The retail market is stable. This year, new store openings have offset retail closures and consolidations to hold the vacancy rate under 5% and finally produce positive net absorption in the third quarter. All good news, but retail owners are looking to squeeze better performance from their retail centers and continue to keep up in an ever-evolving retail landscape.
According to Cindy MacMillan, VP of asset management at Grosvenor and 2025 president of CREW Network, the secret is attracting the overlooked middle-ground segment. She notes that focusing on the retail experience is the best way for landlords to attract tenants and increase foot traffic.
Chasing the Middle-Ground Tenant
Retail landlords have been oscillating between two retail strategies: attracting value shoppers or targeting ultra-luxury retailers to capture higher rents. Either way, they are leaving out the middle-ground shoppers and tenants—but this is an important market segment. A shopping center that can capture the middle-market is set up for long-term success.
“In order to attract middle-market customers, the landlord needs to establish some critical mass,” explains MacMillan. "The tenants should offer a synergistic type of uses that really create an attractive destination for their specific customers.”
Landlords should think about the surrounding community, particularly if the retail is connected to a mixed-use property. The retail should always serve the community first.“Landlords need to get creative about ensuring that the retail really reflects the community who's living above or in and around the retail that they're providing,” adds MacMillan. “The right mix of tenants will help increase dwell time at the property, and that is really what you want.”
Eliminating Pain Points
Retailers aren’t only competing with other brick-and-mortar shops. Online shopping is now a standard part of the retail landscape, and it allows shoppers to make purchases on their own terms—any time and any where. Physical retailers need to provide the same level of flexibility to attract shoppers into the store by eliminating pain points.
The parking garage, store visibility and pedestrian walkways are often overlooked areas that can create an unpleasant experience for the customer, according to MacMillan. Parking should be easily available, stores should have great visibility and branding opportunities, both physically and digitally, and pedestrian walkways should be safe and welcoming.
“It really needs to reflect the omnichannel experience,” she says. “It needs to be convenient for the customer.”
Data Can Illuminate New Opportunities
Finding the right mix of tenants and creating a stellar retail experience isn’t easy, but with AI, landlords are able to gain more insight into what a property needs, what could work and what might not. AI tracks customer patterns through alternative data sets, like cell phones and credit cards, and with it, landlords can gain deeper insights into travel time, foot traffic, dwell time and tenant performance.
“Once you've got that data, you can use AI to run scenarios. Based on performance in existing centers, you can run scenarios to optimize your merchandising plan and put certain co-tenancies together that are complementary and would drive sales up for both of those retailers,” says MacMillan. Retail owners can make more informed decisions and curate the most valuable tenant mix.
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