Despite uncertain economic conditions, retailers are expected to continue advancing their expansion plans throughout 2023. The goal is to be closer to consumers and to leverage hyperlocal leasing strategies to support last-mile fulfillment efforts. While these retailers anticipate opening the same number of stores, what has shifted is the footprints of these locations. Many brands are opting for smaller shops in the face of elevated inflation and interest rates, as well as in response to evolving consumer shopping behaviors.
“I am amazed when we stop to look at how we are merchandising our shopping centers now against how we did it even five to 10 years ago – it paints a clear picture as to how significantly our world has changed in such a short time,” said
Earlier this year, PECO cited a rapid expansion of healthcare providers among open-air shopping centers, and the “medtail” trend has advanced full steam throughout the year. Over the course of 2023, the company expects to see an even broader expansion in the concepts and uses emerging in this space. In addition to new names such as Sage Dental and primary care provider Oak Street Health electing to focus on grocery-anchored shopping centers as they expand, PECO has noted an uptick in veterinary health and wellness concepts joining the fray. These include
We have also seen popular fitness concepts, including OrangeTheory, revise their floorplans to accommodate shifting consumer preferences that emerged during the pandemic. Specifically, the fitness studio noted that members are not using lobbies, locker rooms or showers as they once did, opting instead to shower at home and not sticking around after their workouts are over. As such, OrangeTheory is decreasing the size of its lobbies and eliminating showers altogether in its new locations, allowing it to take space as small as 2,000 square feet. In doing so, the brand can expand to even more locations in smaller storefronts across the
Moreover, PECO notes that one of the most exciting health and wellness concepts currently expanding across the
The company has also noted an uptick in the number of quick-service restaurants that had traditionally gravitated towards in-line storefronts or lifestyle shopping centers seeking drive-thru and outparcel locations in neighborhood shopping centers. According to data from Placer.ai, these suburban markets offer retailers several advantages in today’s environment including comparable, if not superior, visit-per-location trends compared to larger markets; less competition; greater diversification of their customer base; easier access to labor as an “employer of choice” within a market; and less expensive build-out costs. These metrics result in higher-margin stores which are more profitable. In fact, national retailers are raising their long-term store base targets in these markets because they have proven to deliver the same or better store-level economics as traditional locations. In addition, Placer data noted that retailers such as Chipotle, Petco, Kohl’s, and Shake Shack all saw higher visits per location in suburban markets compared to the top 25 MSAs.
“The bottom line is we are seeing record leasing demand that is unlikely to abate anytime soon,” said
These insights are produced by PECO’s National Accounts and Emerging Trends team, which consists of a group of highly specialized leasing professionals that tracks over 400 accounts and actively engages with 150 growing retailers. This team travels the country meeting with brands to learn how they are evolving to identify creative ways that PECO can advance their real estate objectives. In the process, the team closely tracks and documents developing trends across different retail categories including grocery, restaurant, fitness, health and beauty, medical, entertainment and discount.
This deliberate information-gathering approach has proven extremely beneficial to PECO since the team was formed in 2016. This focus leads to collecting a copious amount of data that is constantly informing the company’s leasing strategies as well as how, where and when it chooses to deploy capital. The team’s efforts have resulted in new and stronger relationships with a wide range of innovative retailers that are redefining the retail landscape and customer experiences.
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