Enhanced Activity for Apparel, Beauty, and F&B Retailers
August 2, 2021 • As we make our way through 2021, retail real estate continues to evolve. Pent-up demand has resulted in increased traffic and sales at brick-and-mortar stores and opportunistic tenants are entering into new leases. But the rules of the game are changing. Here’s what we’re seeing.
Enhanced Activity for Apparel, Beauty, and F&B Retailers
According to Placer.ai’s Apparel Quarterly Index 2021: Q2 visits to apparel stores increased 29.1% from Q1 to Q2 and 198.1% since last year, leaving a 6.7% gap when compared to 2019. The biggest winners were Macy’s: with a 42.6% quarterly increase; Belk: 44.2%; JCPenney: 40.6%; Nordstrom Rack: 39.4% and Kohl's: 33.5%. Specialty running retailer Fleet Feet’s sales increased 42% in Q2 at its 185 stores, fueling 4 new store openings this year and 36 additional openings through 2023. Beauty retailer Ulta plans to open 100 Target shop-in-shops in 2021, with 700 more to follow. Fast casual restaurateur Chipotle opened 56 locations this past quarter as its same store sales for the quarter increased 31.2% over 2020. Learn more
Retail Lease Terms Reflect Continued Uncertainty
Notwithstanding what could be called a tentative retail real estate recovery, continued volatility and high vacancy rates have given tenants the upper hand in negotiating the terms of new leases. Rental rates, lease duration and exit strategies are among the key terms that have been most impacted. Rent structures, traditionally dominated by fixed rent, are drifting toward a more dominant role for percentage rent, which is based on the tenant’s sales. Shorter lease durations and early lease termination options triggered by disappointing sales are becoming more standard. According to a recent article in the Wall Street Journal, landlords are also being called upon to shoulder a greater share of the initial tenant fit-out costs and, in some cases, to complete initial tenant fit-outs. Learn more
Traveling Retail Stores Offer Flexibility and Savings
Toyota’s Intelligent Mobility Systems unit has created a modular, mobile store prototype that can be transported by truck and set up in a few days. Digital apparel retailer Cuyana was selected by Toyota from a pool of 50 brands to test the prototype at 5 different Southern California locations ranging from curbside to parking lots, parks and courtyards. At each site, foot traffic, visit duration and other key performance indicators are being measured, including transaction data that will enable heat maps of Cuyana’s growing customer base to be created. If successful, the new mobility unit would enable landlords to monetize underutilized sites and retailers to test out new locations, in both cases, with a minimal capital investment. Learn more
Looking Ahead: Retail Spending by Gen Z
Many predict that Gen Zers (age 6 to 24) will be among the top retail spenders in the coming decade as compared to Millennials and Boomers. According to an ICSC Coronavirus Consumer Survey conducted in March, Gen Zers expect their future spending on leisure and entertainment to increase by 37% compared to pre-pandemic levels, with food & beverage a close second at 36%, followed by fitness: 35%, health and beauty: 34% and electronics: 30%. The survey results also disclosed that marketplaces with varied entertainment activities, food and beverage choices, personal care services, centralized pickup for online orders, and local merchants will entice Gen Zers to visit sooner and more frequently. Gen Z is also expected to be attracted to experiential retailing and retailers that embrace sustainability, with price as the driving factor. Learn more
Issues, Trends, Strategies and Best Practices for Retail Real Estate
Don’t miss ICSC’s Legal Forum’s 2020-2021 series of webinars on the changing state of retail real estate, curated and moderated by Ellen Sinreich. Topics covered include Modernizing the Retail Lease, Restaurants in the Time of COVID, Retail Bankruptcies, Look Ahead to 2021 and Reinventing the Mall. View the webinars