The 30-year decline of department stores was merely accelerated by e-commerce and the recession of 2007–2009, panelists said at ULI’s Fall Meeting in Chicago. Shopping centers, having survived the worst contraction in 50 years, are often turning to restaurants and specialty retailers to replace department stores as anchor tenants.
“Just like after a forest fire, the survivors have regenerated at an accelerated rate,” said moderator Lev Gershman, a lead portfolio analyst and asset manager with GE Capital Real Estate.
Whereas there used to be a tier of top celebrity chefs able to open a high-profile restaurant on the strength of their name, cable’s cooking shows have generated many more such chefs, most of whom are fairly accessible to developers, said Randall Hiatt, a principal with consulting company Fessel International. Dining concepts such as quick casual, the more upscale “polished casual,” and Asian are thriving for Hiatt’s clients. “The restaurant business is back and indispensable to place making,” he said.
Morgan Dene Oliver, principal and CEO of Oliver McMillan, says he’s less enthusiastic about the celebrity chef–driven restaurants as anchors. “I want people who know how to operate,” he said. “The interesting things are the smaller things,” he said, citing a 1,500-square-foot (140 sq m) eatery he worked on in San Diego, where the footprint and overhead are small and the volume is high.
But big-box stores like Walmart are hardly going away, and may be coming to areas that were previously served by bodegas and dollar stores. “One of the growth areas is bringing the suburbs into the urban areas,” said P. Eric Hohmann, a senior managing director at Madison Marquette, which manages 23 million square feet (2.1 million sq m) of retail space.
Nick Egelanian, president and founder of SiteWorks Retail Real Estate Services, talked about the trade-offs between convenience and price. “I’m no apologist for Walmart, but they lower the cost of living near store locations by 20 percent,” he said. “We have 6 billion people [on the planet]. We need delivery systems like Target and Walmart to keep people alive.” Egelanian said Walmart will log $500 billion in revenue next year, compared with just $70 billion for online retailer Amazon.
“The bigger it is, the more parking there is, the easier it is to replace with the internet,” said Oliver. “That [type of] retail is vulnerable.”
Regarding restaurants, “the palette is getting more sophisticated,” said Hohmann. “There’s more entrepreneurialism in food than in fashion. And the capital is driving [entrepreneurs] to food trucks.”
Even food trucks are getting more sophisticated, Hiatt said, hiring bookers and using software to take orders and figure out where to park.
Hiatt also advocated for more mixed-use development. “Restaurants can’t survive on office [workers] alone. They can’t survive on lunch,” he said.
Oliver singled out infill development as an area of interest, saying, “The big money wants to invest in infill. No one says you are ‘too urban.’ ”
Egelanian also expects more concepts like Apple Stores to take hold—retailers controlling their own brands and even able to take a small loss during an economic downturn. Department stores were quick to slash prices during the recession, he said.