The Stable Economy Favors Growth: The five year-long bull market in the United States gives impetus to the notion that commercial real estate (CRE) offers strong investment advantages – especially in markets where supply is limited and the book value of projects has been growing incrementally.  In December, the Federal Reserve encouraged CRE investors with predictions of long-term stability in the markets and very limited inflation. Employment gains across the country also augur good things for CRE as demand for office (principally creative office) has grown apace.

 Urbanization and The Millennial/Boomer Effect: An explosion of milennials into the workforce and their preference for inner city life has fueled expanded development for office, residential and retail in core markets across the country. Added to this trend, a stream of boomers leaving suburbia behind for “downsized” urban dwellings, has strengthened and made more competitive the growth of city neighborhoods that offer a range of amenities and transportation options.  This demographic shift is predicted to continue into the next decade or more – and will reward investors and developers who can leverage demand with appealing and well-priced supply.

Ecommerce Shaping Retail Development: The growing impact of ecommerce on bricks and mortar stores will be felt even more strongly in 2016 and in the years ahead.  Shifting shopper preferences and space pressures in urban core markets will lead to an expanding palette of mini-shops (City Target) and quick trip store formats that cater to office workers with limited time and micro-unit residences.  At the same time, retailers will be investing ever more heavily in technology solutions that can compete with the convenience of ecommerce and experiential scenarios such as cocktail receptions, in-store fashion shows and pop up stores that make a shopping trip “fun and fierce.”

Increasing Foreign Investment in U.S. Real Estate: Despite some hiccups in the Chinese economy and the economic pressures felt by Europe because of the migrant crisis, foreign investment in U.S. real estate will remain strong. The passage of FIRPTA reform in December, 2015, has been a factor in expanding investment by foreign pension funds – including Canadian and Asian funds.  The Association of Foreign Investors in Real Estate (AFIRE) reported recently that its members expect 2016 to be a growth year.

 Core Market Appeal: Urban gateway markets (New York, Boston, Washington, D.C., Los Angeles, San Francisco and Seattle as examples) will continue to feel strong demand for office and residential space.  This trend rests on demographics (see trend 2 above) and on limited options for development or redevelopment because of geographic boundaries and pre-existing density.  Developers with expertise in adaptive re-use of properties in key urban locations will fare well and are seen to be active in these high in-demand locations.

The post 2016 – The Year Of Emerging Commercial Real Estate Trends appeared first on PLACES.

More than just showing up: Experiential marketing is a two-way relationship between consumer and brand. Shopping malls know first-hand that engaging customers takes more than just showing up. In today’s competitive retail environment, it is vital that marketers give customers an invaluable experience that surpasses their initial purchase. Building “brand love” is more than creating foot traffic in your center. It necessitates a true commitment to crafting memories that are not only treasured, but ones that will capture the consumers’ attention so they come back for more. For example, lululemon doesn’t want shoppers walking out the door because their size or color choice is not in store. Consistent in any lululemon store, lululemon has stationed iPads throughout the shop so a lululemon sales associate can search for sizes and colors to order directly from the website and have it shipped to the customer’s home or office.

Consumer Choice: Retailers are forcing the consumer to make choices between the convenience of online shopping and truly experiencing the brand in a brick and mortar setting. The main challenges facing shopping centers includes; the potential for information overload, streamlining their messaging and learning how to add another layer of experience. Consumers are becoming more selective in the brands they buy and the shopping environments in which they make those purchases. What marketers are beginning to realize is that malls have an “in” on what will become a sought-after trend – new fall fashions, window displays, hot cuisine trends.  More and more, mall marketing teams are “hacking” their own social pages and using them to capture shopper interest via Instagram or Pinterest. Another area for enticing and keeping the customer’s attention is by creating an environment that makes the shopping experience unique and fun. Trendsetting Urban Outfitters recently acquired The Vetri Family’s Italian restaurants. The retailer offers its customers pizza for snacking on, which has been successful in satiating both the customer’s hunger for food and fashion.

Customer Interface: Customer interaction is key to creating that personalized encounter. More and more, retailers are bringing back “customer service” through vehicles that make consumers feel good about their retail shopping choices. For example, personal stylists curating fashions for customers, such as Trunk Club, which was recently bought by Nordstrom, have generated a luxury-inspired service that feels exclusive, but caters to all consumer budgets. Restoration Hardware offers a membership program, where customers pay a $100 fee to receive “member” discounts, and have access to personal design consultants who can help them decorate an entire home. Shopping Centers have also capitalized on this model as they continue to make shopping a more convenient and pleasurable experience with VIP perks such as parking, charging stations for electronics, free Wi-Fi, shopping bag storage and same-day delivery.

Pay It Forward: Shopping Center marketing teams often struggle with not being in complete control over the customer’s experience. Today, communication has become transparent with social media re-posting, re-gramming and re-tweeting, and marketers know that showing customers that they place a high value on their choice to shop at their center is key to creating brand loyalty. By “paying it forward,” malls can express their appreciation so shoppers feel pampered and rewarded. It pays to be kind, and with that in mind, Shopping Centers can take that meaning literal by thanking their customers through humble gestures, which leave a lasting impression. This can be demonstrated by something as simple as offering to carry shopping bags to their car or an Uber-type car service to drive them to their hotel, office or next destination. Retailers are paying it forward to, for example, if it’s raining, the Dry Bar, known in the beauty industry as the premier blow dry specialists, gives complimentary umbrellas with the retailer’s logo.

When used to its fullest capacity, experiential marketing can produce endless possibilities and successes for shopping malls. By creating meaningful experiences, the marketing strategy goes beyond the shopping center entrance and can influence and inspire customers. Honing in on targeted experiential marketing tactics will ultimately translate to increased foot traffic, “brand love,” and retailer leasing opportunities.

The post Turning Shopping Centers Into Coveted Consumer Brands: How Experiential Marketing Is Transforming The Traditional Mall appeared first on PLACES.

The PLACES Team took a look at which malls and shopping centers are thriving in the post-recession millennial generation, vs. the ones that have failed, examining several components of “A Malls” vs. “B Malls” and their re-development across the country. We analyzed the common characteristics of “A Malls” and their growth, as well as the technology that is changing the face of how we learn about and consume products, services and retail goods.

“Malls Are Dying” Is Not the Whole Story

Overbuilding, a mass recession, the rise of e-commerce, and several big brand retailer bankruptcies have forced landlords and property managers to re-envision a Foot Locker into a health clinic, a Sunglass Hut into mixed-use office space. According to Greenstreet Advisors, nearly 25 enclosed shopping centers around the country have closed since 2010, and another 75 are in danger of failing.

The International Council of Shopping Centers (ICSC) reported that since 1990, when 16 million-square-feet of mall space opened, shopping center building has tailed off, and only one large new mall has opened in the U.S. since 2007. Technology and emerging entertainment alternatives have all subtracted considerable traction from America’s traditional enclosed mall model. But it’s difficult to compare apples to oranges.

A combination of socio-economic forces have revolutionized consumer habits and spending across generations and demographics. The number of individuals living below the poverty line has nearly doubled since the recession in 2008, wiping out a large group of consumers who populated the B and C mall brands. Department stores have experienced rapid consolidation, leaving fewer options for traditional department-style anchor tenants, and discount retailers like T.J. Maxx and Target have replaced J.C. Penney and Macy’s as the popular go-to retailers for home essentials and personal care products. In addition, millennials want a product no one else has. Shoppers want discount, but another portion of them want authentic and luxury. The middle has bottomed out. The Wall Street Journal recently reported that “A Malls” currently make up only 3.5% of malls, yet account for 22% of all value. According to Goldman Sachs 2015 list of top 100 malls in the U.S. 75 percent are home to an Apple store, up from 69 percent in 2014.

Short Hills Mall in New Jersey, considered one of the most high-trafficked, and maximum sales per square foot mall properties in the country, has anchor tenants Bloomingdale’s and Saks Fifth Avenue peddling luxury leather and skin creams to a much higher net worth demographic than the malls in tertiary markets with marginalized retail concepts that can’t compete in a more sophisticated retail scene. “B Malls” are traditionally classified by their location in secondary markets, and the range of $300-500 per square ft. in sales, according to National Real Estate Investor.

Century III Mall, once a bustling shopping hub among suburban Pittsburgh residents, recently closed after being burdened by a 70 percent occupancy rate with sales revenue hovering at $200 per square foot. Highland Mall in Austin, TX, suffered a similar fate with a 61% occupancy rate. So what is to become of all the overbuilt square footage in these shuttered properties?

Mayfield Mall in Silicon Valley was bought by Google, and re-purposed as office space for Google Glass. Hickory Hollow Mall became a satellite campus for Nashville State Community College and opened a practice rink for Nashville’s NHL team. Other properties have morphed into apartment buildings, botanical gardens and medical facilities.

When Madison Marquette stepped in to re-develop and manage Richland Mall in North Central Ohio, they knew they had to meet a growing need within the community beyond just retail. In 2013, Avita Health Systems bought the property, providing a new opportunity for food and other mixed-use concepts in addition to providing on-site jobs. By swapping out old infrastructure for the installation of drop-irrigation tanks, the building was retrofitted for a modern energy management plan. When Avita Health System opened Phase I in December 2014, center traffic increased by 15% with a 3% increase in overall sales, a successful model of a strong re-use development.

Since fewer, if any, retail properties are being developed from the ground-up, existing ones are looking for innovative ways to re-market their square footage, like Highland Mall in Austin, TX, which is being converted into a campus for Austin Community College, complete with classrooms, and a culinary arts center. Springfield Town Center in the densely populated suburbs of Northern Virginia, closed for renovation in 2012, after suffering double-digit revenue losses during the recession. It re-opened in October 2015 with a spa, a children’s lending library and a movie theater with recliner seating, and is being re-positioned to take center stage as a community retail and entertainment destination for surrounding residents and businesses.

Experiential Shopping and the Millennial Market

The rise of the millennial spender and the shift in consumer shopping habits is so complex, the Wall Street Journal has dedicated an entire series in their business section to examining the topic. Retailers’ longstanding model of saturating every market with outposts of their brand has been adapted into creating fewer, but more upscale stores and shopping destinations with a multi-purpose appeal.

Bloomberg News has reported that millennials aren’t that into malls, compared to the previous generation X who grew up in the “mallrat culture” of the 90’s. Developers, therefore, are not only focusing properties around housing, dining and entertainment options, as millennials want to live closer to work and play; but also have to think about how to integrate their merchandising into mobile-friendly marketing concepts that draw shoppers into their physical locations, and not just the screen.

Millennials and the next generation of shoppers desire outdoor spaces and garden rooftops, dining options that are local to their environment, and unique retail they can’t find online or in every chain across America. In losing traditional anchor tenants like Macy’s and J.C. Penney, once the go-to purveyors of appliances, lawn care equipment and towels in every color, developers are reinventing the experiential side of shopping, with on-site programming and events like wine tastings, movie nights, and interactive playgrounds to merge the evolving interests of a more connected than ever population of consumers.

The post The Decline of the Traditional Mall and the Evolution of Experiential Shopping appeared first on PLACES.

But with $200 billion in disposable income per year, they’re too big a market to write off. It is possible to develop profitable retail, residential and office projects for millennials, but they have to be carefully designed for their very specific needs.

The Millennial Mindset

Millennials, born between the early 1980s and the early 2000s, pose an interesting contrast with the Baby Boomers who were born in the late 1940s to early 1960s and those in Generation X, born between the early 1960s and early 1980s.

Boomers are aging and starting to retire in large numbers.  They’ve shifted their lifestyles from accumulation of things to spending on experiences like travel and eating out. They’re also doing a lot of downsizing and are gravitating towards urban areas (like millennials). Gen Xers can be broadly defined as “Big Box” shoppers focused on value, sandwiched between saving money for retirement and often still subsidizing their millennial children.

Millennials are different in many fundamental ways. They tend to be trend conscious rather than brand conscious, are very technically literate and do much of their buying and socializing online. They are more heavily influenced by their peers through social media and gravitate more towards buying from socially responsible companies they feel they can connect with.

Development Wish List

In retail, office or residential space, the one word that sums up millennials is “efficiency,” whether that refers to a project’s size or its environmental impact.

In developing retail, millennials don’t always need a physical place to hang out with their friends. Gen Xers grew up hanging out in malls. For Baby Boomers, the gathering spot might have been the town square. Millennials are just as comfortable connecting with their friends on Facebook or other social media.  This means you need to create a compelling experience to attract them in a space that’s often much smaller but more technology-rich than a traditional retailer.

This is one reason we’re seeing a shift from large stores with extensive inventory to a hybrid of traditional retailing and “showrooms” where customers can see or try on products but have them delivered to their homes.  Ten years ago, what would have been a 5,000-square-foot store is now 1,500 or 2,000 square feet with no product in the store people can walk out with. You walk in, get fitted (if the product is clothing) and your purchase is shipped to you the next day.

At La Brea, Madison Marquette’s 90,000-square-foot adaptive re-use development project in Los Angeles, we’re seeing a lot of these trends take shape. One tenant, Bonobos Guideshop, has no cash registers. All transactions are done on an iPad. It features a “SELFY Mirror” that takes a customer’s full-length picture as they try on clothes, allowing them to text or email it to a friend for their approval. There’s no inventory, and all deliveries are shipped to the shopper’s home. That’s the sort of technology-infused experience it takes to keep millennials engaged.

As you think about the types of retail tenants you want your projects to attract, ask yourself if they are selling commodity or specialty items.  For commodity products, millennials can go to Amazon or elsewhere online and get it shipped the next day. But for specialty goods, you want to make the retail environment more of an experience, and you can use technology when appropriate to make it more interesting. That’s the way to get millennial customers out to the mall and visiting the other shops and restaurants in your development.

Another technology enhancing the retail experience is digital storefronts that use large LED screens alongside, or even instead of, merchandise that lets a retailer create a new look for a store with a flip of a switch. It’s a cost-effective way to “reinvent” a store almost on a daily basis to reflect the trends your millennial audience is following. We’re also seeing, of course, the increased use of social media to track customer preferences and draw customers into the store.

Since millennials are into efficiency, they also prefer smaller residential spaces, but with proximity to good jobs, quality shopping and entertainment. Access to mass transit is even more important to them than other age groups because of their reduced affinity for car ownership and driving which some claim is a result of millennials’ somewhat lower incomes and student debt.

One thing that’s worrisome, though, is whether developers are overbuilding tiny studios and one-bedroom apartments. There’s a multi-thousand-unit development in Los Angeles, for example, that offered less than a dozen two- or three-bedroom apartments.

What happens when millennials start making life-changing decisions like getting married and having children? If we haven’t built somewhat larger units for them, or those units are too expensive, these millennials will be forced to move to the suburbs as they age. The generation coming after them may not be large enough to fill these units.

On the flip side, there may actually be a market for larger, but still space-efficient, two- to three-bedroom units in urban centers for millennials as they age that also caters to the retiring baby boomer generation. Amenities such as quality shopping and dining, employment and mass transit will continue to be key influencers.

In the office market, millennials again favor quality experiences and connecting with their peers over space. They don’t need a corner office with a mahogany desk and walls. They’re fine with pods (cubes are on the way out) along with nice gathering spots for groups.

Just as retail footprints have shrunk, we’re seeing the traditional office space dropping from 250 square feet per person to 150 or even 100 square feet today. With increased density comes the need for more parking and better amenities. This means not just the quick sandwich you’d see in the lobby of a traditional office building, but a more gourmet sandwich offering at a higher price point. Think about an interesting sushi restaurant where employees can hold meetings and the kind of stores where employees will want to shop on their lunch hour. By providing such things at La Brea, we’ve been able to realize accretive rents.

Success Story

Our La Brea mixed-use development in Los Angelesis a good example of how creative use of a site can deliver a profitable development catering to millennials.

Millennials are socially and environmentally conscious and respond to a location that has a story behind it. We spoke to this by featuring the building’s wood truss ceilings and exposed brick and steel beams. With specialty retailers taking less space than traditional retailers, we “short-sheeted” the building with shallower retail stores and used the extra interior space for creative office units. Since employers want their employees to stay longer and work harder, we structured the offices with break out rooms and attractive gathering places.

By being flexible and creative, we’re able to achieve a premium in rents. Offering amenities and building creative office space allowed us to achieve rents in excess of market rate; today, the retail part of the project is currently 100 percent leased while the office space is 94 percent full.

It’s also important to note that millennials tend to avoid anything that feels like a cookie-cutter approach. Every project, every property and every urban core is different. To reach them, it’s critical to understand the nuances of the project and of the specific subset of millennials you’re targeting: A creative district of struggling artists or non-profit workers demands a different approach than a higher-income cohort of young professionals working in gaming or ecommerce.

Millennials have an enormous amount of spending power but are probably the most difficult generation to fully understand. Stay nimble and creative and you can serve them profitably.

The post Developing for Millennials: Tips From the Trenches appeared first on PLACES.

There is a reason that you’ve been hearing about millennials everywhere: They cannot be ignored any longer. Millennials have not only reached critical mass in the consumer marketplace, but they are widely expected to outspend the boomer generation by 2017. Millennials now make up the majority of the coveted 18- to 35-year-old demographic and, in fact, have more 24-year-old consumers in America than any other age. In short, millennials are here to stay, and it’s time for you to do something about it.

But do what?

Below is a deep dive into some of the characteristics of millennials and how you can make your property irresistible to them based on what engages them.

Millennials live to collaborate. The oldest Gen Yers have been collaborating on social media since the MySpace and Xanga days. During their school years, they witnessed the transformation of their classrooms from neatly organized rows of desks facing the teacher to the ultra-collaborative classroom with desks grouped in pods facing each other. Collaboration is ingrained into the millennial mindset, and that’s good news for us.

Millennials desire to collaborate with everyone –even brands. And that includes you. Create marketing campaigns that invite millennials to not only interact with your brand, but to participate in the creation of your brand. Have them tell your brand story through their perspective. Mockingbird Station, a mixed-use development in Dallas, recently held a “digital fashion show” that paired local fashion bloggers with influential photographers to create their own fashion shoots to share via social media. Check out #MockingbirdStyles on Instagram to see an example of how millennials are collaborating with the retail brands at Mockingbird Station.

Even millennials’shopping experiences are collaborative. Millennials usually travel in packs when they do anything. Eating out, shopping, going to the movies, drinking at the bar – Gen Yers share their experiences with each other as well as larger groups of friends and acquaintances on social networks. Since millennials want that sense of community and enjoy large community events, start thinking about your property as a gathering place with a mission focused on building community. Large events like concert series, food festivals, outdoor movies and fashion shows attract millennials and give them a chance to connect with others – and this doesn’t just mean giving them the chance to connect with people their own age. On the contrary, millennials enjoy the company of other generations just as much as their own. Gen Y is the generation that loves to hang out with older people.

Which group of “older people” are their favorites? Their parents. Gen Yers have strong bonds with their parents, and that’s good news since a number of millennials are currently living at home with them as a result of the recession. Because of this “family pack” mentality, millennials are even influencing their parents’ buying decisions. From home purchases to fashion choices, Gen Yers are guiding the conversation often with ample amounts of online research about the products they – and their families – are purchasing.

The key takeaway? Don’t hesitate to include family-friendly events in your local marketing efforts to Gen Yers. Most of the older millennials are in their 30s now with small children; they’re “famillennials.” Therefore, multi-generational events that bring people together work very well at retail or mixed-use properties.

Millennials are often proponents of “social justice” as well. They want to leave their mark, to do good for the world, and gravitate toward brands with a social justice-minded business model. As a result, brands like TOMS, the Arkola Project, and Patagonia are creating loyalists out of millennials, and like-minded, fair-trade companies are becoming the go-to choice when making purchasing decisions.

Seek out social-justice minded retailers, and align your property with “doing good.” Team up with local nonprofits or charities that benefit when people do business with you. Better yet, integrate a charity or nonprofit in every campaign or promotion you run.

Millennials have become a generation that is constantly under scrutiny, and they’re looking to prove themselves as a force to be reckoned with. Aligning your property with their goals and principles will help initiate the conversation with this growing consumer group and give you a chance to take part in their ever-popular lifestyle.

The post Unlocking the Millennial Mind appeared first on PLACES.

Millennials are far less loyal to particular brands than older generations have been.  They’re driven instead by their individual desires for rich, personal experiences.  Brand names mean much less to millennials who don’t need the “insurance” on their choices that a known name affords. Rather than stick with a familiar hotel or restaurant, they go online to get instant tips from their peers on what’s new, interesting and trendy. They will take more risk, looking less for the safety and security of a brand name and more for the upside in new experiences, interactions with their peers, and the ability to project a certain self-image associated with those experiences and surroundings.

When it comes to lodging, millennials demand more personalized, more casual and more rewarding choices than their older peers. In anticipation of these demands, the lodging industry has created a dizzying variety of “lifestyle hotel” choices over the last 15 years. Even the most mainstream hotel brands have unveiled their own lifestyle concepts, sometimes together with edgier partners who create emotional, even visceral experiences for guests.

Experience is King

“Lifestyle” hotels mean different things to different developers, but in general a lifestyle or boutique hotel provides the guest an experience that goes beyond just clean, comfortable surroundings and convenient food and drink. You know you’re at a lifestyle property when you see unique décor ranging from high-tech to recycled industrial coupled with inventive food and beverage offerings. There will be a “buzz” in the lobby as locals and visitors alike connect with one another in inviting surroundings rich with local culture and nouveau architecture.

Of course, the lifestyle hotel offers accommodations that provide the basics of comfort and safety, but it goes well beyond the well-known bland, corporate look, enhancing the experience with:

• Designs that reflect the unique history and culture of the surrounding area
• Sophisticated furnishings and appointments – especially those involving the latest technology – but not necessarily large amounts of room space
• A high-energy social environment with live music, drinks and comfortable, inviting common spaces in which to socialize
• Amenities that cater to Gen Y’s desire for healthy, authentic experiences ranging from loaner bicycles to vegetarian or vegan food 

Lifestyle Development

Obviously, creating a lifestyle atmosphere requires some new skills.  And since so much of the experience is about the surrounding area, the wise developer will pay sharp attention to local lore, eye-catching oddities and uniquely memorable pursuits available nearby.

To get a feel for how this works, look at The Wharf, a 50-acre redevelopment project in Washington, D.C., being co-developed by Madison Marquette and PN Hoffman & Associates. This development will revitalize the last remaining waterfront property in one of the nation’s top tourist areas by incorporating elements of a lifestyle destination in its featured hotels as well as in the overall design and selection of both its retail and its food and beverage offerings.

The Wharf will appeal to residential customers drawn by the waterfront location and the proximity to the Federal Triangle South complex of federal offices near the National Mall, but it will also be equally appealing to business travelers and tourists.

According to Daniel McCahan, Senior Vice President, Project Management with Madison Marquette, the key to the development is making The Wharf a lifestyle destination that will draw local residents whose very presence will make it more attractive to tourists and business travelers. The draws will include a rich mix of retail, food and beverage options as well as a 6,000-seat performing arts building that can double as a convention center.

The developers of The Wharf tweaked the design to create “found spaces” like those comfortable nooks in an older city, something which Brant Snyder, Madison Marquette Development Manager, describes as “cool side streets with a more intimate environment.” Additionally, Madison Marquette is working with the operators of the 9:30 Club, a highly popular club in northwest Washington, to recreate that experience in a larger physical space at The Wharf.  Snyder says Madison Marquette wants to make The Wharf attractive to people from Maryland or Virginia as well as Washington, D.C. – anyone who wants a night on the town or to go to a show or just take a walk along the water. “Because the locals will think it’s cool, people both in the region and nationally are going to want to come here,” Snyder explains.

For a different experience, a ferry will take visitors across the Potomac River to East Potomac Park which features a golf course, a tennis facility and paths for running, walking and cycling. McCahan says the goal with The Wharf is to allow people to model it to their lifestyle: “It will be different things to different people from the extroverted tenant to the introverted tenant, the business traveler and the tourist.”

The developers are also investing more money up front to create spaces that can be easily converted to other purposes, such as a pier that can be used as either a boat landing or a restaurant.  Loews’ lifestyle brand, the OE Collection, would have been a perfect fit for The Wharf, and if the OE Collection had been launched a year or two earlier, we would have competed for a site in The Wharf to complement our more traditional DC offering, Loews Madison Hotel.

Making Lifestyle Work

Making the lifestyle concept work requires careful choices as well as some tradeoffs. For example, The Wharf will include an InterContinental Hotel serving a high-end clientele as well as two less extravagant hotels – one an extended stay, the other a lifestyle – with a combined 400 beds.

So how does one pick the right lifestyle hotel for a given project’s desired look and feel? According to McCahan, it takes many rounds of interviews with various brands and operators. The hotel brands selected had aesthetics that matched the developers’ vision, including designs that look like a redeveloped older industrial space rather than a brand-new concept.

According to McCahan, one important clue that a hotel operator understood the experience The Wharf’s developers wanted to achieve was when the hotel operator mentioned a retailer it hoped to attract – the same retailer McCahan was already luring into a prominent project location.

Step Out of the Box

Rather than focusing leasing efforts on national chain restaurants, to draw the kind of lifestyle-oriented diners The Wharf wants, Snyder says the developers focused their attention and negotiations on a variety of best-in-class local restaurants with star chefs at varying price points.  The idea is to offer a variety of styles from white tablecloth to sit-down to more casual atmospheres.  Similarly, the hotel development plan is to provide more than the familiar standard brands.

Retail and lodging are both areas where a lifestyle developer might need to be flexible and look past standard economic rules-of-thumb and expectations.  An example of that flexibility might be accepting a slightly lower rent to secure a retailer who will help create the “buzz” that will draw large numbers of visitors, something which justifies higher rental rates for other properties in the development.  In the hospitality realm, the best example may be Ace Hotel in New York, where the developer went with finishes and furnishings well beneath any four-star standards but has ended up with revenues dramatically higher than nearby four-star competitors.  “Retail drives the lifestyle concept and it’s how people are going to experience the site,” Snyder says. “You need a mix of users to unlock the overall value. That means you can’t be locked into what you had in the pro forma that projected the financial return or your original plan. To create a place people want to come to – whether it’s to shop or to stay overnight – you’ve got to be especially creative with the retail.”

Finally, developers need to walk a fine line between being trendy enough to draw attention from millennials, but not so far out that they turn off more mainstream or older customers. Snyder says the developers aren’t going for the safety and security of large national chains, but generally speaking, they are looking to work with people who have proven concepts and a track record of success: “It’s a balancing act. If you want something that’s more exciting, there is a little bit more risk, so you have to be diligent about who you partner with.”

The rise of the millennials and the subsequent need to change how we think about development is certainly a challenge. But it also brings some excitement and creativity to our vision for Loews Hotels and our ever-increasing focus on being a key part of great multi-use developments. Above all, millennials are our future customer base, and the developers that meet their needs soonest and most effectively will reap the highest rewards.

The post Hotels Lures Millennials with Lifestyle Concepts appeared first on PLACES.

Q. What trends are important to monitor in today’s real estate investment market?

M: It is very important to look at population growth as well as the jobs which drive the need for more office and retail space. In addition to tracking millennial trends, we also look at where people are retiring to and where young families are moving. To stay informed and make good decisions, it’s critical to examine where the growth is occurring.

Q. What are some of the most important factors institutional investors look for when making real estate investments?

M: They are looking for long-term durability, strong credit ratings and whether there are stable anchors. On the office side, in addition to larger private-sector credit tenants, some institutional investors look for General Services Administration (GSA) buildings – office buildings that have government agencies as tenants. While these kinds of investments have a low yield and low return, they are very secure, which is a plus.

Q. What are some of the most interesting investment opportunities for 2016 and beyond?

M: Emerging submarkets that are on the cusp of becoming primary submarkets are going to be very interesting. Recent examples of this include targets like Miami’s Wynwood District, Design District, downtown Brickell area and Flagler Street. Brickell and Flagler were part of a sleepy downtown Miami, and Wynwood and Design District were industrial areas comprised mainly of old warehouses and low-income housing. With the growth of the urban core of Miami taking off in the last few years, we have seen leasing take off in these submarkets with new, hip retailers and restaurants, along with some of the more desirable high-lux standard bearers, and in turn, we have also seen soaring property valuations.

Other interesting investment opportunities include secondary markets that have been devoid of a dynamic urban core environment, but are now experiencing an influx of young professionals from markets such as New York, Boston and San Francisco. Whether their relocation is due to their attending school in the market or because of a job relocation, they originally hail from markets with strong and vibrant downtowns, and therefore are driving growth in the urban core of their new cities and leading the change to a dynamic downtown. Sun Belt cities seem to have been the primary beneficiary of this trend.

Q. Why should real estate investors look to cities with an upsurge in millennials for new investment opportunities?

M: People in their 20s and 30s typically spend more because they have more disposable income. This is why millennials are a great target for retailers. There are great opportunities for those investing in assets that house retail stores, restaurants and bars since millennials tend to spend freely on things like clothing and eating out. On the flip side, millennials can be transient, and their patterns may change as they marry and start families, so you have to be mindful of this trend.

Q. Are retail-centric properties a safe investment?

M: Yes. Grocery-anchored centers are your bread-and-butter investment, especially if they are in a good location. So, if a center has the right grocery anchor, is well located, and has services and restaurants that cater to an affluent and meaningful local population, we consider it to be a safe, or core investment. Urban properties also tend to fall into the core investment group. Think about downtown assets in markets like New York City, San Francisco, Boston and Washington, D.C., where the foot traffic is significant at all hours of the day.

Q: How do you select the right asset to invest in?

M: There are a number of factors that must be taken into consideration when selecting an asset to invest in: Where is the location? What is the transportation situation? Where is the competition located? What is the makeup of the market? Madison Marquette likes to invest in coastal areas, for example, because they tend to have built-in barriers to entry, established or growing employment industries, and strong population growth trends.

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Q: What are some of the key strategies for driving traffic in today’s environment?

 LC: Customer experience is always an important factor in driving traffic. Parking should be easy to find (and paid for if required), a dynamic marketing and activities program including events that appeal to the community such as farmer’s markets and children’s programs, and a clean and well-maintained center are all important elements to creating a valued experience. It is also crucial to keep the community aware of new tenants and center enhancements, which can be done through advertising as well as marketing and public relations initiatives. Customers have a lot of options when it comes to making purchases, so owners and property managers must create a warm, inviting environment to attract attention and build and foster loyalty.

KW: In today’s tech-driven age, social media is also a key driver of traffic and in building customer loyalty. Of course having the right merchandising mix is integral as well. As Lori noted, it is always important to create an atmosphere where shoppers want to visit and stay. Creating that special experience for a shopper is the advantage a shopping center will always hold over online shopping. With the ever-changing, fast-paced world we are now living in, we have to be quick to adjust to consumer needs on all levels to continue to provide that “experience” that shoppers crave.

Q: How has the millennial generation impacted the tenant mix, services and amenities offered at centers?

 LC: Customers today are extremely price sensitive and millennials desire information at their fingertips. Centers that offer mobile applications and social media incentives create a stronger brand which can help capture this new generation of consumers.

KW: The millennial generation is extremely tech-savvy and is typically well-educated and ambitious, but they also want everything now. As shopping center managers, we have to take the instant-gratification desires of this generation into consideration when deciding on tenant mix and what retailers, restaurants and entertainment options we are making available at the center. How do we get millennials into the mall and how do we keep them coming back are questions that must be asked when determining center offerings. Amenities such as Wi-Fi, mobile apps, marketing campaigns, and promotions that include social media are an important part of reaching this generation. Engagement is key.

Q: How do you enhance the shopping experience at your centers?

 LC: I manage neighborhood shopping centers and there are a number of things we can do, even in the absence of a marketing budget. We enhance the customer experience by keeping the center clean at all times, providing beautiful landscaping that is constantly maintained, providing common area music, and ensuring tenants adhere to the center’s design and operating standards. The easiest thing a Property Manager can do is to ensure their vendors are performing their duties to the highest standards on a daily basis. Customers will often forgo shopping at a neglected center.

KW: Different kinds of properties require different things to create an appealing experience. Events, merchandise and marketing must be tailored to the demographics and needs of the community. My centers are primarily mixed use, community centers, which are unique in that they have to appeal to residents as well as customers from the surrounding neighborhoods and communities. I find that focusing on grassroots efforts can ensure we are meeting the needs of our customers and residents. This can include paying attention to shopping/visiting habits and monitoring social media for customer feedback. Additionally, property managers must work with their merchants to enhance offerings and possibly create cross-promotional opportunities among various retailers.

Q: What can centers do to stay relevant?

 LC: Today’s shopping centers must embrace technology to stay relevant. At a minimum, shopping centers should offer Wi-Fi services as more and more customers rely upon an internet connection as an integral part of their shopping experience. Leasing plays a big role in merchandising the center. The merchandise mix and entertainment and dining options must appeal to the local needs and therefore having an experienced, effective leasing team, and working together with that team is a vital component of keeping a center relevant.

KW: We must follow the trends and listen to our customers. Whether through the center’s website, Twitter feed or Facebook page, property managers must make sure that we are engaging our customers and capitalizing on the viral nature of these outlets to tap into customers’ networks and appeal to broader audiences. These channels allow centers to promote sales, events, community involvement and foster engagement with the center, keeping it top of mind with consumers.

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Millennial spending power, the “jeans” concept and the grocery evolution

Women’s Wear Daily, in partnership with Berglass + Associates, conducted a retail study determining that millennials’ annual spending power in the United States is $200 billion. They are expected to outspend baby boomers by 2017 and are influenced by online brand advertising more than keeping up with their friends’ consumer habits. When it comes to dealing with money, baby boomers were traditionally known to spend, while Generation X saved. Generation Y combines characteristics of both—they “earn to spend,” as they value time and work-life balance over the workaholic boomer generation, inventors of the 50-hour work week.

We can trace the evolution of shopping, branding and psychology through the ways in which each generation purchases clothing and groceries. Boomers will buy seven pairs of jeans because they value acquisition and quantity, while their children value quality. Generation X saw the onset of boutique brands sprouting up with price tags and exclusivity far beyond the stalwart household names like Gap and Levi’s. They became more attracted to the likes of 7 for All Mankind and Citizens of Humanity as a means to differentiate themselves from their peers. Meanwhile Generation Y relies on style to make a statement — vintage, pre-washed or skinny.

Similarly, grocery stores went from selling the same Kraft and Oscar Mayer packaged goods and frozen dinners during the boomer era, to touting hundreds of small-scale, locally sourced organic lines of pressed juice, kale chips, soy milk and beyond. Generation X and millennials are health-focused and willing to pay a premium for seasonal boutique brands and farmer’s market goods over the convenience foods of their parent’s generation. While baby boomers valued the suburbs and the convenience of a Sam’s Club or big box retailer, Generation X and Y are trending toward urban environs and are more interested in a greener, lighter footprint on the environment and their utility bills.

Over time, the shopper’s environment has shifted from enclosed malls of the boomer generation to the open-air centers with entertainment and lifestyle options of today. According to a survey conducted by the Urban Land Institute, Generation Y spends more time researching products, price comparing and scrolling through online clothing and retail sites as opposed to the impulse shopping of prior generations. At the same time, discount department stores reign supreme for Generation Y, and pop-up shops, limited-edition clothing lines and exciting, young designers control their interest. Problematic centers with traditional anchor stores will have difficulty maintaining applicability for a generation of Amazon.com and online J.Crew shoppers; however, both gen X and Y continue to frequent shopping centers (predominantly those centrally located in neighborhoods or communities) at least once a week.

Economy, Employment and the Digital Age

What does the evolution of the economy and the work environment say about each generation? The career paths of Generation X and Y have evolved from that of boomers, where an employee stayed in one job for forty years, collected a pension, a 401K and retired. The paved road to a lifelong position with one employer has developed into a fragmented career at multiple companies. According to the Bureau of Labor Statistics, the average employee today stays at one job for 4.4 years. Generation X is a smaller population than either the boomers or Gen-Y and largely better at saving than its predecessors, valuing smaller homes, cars and fewer consumer goods than their parents. For this reason, many retailers have largely ignored this group and are marketing to the larger, more demographically mixed Generation Y, the future of spending power.

Millennials were the first generation to grow up completely embedded in digital technology and social media. While Generation X was calling their friends in high school and college, millennials were texting, Tweeting and Instagramming their lives for public consumption. They face a society vigorously designed for the individual. No longer a one size fits all, television programming, music, sports, clothing, food and entertainment are all fragmented to gear toward niche, personality-driven consumers with open access. The seven TV stations of the boomer generation have made way for 700+ channels, customized toward individual preference in a way that speaks directly to their audience by mirroring their interests and emotions on the screen. Online advertising, inbound marketing, tiered business development and personalized service have both complicated and leveraged the multitude of opportunities to reach end users in today’s consumer marketplace.

Retailers and marketers are racing against one another to reach a new generation with limitless capabilities and significant spending power. They have more platforms on which to do so than ever before, through Pinterest, Twitter, Tumblr and Facebook. It’s never been easier to reach an intended audience, but by nature of these millions of options, it’s also never been more challenging. According to Tumblr’s most recent press report, it hosts over 178.4 million blogs (and growing) with an average of 92.9 million posts per day. Pinterest is adding paid advertising and news agencies, travel companies, clothing brands and bloggers are all competing for market share on the success of such a visual platform to showcase their products and services.

It turns out we raised more questions than we could answer, as each generation has overlap and cultural factors that make it more or less like its predecessor. One thing that remains fixed: Each generation rebels against their parent’s era, endeavoring to make their own lives more fulfilling and balanced. Boomers still want to have cool gadgets and clothes, while segments of Generation Y are buying bulk at Sam’s Club. Retailers and marketers need to tap into the enormous influence each generation has on one another to understand the core impact their environment and age group have on the marketplace. They need to recognize that each generation is distinctive and that successfully selling to a consumer today requires understanding in detail who the target consumer is, what drives them and why.

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