LAS VEGAS — The retail industry could stand to rid from its lexicon the word “experiential” and maybe throw out “authenticity” as well.
As the International Council of Shopping Centers wrapped the 2016 RECon retail real estate conference, attendees — of which there were more than 36,000 — had the words experiential, Millennial and authenticity beat into their heads. If they didn’t hear it from the conference floor, the concepts made their way into the conversations of panels talking about everything from leasing to development.
And for as much as the words became overused to the point of losing meaning, a panel assembled of developers and retailers talking urban development reined the conversation back in and managed to show projects aren’t just about smacking in a local restaurant — the golden child of retail leasing at the moment — and calling it a day.
“The answer isn’t to do an urban location and put a restaurant in it,” David Stanchak, chief real estate and development officer at Restoration Hardware, told an audience during a panel at RECon.
The furniture company has proved a case study in what it means to create spaces far evolved from places merely meant to transact.
Take RH Chicago, the Gallery at the Three Arts Club, which fuses a gallery, café, wine tasting room, espresso bar, garden courtyard, design atelier and lounge areas spread across six floors totaling nearly 70,000 square feet. Fifteen marriage proposals have occurred in the café at RH Chicago since its October opening. Some 800 to 1,200 people are served there daily and there are lines outside the door Fridays through Sundays before the space opens, Stanchak pointed out by way of exemplifying these aren’t just stores the company’s building out.
“It’s creating something that is magical,” Stanchak said. “That’s what we have to do: throw everything out and destroy today’s reality of retail. We’re like residential that’s blurring the lines between residential and retail. We think urban is the right kind of cool place to be doing it….It’s a whole different way of thinking.”
RH’s Meatpacking District location in Manhattan, the real estate of which it acquired, is set to open next year, and aside from the gallery, will feature a guesthouse where people can stay.
Bottega Veneta’s recently opened Beverly Hills maison is another good example, said Richard J. Johnson, senior real estate specialist for the Americas at Kering, the brand’s parent. The 4,828-square-foot boutique designed by creative director Tomas Maier fuses together styles from Southern California’s Mediterranean and Mexican Colonial Spanish revivals. A similar tack of creating a market-specific location will be taken with Bottega Veneta’s future New York boutique.
While tenants are key to any project, site selection in urban development provides the backbone on which success is measured. That process varies depending on the retailer, but for luxury brands it’s slightly different from most, Johnson pointed out.
“We as luxury brands tend to clump together and cluster together,” he said during the day’s panel. “We also look for iconic locations.”
The latter point of which provides a 401(k) plan of sorts on the real estate decision. Iconic locations can boost real estate value, which is why some houses choose to purchase the properties in which they reside, thus shielding themselves from rising rents and providing peace of mind for the long term. Still, Kering doesn’t own any of its properties in the U.S. and isn’t currently scouting locations, Johnson added.
Acadia Realty Trust, as a real estate investment trust, owns its portfolio and tapped downtown Brooklyn, N.Y., to be the site of its City Point project. The development boasts three residential towers and some 700,000 square feet of commercial space, anchored by an Alamo Drafthouse, Century 21 and Target. A portion of the project had originally been earmarked for big-box tenants, but feedback from retailers and residents had the developer addressing the missing food component, requiring an $11 million design change to accommodate a 6,800-square-foot food hall that will see Katz’s Delicatessen expand to its first location outside its original Houston Street shop. Just be sure not to call the space a food court.
“Food courts are for B malls and C malls and airports — not for Brooklyn,” Chris Conlon, Acadia executive vice president and chief operating officer, told the crowd.
Store environment goes a long way in producing an experience for Kering’s luxury brands that can’t be duplicated online, Johnson said.
“We’re a little protected on the luxury side from the Internet,” Johnson said. “People tend to look online and purchase in store. We do have robust online sales but it’s just an additional incremental growth.”
Restoration Hardware, being in the furniture business, is also more insulated from the pains retailers, such as those in the apparel business, may be feeling. The Internet is important, though, with about 50 percent of sales done online. It’s not so much about next-day delivery for RH customers in store as much as it is being able to offer something in the real world that doesn’t waste people’s time by sending them to physical stores that look the same across a chain, Stanchak said — a sentiment echoed throughout Vegas over RECon’s four-day run.
“To me, it really ends up being how do you solve time for customers?” Stanchak said. “How do you make their interaction with you very respectful of their time because, really, that’s the ultimate luxury and we’re in the luxury business. We don’t think about digital versus physical. It’s physical with digital.”