The Must-Have Element for Luxury Retail

NEWPORT BEACH, CA—Unique concepts, upscale retailers and purveyors of aspirational items are essential for luxury retail centers, but the real key is an element of exclusivity, Strategic Retail Advisors partner Jim Clarkson tells GlobeSt.com. The retail real estate brokerage and consulting company was recently selected by Craig Realty Group, the owner and developer of the 81,658 square feet of development surrounding the premium outlet center made up of shops and pads fronting Avenida Vista Hermosa in San Clemente, CA. Clarkson says with the Outlets at San Clemente, the firm plans to deliver “a mix of luxury tenants that include high-end retail shops and dinner houses that will cater to the affluent population of the Southern California region to complement the outlet stores.” We spoke exclusively with Clarkson about what types of tenants work best in luxury retail centers and what to keep in mind when leasing up these centers.

GlobeSt.com: What types of tenants work best/worst in luxury retail centers?

Clarkson: Restaurants and upscale retailers that focus on aspirational luxury items and apparel tend to work best in luxury retail centers. Unique, chef-driven restaurant concepts definitely win over large chain-dining options, and smaller-format stores that focus on quality over quantity are successful as compared to big-box and discount retailers. A feeling of exclusivity must be reflected in the brand names and tenant mix in order for a high-end shopper to identify with a luxury center—even one or two “bad” brand names can impact a center's overall appeal. The South Orange County area has one of the highest income per capita in the country, and they expect quality and uniqueness. The Outlets at San Clemente will attract high-priced stores at discounted prices based on these demographics. People want to experience different kinds of upscale restaurant concepts that are new to the area and include known chefs. We are currently canvassing Los Angeles and San Diego for these types of restaurants that may be looking to come to Orange County.

GlobeSt.com: Which are the best types of markets for luxury retail centers?

Clarkson: Many successful luxury retail centers are a component of mixed-use projects with uses like entertainment venues, and they target markets near high-end residential neighborhoods with affluent demographics in highly visible locations. While they often become destinations, convenience for local residents remains critical. As I've mentioned, South Orange County with a population of about 1.5 million people has one of the highest income per capita in the country. The Outlets at San Clemente will easily cater to this population. It backs up to the I-5 freeway and carries 230,000 cars per day. In addition, accessibility to the project is made easy by the interchanges on both sides of the project.

GlobeSt.com: What do owners and brokers have to keep in mind when leasing up these centers?

Clarkson: When leasing luxury retail centers, strong demographics and household income immediately surrounding the center are the most important factors. In addition, securing the right mix of tenants is key to bringing consumers in and keeping them at their center for a longer period of time. Finally, having affirm understanding of other luxury retailers surrounding the property is instrumental in learning what works and, most importantly, what doesn't work in a given trade area. Quality tenants are key. The higher the demographics, the higher the quality of tenant that is demanded. People want to buy quality and nice things if they have the money to do that. If you can find quality products at a discounted price, the demand is huge. If you bring in the “ho-hum” tenant, it can really change the feel quickly. This applies to restaurants as well.

GlobeSt.com: What else should our readers know about luxury retail?

Clarkson: The luxury retail market is starting to expand and evolve in different markets throughout the country. Luxury shoppers are a much more diverse group than ever, with wide-ranging tastes that seek quality and authenticity, which creates even more competition in the luxury-retail market. Millennials, in particular, are willing to make big purchases, but they will absolutely do their research online prior to making a purchase, and they expect an experience when they do go in-store, as evidenced by brands like Restoration Hardware opening gallery stores and Tom's adding a coffee shop and Wi-Fi to its flagship location.

The Internet has changed shopping today, and landlords need to be aware of it. Twenty percent of Christmas shopping last year was done online. That number will continue to grow as the younger generation grows because that's how they have been raised to shop. Shopping needs to be a “pleasant experience” to get the consumer off the computer. Landlords need to recognize this and focus on making their shopping center an experience and a place to go. Make it fun; add fountains, enhanced landscaping, sitting areas, music, etc. We will always have the “A” shopping centers because they're already a great experience and in great locations, but the “B” and “C” centers need to adapt or their vacancy rate will continue to climb.