Experience Based Retail Continues to Shine

Experience Based Retail Continues to Shine

September 19, 2019 | print | Industry News

When we outlined our asset-level retail strategy in the 2016 white paper, The Age of Experience Based Retail, we explained why we favored assets that cater to tenants with a focus on experiences. This strategy was based both on the widely observed trend towards e-commerce spending, and on an examination and forecast of our internally developed “experience-to-stuff ratio.” We calculated the ratio as 1.3x at the time, meaning for every $1.00 spent on stuff, $1.30 was spent on experiences. 

 

Today, our analysis of Bureau of Labor Statistics data suggests that around $1.50 is spent on experiences for every $1.00 spent on stuff. We believe this has contributed to stronger demand in centers with experiential elements such as restaurants, showrooms, event space, and activities. Stores that are primarily goods based have faced headwinds from both the trend towards spending on experiences rather than stuff, and the trend towards buying that stuff online rather than in a store. In addition to targeting centers with experience focused tenants, we believe many goods-based retailers are increasingly using their stores as showrooms, to help boost their online sales. The result is less need for inventory, and less need for a large format space. 

 

Our analysis of lease signings across more than 150 retailers suggests this trend is underway, with the median store footprint decreasing by 1.2% between 2017 and 2018, and we believe it will continue shrinking in the years to come. We therefore continue to focus on centers with experienced based offerings as well as centers with smaller spaces, or with layouts that could be subdivided into smaller spaces in the future.

 

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