Though not an article about local Philadelphia retail real estate, BisNow London has an article called, If You Don’t Want Your Property To Become Obsolete, Here Are The 10 Things You Need To Know. The article cites a new study from the Urban Land Institute and PwC called Emerging Trends in Real Estate: The Global Outlook for 2019.
The customer used to be the capital markets, but now it is the person using the building.
The acute problem for the real estate industry going forward is how to value older, retail properties that are becoming obsolete in today’s new retail paradigm? The problem retail real estate investors face going forward, is how to begin properly valuing these properties before and after their conversion.
The article from BisNow highlights an interesting part of the retail paradigm where a number of retail real estate investors, may be trapped by their current leases and see the value in current leases and not find value in reinvesting money back into the property. This seemingly narrow-minded outlook could be the best option for many.
If you are a leveraged investor, you might know that the equity value of the scheme that you own is zero,” one investor said in the report. “With that in mind, the only value the property has for you comes from the leases that are currently in place.
So why would you invest money in the property or do anything that reduces the income from those leases?” On top of this, it will take some time before those willing to step in and undertake the process of repositioning retail get the chance, the report said.
Going forward retail property owners will need to elicit better feedback from those using their buildings. As the study points out the future of retail is going to be driven by the end users experience.
It is no longer okay to just give people a box and then not speak to them for the next 10 years. People want you to design, develop and manage the space for them. They want you to provide amenities, experience and help to create a community.
In our opinion experiential retail is going to play a big part in redeveloping older retail properties. The drive towards increased understanding of one’s tenant is only going to grow. The adoption of digital tenant engagement apps by the major REIT’s is an early first-sign in the drive towards increased tenant engagement.
It’s clear that to avoid obsolescence and remain relevant in the modern world, real estate will need to provide that amenity and experience that the ultimate end users require – be they office workers, shoppers or residents.
Technology will be key in measuring feedback from people – both in terms of what they say they like about a building as well as how they actually use it in practice – and in creating a clearer link between new uses and value.
Owners will need to forge closer ties with occupiers, to collaborate and analyse what’s working for the people using buildings, day in and day out. The owners who can assess how people want to feel about a building and fulfil that intangible demand will be the most likely to avoid their assets becoming obsolete.
If you are a real estate investor that is considering the opportunities offered by retail and older mall redevelopment than it is going to be important to continually focus on how you can drive value to your visitors. Adopting innovative mall marketing strategies is one step towards going forward.