Declining Rents And Investor Concern Forcing Mixed-Use Developers To Rethink Retail
Bisnow interviewed Fifield EVP Lindsey Senn on the future of retail in mixed-use communities. Read the full article at this link.
“The twin crises of e-commerce’s rise and the coronavirus pandemic hit retailers hard, diminishing their reputation among investors and lenders. But mixed-use developers say whatever its current troubles, retail will always be needed to create properties appealing to the widest possible range of tenants, and it still plays a key role in their work.
“While retail is not directly driving value in the near term, we still strongly believe retail indirectly drives value by setting a tone for the building, generating traffic and providing a unique building amenity,” said Lindsey Senn, executive vice president of finance and development at Fifield Cos.
That doesn’t mean it isn’t being looked at differently now. Institutional partners are more skeptical of using retail and can cite data on its declining rental income, Senn added. Assembling the puzzle pieces of a mixed-use development won’t be as easy as it was even one year ago.
“As a result, we are reconsidering the amount of retail in new developments but not excluding it completely,” she said.
The overall conditions mean curating retail for mixed-use developments will be more challenging from now on and warrant a cautious approach, especially in less-established trade areas, Senn said.
Placing retail outlets on the second level of a project could be risky, she added. Instead, keeping even the high-quality retailers on the ground floor and in the sightlines of casual shoppers and passersby is the better option. Sticking with retailers considered essential in a pandemic, or ones that provide services to residents, may also be necessary, as will limiting the size of retail suites.
Fifield is leasing up Logan and has found that filling up a development’s retail spaces in the midst of the pandemic is far from impossible. A small-format Target store occupies 27K SF. Other spaces were taken by a Verizon store, an ice cream shop and casual restaurants including a Korean-style barbecue. The retail space is 70% leased and the company is close to signing a deal with a dentist.
“We’re still getting great traction from potential tenants,” Senn said.
But in the future, many mixed-use developers may still have to get more creative with their first-floor retail spaces, she added. The good news is that space is flexible. Developers could choose to ramp up parking or expand other services such as bike storage.
“There are a lot of options or puzzle pieces which you can fit in,” she said.
One option Fifield is considering for future projects is a blending of retail and residential spaces. It is looking at options like finding a coffee shop or doughnut shop owner willing to use the seating space of a building lobby for its customers, sharing it with residents and bringing in foot traffic and life.
“It’s challenging to find operators that want to share space, but I think we will start to see more of that in some markets,” she said.
No one knows how long this troubled period for retail will last, but Senn said it won’t be short.
“I think all of this is going to impact retail going forward beyond the next 12 to 24 months.”