A changing retail environment
By: J. David Chapman/January 19, 2017
In his 2017 State of the City address last week, Mayor Mick Cornett expressed concern with the drop in sales tax revenue in Oklahoma City.
He placed at least part of the blame for the decrease on self-reported internet sales and the difficulty in collecting local sales tax on these transactions. These comments caused me to contemplate the changing environment of retail real estate in our community.
Cyber Monday 2016 was the largest online shopping day in history. I expect this rapid expansion of online shopping to continue; however, I don’t believe we are seeing the end of brick-and-mortar retail. We will see instead a shift in the traditional shopping center layout and tenant mix. The typical retail store is getting significantly smaller and retailers are focusing more on the experience of shopping.
The term experiential retail describes the effort of retailers focusing on providing a fun and exciting experience. Shoppers not only want to touch and feel the product they are buying, but also want to be engaged and entertained in the process. Not only is this something consumers cannot get with e-commerce, apparently it turns out they are actually willing to pay more to get it.
In order to be successful, property owners and landlords of retail malls need to listen, understand, and adapt to this consumer desire. The physical layout of the shopping center and overall destination must change. Urbanization and revitalization of downtowns across the country are showing us the direction and trends of retail. This can be seen right here in Oklahoma City by taking a stroll in Midtown or through the Plaza District.
The term adaptive reuse is critical for owners of traditional shopping centers. As retailers continue to shrink their footprints, owners are going to have to get creative to backfill the big-box vacancies left by former tenants. Here in Oklahoma City, these large-box spaces left vacant are being backfilled by entertainment and training-type uses such as indoor go-kart tracks, trampoline arenas, cheerleading, dance, tumbling, baseball, basketball and indoor swimming facilities. There are a myriad of opportunities out there for property owners that are willing to think outside the box and be creative.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).