By this time of year, most retail stores are decorated to the nines for the holiday season, creating the annual experiential effect that gets consumers in the buying spirit. Even as e-commerce shopping forecasts continue to set new records (market watchers say Black Friday sales grew anywhere between by 23-28% online this year), there’s no doubt that appealing to consumers strolling down the street remains one of the best ways to generate traffic, engagement and sales for retailers. With total holiday sales expected to surpass last year’s results, the death of retail appears to be greatly exaggerated, even in its physical incarnation.
But for commercial property owners faced with empty spaces this holiday season, even the most optimistic forecasts for brick-and-mortar resurgence don’t help the short term issue. This creates a conundrum: leave prime space empty, even during a season like the holidays; dramatically reduce lease rates; or get creative and fill your space in a more flexible way. Taking a page from the sharing economy strategy to optimize asset utilization – enabled in other sectors by companies like Uber and AirBnB – more and more landlords are choosing the latter, embracing the new reality of retail.
The good news is people still like to shop in person. A 2017 survey of experts pointed to the enduring appeal of in-store shopping during the holidays, including: It’s a ritual for many families and friends and a form of entertainment; stores offer ease of return that many online retailers do not; in-person shopping delivers an instant gratification that doesn’t translate on the web. In-store sales still win in several important categories, including clothing, which makes up more than 50 percent of all holiday purchases.
As Ed Kennedy of Episerver puts it, “E-commerce is not to blame for the ‘death of retail,’ because retail is not dead or dying.” What is clear is that the brick-and-mortar holiday shopping experience is changing, not disappearing.
Fear of commitment
So with a continuing, perhaps re-energized, motivation by retailers to physically get in front of customers during this peak shopping season, filling prime commercial space should be no problem for property managers and owners, right?
Yes, and no. There’s no question that property owners in major markets are seeing a steady decline in long-term leases and struggling to keep store spaces occupied, even in high traffic locations. While recognizing the value of a physical presence, especially during busy shopping periods, jittery retailers and brands are nervous about committing to the long-term overhead that typical storefronts have traditionally required.
Commercial real estate is jumping on the pop-up bandwagon
Short-term rental is an increasingly attractive option for both property owners and tenants. Pop-up is no longer a fad or a one-time tactic by brands and retailers. It’s forecasted to be a $50 billion industry and has become an essential ingredient in many retailers omni channel strategies. It has found a wave of new converts even in the world of digital natives. And, like Airbnb did for connecting property owners and short-term accommodation seekers, the trend is being bolstered by a growing infrastructure of enablers. At Storefront, we try to be this type of enabler by hosting a marketplace containing more than 10,000 listings of temporary retail spaces worldwide.
For property owners, a temporary space rental offers a way to address retailers increasing fear of commitment, yet still generate income from their space, often times at a premium rate depending on the time of year or location.
Jeffrey Yuan of Urban Stone Realty has seen more than a few iterations of pop-up stores. Yuan is the exclusive broker for the building at 107 Grand Street in New York’s Soho neighborhood, which has hosted pop-up stores for the likes of FILA, Canon, Kohls x PopSugar, and Netflix. So what makes this space so appealing to top brands during the holiday season and beyond?
“Not only is this space in a central location in SoHo, where foot traffic is never-ending, but it has something most modern retailers are looking for – a space with character,” said Yaun. With the modern brick and mortar shop being all about customer experience, a unique and compelling presentation is more important than ever. We are starting to see that genuine character being a large part of brand messaging, and what better time to capitalize on this than during the charm of the holiday season.
Yuan also credits the building’s success to accommodating and flexible building management, as well as strategic partnerships. While the ultimate goal of the store is to secure a long-term tenant, having short-term rentals has been a great marketing strategy towards that goal. That is why 107 Grand is listed on our platform.
“Storefront’s client list has been nothing short of phenomenal and their staff has been instrumental in helping us close these deals. All their brands bring exciting and unique ways in transforming the space,” said Yuan. On the retailer side, pop-up shops have been on the rise due to a changing consumer behavior, and brands are experimenting with the best way to present an omnichannel experience to their customers.
Although the concept of a pop-up shop has proven its here to stay, many brands are just now embracing it. As the benefits become clearer and temporary space more available, we will see an increase in brands looking for space to host their first pop-up shop this holiday season. For example, e-commerce giant Wayfair recently opened their first holiday pop-ups. Even eBay, who launched its first toy catalog, Toytopia website, and a pop-up shop in Chelsea, is getting in on the pop-up trend. Retailers are getting creative with how they use temporary spaces, with notable trends such as setting up merchandise pick-up locations for online orders, installing internet kiosks to actually place orders online, and opening temporary post-holiday sales venues to clear out unsold merchandise.
The message to property owners and landlords is clear. Just because you don’t have a long-term tenant in place for the holidays, don’t think there isn’t an opportunity to generate income from your space. A smart move is to list your space on a pop-up marketplace and take advantage of this evolving innovation in retailing.