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Food Service Industry Updates Retail Industry Updates

How to Leverage Retail Data in the Here and Now to Bolster Your Real Estate Strategy

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As abrupt as the shakeup felt within retail real estate over COVID-19, those studying the industry generally agreed that what the pandemic yielded was not exactly novel. In fact, it was an acceleration of trends already underway within commercial real estate.

The landscape and demand for retail space are changing, after all. And when considering the future of retail real estate, we see a flexible, lighter footprint as a necessary part of keeping retailers relevant in an ever-evolving industry.

If recent trends keep up, some 10,000 stores could close in the United States this year, meaning “how many locations can we sustain?” has become the concern for retailers with brick-and-mortar real estate. One of the trickier facets to contend with among bigger retail players has been maintaining balance in the wake of regulatory flux between states. This forced retailers to get acquainted with dozens of mandates; comply at federal, state and local levels; and pivot when the mandates changed. Retailers began considering the space they occupied on a case-by-case basis.

I’ve seen this play out with many of the partners my company works with. Black Rock Coffee Bar, for example, was able to adapt its operation of 80-plus shops in the West to a heavier focus on drive-thru. And Bluestone Lane, which had a direct-to-consumer arm in place, built on its online capabilities at its coffee shops, which are located on the East and West coasts.

Despite industrywide bursts of ingenuity, revenue for retailers has dropped across the board. Thus, real estate presented an opportunity for companies to reduce their financial burden. Those able to analyze their own real estate data found themselves well-positioned to act quickly and stave off serious losses.

Retail Real Estate in the Here and Now

Shopping behaviors lend valuable insights for traditional retailers with brick-and-mortar real estate. Short-term pop-ups have always been a useful testing ground for brand consumer development. Save that market, however, property companies have a natural preference for longer fixed leases. With a worldwide slump in physical retail sales, though, more flexible options suddenly yield more prospects.

Ultimately, it’s a buyer’s market. That means property owners will be more likely to permit flexibility within commercial lease agreements to keep occupancy from dipping even lower. Consequently, we can expect to see a swift, continued boost in demand for more flexible leasing. Pop-up, low-budget and short-term options will be more in demand now than in years previous.

Dark stores represent an additional byproduct of retail’s evolution. Some businesses are shifting physical locations from the store setting to a more warehouse-like operation in which orders placed online can be packed for local pickup and delivery. Similar trends are happening in food service given that the pandemic upended much of the restaurant industry, which shifted demand toward food delivery.

Food app delivery platforms such as Uber Eats and DoorDash only furthered the move, allowing food seekers to order from the comfort of their own home en masse. Another result of this change was the ghost kitchen. As with dark stores, this model works strictly as a cooking facility for takeout and delivery, and it could drive a global market as large as $1 trillion by 2030.

Digital Best Practices to Keep Your Operation Limber

While seemingly complex, data has a stabilizing role to play in navigating a market split between disruption and evolution. In a post-COVID reality, data should inform retail strategies as they relate to commercial leases in particular. Having relevant data at a moment’s notice is immensely helpful in making correct business decisions. Despite the gradient of this task, companies will be well-served by tracking legal, financial and critical date information for effective commercial lease management.

Proprietors should know the language of their leases at the very least. Force majeure, termination and “Acts of God” clauses are all things buried in leases that, left unnoticed, can represent missed opportunities. When an event arises, you’ll be better able to identify opportunities to negotiate more favorable terms and reduce risk.

Consumer insights are pertinent, too, as customers are especially forthcoming with expectations. What are they saying about on-the-ground experiences? As a retailer, you’ll want to capture those insights and integrate what’s tenable. Beyond identifying the right technology for the task, you can assess your current brick-and-mortar real estate operation to see what moves your commercial lease might allow for. (You’ll never know without looking, after all.)

Operational flexibility and access to relevant information are what retailers need most right now. With each — and the will to adapt toward futurity — companies will be poised to effectively navigate new operational terrain while ensuring their retail strategy doesn’t leave them in the dust of yesterday’s best practices.

Andrew Flint is a co-founder at Occupier, a transaction and portfolio management software helping commercial tenants and brokers manage their real estate footprint. Occupier’s software helps teams make smarter, more informed lease decisions by centralizing the way they work. In turn, teams ensure alignment between their real estate decisions and business successes. Flint, based in New York City, has a wide breadth of experience in the sales and commercial real estate spheres.

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