The Primacy of Place: Staying Competitive in a Shifting World for Shopping Centers

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Written for Minnesota Shopping Center Association (MSCA):
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It’s no surprise to anyone who is a member of MSCA, that the world of retail is changing. But with so much in flux, it can be hard to determine the direction of this change. During MSCA’s recent Learning Session on The Dollars and Sense of Placemaking for Shopping Centers, John Breitinger (United Properties/Cushman Wakefield), Jeff Hagen (Platinum Properties), and I discerned what we are seeing at a macro level and how we’ve made tactical changes to shopping centers in response.

A New Direction in Retail
We all know that the rise of e-commerce, demographic shifts, and economic change has introduced an unprecedented level of disruption for bricks and mortar retailers.
Savvy merchants are navigating – and thriving - by integrating online, mobile, and in-store experiences to deliver their wares, but where does that leave shopping centers? John Breitinger laid out four reasons for people to still visit bricks and mortar merchants and shopping centers that were “defensible” against online competition:

1. Convenience: most people choose to live in places convenient to shopping and consider it a quality of life issue
2. Service: there are certain elements of service that simply do not deliver as well over the wire or through a UPS truck that are an important part of the value proposition
3. A curated experience: an opportunity to present goods in very thoughtful way and to create interactions between producers and customers creates real value for both sides. 
4. Social: the ability to be around and interact with other people 

Towards a World of Extremes
Not only do customers have fewer reasons to need to visit a shopping center, competition between centers is becoming increasingly winner-take-all. In the past, the relative success of retailers and shopping centers within a market area followed a bell curve; a few did really well, a few were dramatically underperforming, but most were around the market’s average for occupancy. That is now changing.

In most markets, the bell curve has been inverted into a “saddle”. With the most frequent performance levels in terms of sales and occupancy now being either very low or very high. This is great news for those in the top quartile, but for the other centers, Breitinger warned that it has become incredibly difficult to revive one if it had lost its strong position. He added, “The strongest places are turning in the best performance on every measure.”

Two key strategies to regaining and maintaining market dominance: Tenant Mix and Creating a Vibrant Social Scene
The first two defensible reasons for people to continue to visit bricks and mortar shopping centers are primarily delivered by tenants. The mix of retailers has always been a critical element of a center’s success, but the ideal flavor of that mix has shifted. The grocery-anchor is still strong, but entertainment, restaurant, recreation, and destination services and experiences are all emerging as increasingly important features of successful shopping centers.

So if you have the right tenant mix – and especially if you don’t – how does one create a vibrant social atmosphere within your shopping center? How can you foster an experience that will draw people in, regardless of their initial desires, and keep them there longer once they arrive?

Placemaking as a Strategy to Create Social Life
The key to cultivating a vibrant experience and social life in any shopping center lies within its common area. These are the spaces that the owner completely controls, that every customer has to utilize, and that connects the tenant spaces to each other.

The process of placemaking requires thinking about your shopping center holistically and putting the wants, needs, and desires of your customers at the forefront. In helping bring social life (and financial returns) to dozens of retail, office, housing, and community spaces, we’ve found that there are six factors that needs to brought into balance:

1. The physical elements and design of a space
2. How that space is maintained
3. The activities, uses, experiences, and “events” that occur within that space

In order to determine what the right combination of these elements needs to be, one then needs to continually:

1. Engage directly with your users, tenants, and other stakeholders
2. Collect data and evaluate what is working and what isn’t
3. Communicate directly to your users, tenants, and other stakeholders

Placemaking Tips and Tricks to Generate Results
The learning session concluded with Jeff Hagen and I discussing our implementation of this placemaking strategy at the grocery-anchored Vadnais Square which his firm owned. Things that worked there, which are broadly applicable to other shopping centers include:

• Adding comfortable, colorful, and movable seating
• Using decorative lighting to frame and add energy to dark corridors and congregation areas
• Converting open expanses of sidewalk into semi-enclosed areas that are more comfortable for congregation
• Enhancing pedestrian pathways through crosswalks and adding visual interest along walking routes and arcades

Hagen reported that these additions had turned “Vandais Square (into) a hub of activity. Customers were eating outside in the revamped patio and then hanging out for hours. Vadnais Square became a gathering place for the community. The only complaint from tenants was that they want more of what we’d done.”

Additional tactics that we have deployed elsewhere that proved effective at cultivating social life include:

• Adding lawn, table, and board games
• Adding facilities for pets and bicycles
• Producing small reoccurring events in collaboration with tenants
• Deploying signage throughout a center that communicated new amenities, features, and destinations
• Introducing pop-up vendors into vacant and common area spaces
• Converting 1-2 parking spaces into an outdoor patio

The imperative is real and the possibilities are endless. Every shopping center has the opportunity to turn shifting trends into their new competitive advantage. And the process of placemaking provides us with the path to get there.

By Max Musicant, Principal: Placemaker, The Musicant Group