April 2, 2018
There are countless prognostications about the future of retail that run the spectrum: a quick search for ‘the future of retail’ will tell you that brick and mortar retail is dying at the same time as it highlights successful eCommerce startups building dozens of retail stores across the country.
You already know the truth: retail is changing – just like it always has. If you go back 20 years and look at the headlines, they covered in the death of Main Street and the boom of the mall and big box retailing.
The real question is, ‘How is retail changing and what’s next?’
The answer is in the data.
Commercial Real Estate has always been about information: gathering it, analyzing it, and then providing your clients with value. What we’re excited most about is the influx of new information coming into CRE.
More and more, building owners are installing sensor technology to gather real-time pedestrian and vehicle traffic statistics. Combining this with unstructured data from sources like search engines and social media enables us to overlay traffic volume with other data, such as interests, behaviors and income, giving retailers real, actionable data to find their ideal location.
Being able to ascertain the revenue a specific type of retailer can generate from a given location in turn gives LL Reps more information so that they know precisely what NOI is possible.
On top of that, the trendy business model for retailers is to start out as an eCommerce-only store and then expand to have physical locations. This gives them a large amount of data about their customers when they’re shopping around with their Rep. They can see where their site is getting the most traffic from, and the common interests of their fans on Facebook and Twitter, and use that to help with site selection.
The Long-Awaited Internet of Things
IoT has been on pretty much every ‘what’s next’ list for years. The idea of creating smart buildings to adjust temperature, humidity, and lights has had people excited for ages. Now, the addition of tech to give us more location analytics so that retailers can learn more than ever before about people’s in-store purchasing behavior, giving retailers a better ability to determine what building layouts work best, and which ones don’t.
This, layered with traffic data, likely makes for the best-informed tenant in history.
The Meaning for Commercial Real Estate
From CRE’s point of view, the need will be centered around gathering actionable market data as quickly as possible. With it, Tenant Reps will be able to see what building layouts and assignable area they will need to maximize revenue for the store as well as ascertain reliable revenue models to make sure the location is a good long-term fit.