "to be determined" (TBD). Landlords have preferred to not dis- close the price they seek for a particu- lar space or to keep options open and this approach has worked well in an inefficient and random market place. This model still has a place in spe- cialty leasing. However, as the tem- porary leasing of retail, promotions and advertising spaces becomes nor- malized across the retail sector, oper- ators will increasingly expect to know what market rates apply for spaces of interest to them. Moreover, TBD is of- ten also a disincentive for operators to progress their interest in a partic- ular space. In Australia, many short-term "commodity" spaces such as carts, vending machines and marketing opportunities are advertised with a set weekly or monthly rent. While the rates of certain temporary spaces will remain open to negotiation the concept of showing actual rates, or at least indicative rates, is likely to gain momentum as specialty leasing tran- sitions to a more traditional and or- ganized marketplace. The market not the landlord ultimately determines rates. MORE CLICKS & MORTAR RETAIL Online retailers recognize that the bulk of consumer spending will con- tinue to take place in retail centers. An interesting market force adding fuel to the pop-up fire is the concept of "clicks and mortar" retail — online businesses experimenting with and opening temporary shops or kiosks to create a physical presence. And they're finding real benefits from this retail double act since: • Face-to-face interactions are im- portant. Real customer interaction is stronger than virtual encounters. • Bricks-and-mortar enable a com- plete sensory experience and provide a sense of community. Consumers are still human beings, not robots. • Online retailers can meet and interact with customers where they live. This real experience can bring the brand closer to the hearts and minds of the shopper. Online retail and physical shops are not mutually exclusive. They are com- patible — a hand in glove approach in this new retail world. Amazon is presumably basing its pop-up strate- gy on this reality and as Scott Gallo- way comments in his book, "The Rise of the Pop-up," "Stores are the new black in the world of e-commerce." EXPLOITING TECHNOLOGY TO LIFT EFFICIENCIES It's no surprise that technology is influencing specialty leasing on two key fronts. First, there's the growing use of technology with automated retail concepts and digital marketing op- portunities. In what could be a first of it's kind, a store has recently opened in Melbourne's coastal suburb of St. Kilda with nothing in it except for vending machines selling assorted consumer products. No humans serv- ing customers, no EPOS, no creative visual merchandising, no fancy build outs — just state-of-the-art vending machines across all the walls in the shop offering shoppers the products they want. The trend of automated retail and technology to replace tradi- tional short-term retailing techniques is sure to gain momentum. Then there's the use of technolo- gy to help landlords and short-term retailers and promoters reach out to each other and connect far more effectively than before. Innovative platforms are disrupting inefficient practices of marketing short-term opportunities to operators and the traditionally awkward processes op- erators face identifying, assessing and booking spaces. For a typical op- erator to find out what opportunities are available in a particular center, to then hunt down the right person to negotiate with can often be more than a minor challenge. Operators can, at the click of a button on their phone or tablet, find, assess and book spaces of interest while landlords can now eas- ily list all their short-term options on one platform and simplify processes. It's a solution for both parties. The use of technology will contin- ue to positively support specialty leasing through automated retail and marketing techniques, as well as with more efficient matching of suppliers of temporary locations with users of such locations. AN INCREASE IN EXPERIENTIAL RETAIL There's always been an element of theatre with every successful retail enterprise. Ray Kroc, founder of Mc- Donalds, famously remarked all those years ago, "when you open the doors and you turn on the lights, you're on stage." Short-term retail demands creativity and theatrics to create a "wow" and pop-up operators are in- creasingly engaging customers with experiences such as sample tasting, product testing or other innovative interactivity. Creating an exciting, in- teractive or physical experience for the consumer is becoming the pop-up retail norm. WHERE TO FROM HERE? It's pretty clear that shopping cen- ters and retailers are adjusting their business models to meet fast chang- ing consumer behavior. The millen- nial shopper is no longer attracted to clinical shopping centers when they can use their time more effectively and buy what they need cheaper else- where. Whichever way one interprets these trends, retail is undergoing rapid structural change. It's a case of adapt or die, however specialty leas- ing is well placed to exploit the con- tinuing shifts in consumer behavior. CC Stephen Katz is CEO of Casual Lease, a company specializing in bringing short- term tenants to shopping centers.

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