Right Sizing Commercial Retail Spaces
Two trends have emerged in the turbulent ocean of commercial real estate leasing and development in 2020 — brick-and-mortar retail is sinking, while boutique, wellness-centric, and office demand is swelling.
The forward-thinking retail developer’s strategy is now focused on converting idle retail spaces to boutique offices/retail spaces. Quirky, smaller, boutique offices have become the new play for many unused large retail assets or commercial warehouse spaces.
For developers the big-box retailers that “anchor” a large commercial development are few and far between, while smaller regional chains just aren’t leasing as much, because of stiff competition from Amazon and other online shopping entities.
Developers have begun “chopping up” large and medium-sized retail spaces especially in shopping malls and other retail-anchored environments. What used to be a Sears, J. Crew, Express, or JC Penny is now 1-2 or for larger stores 10-12 smaller businesses, everything from wellness centers to churches.
Many of the businesses thrive in open floor-plans. In some cases businesses like corporate offices that require a certain amount of sunlight for their employees, making the split of large pre-built structures difficult. In those cases, developers have resorted to splitting the larger unit into two halves with a street-side and a backside. The backside side being for businesses that don’t require a lot of window space, i.e. clinics, gyms, distilleries, etc…
In some cases developers have taken cold, dark shells of the previous big box store, that were hard-to-lease and added upgrades such as mezzanine levels inside or rooftops in order to make them more attractive to potential leaser’s or buyers.
As discussed in previous blog posts in the age of COVID many developers are retrofitting and repurposing all kinds of spaces from traditional restaurants and retail into libraries and wellness providers. By repurposing spaces to more consumer-friendly businesses like clinics, yoga studios, or libraries, developers are living up to the idea of creating a truly walkable, mixed-use environment where residents can live-work-play. That kind of innovative thinking will ultimately attract younger crowds and tech companies with millennials looking for those kinds of amenities.
These renovations are not easy, these types of innovative concepts involve building restrooms and break rooms for one space, rather than creating common, shared boilerplate cores. It’s great for creativity and additional amenities, but building that extra infrastructure can increase costs. But is a world post-COVID, this is the necessary thinking and re-imagining of commercial spaces that will lead to major innovations for developers going forward.