FTI Consulting Survey Finds Mall Landlords Are Out of Sync with Retailers’ Biggest Concerns
November 15 2017 - 7:30AM
FTI Consulting, Inc. (NYSE:FCN) today released a survey that finds
a significant gap in the perceptions of mall and shopping center
landlords and their retailer tenants about the role of brick and
mortar stores, as well as retailers’ top business concerns.
According to the FTI Consulting Retail Real Estate Beat, just 61
percent of retailers agree or strongly agree that new stores are
critical to their sales growth, while as many as 93 percent of
landlords agree or strongly agree. Conversely, only 33 percent of
landlords, compared with 73 percent of retailers, agree or strongly
agree that shoppers require a more personalized in-store
experience.
When it comes to brick and mortar stores, landlords and
retailers also view real estate benefits differently. Landlords
believe that being located near other high-traffic retailers (87
percent) and providing a compelling architectural design and
physical environment (73 percent) are the two most important
benefits they could offer a retail tenant.
Meanwhile, only 66 percent of retailers surveyed believe being
located near other high-traffic retailers is the most important
priority for their brick and mortar locations, followed by
convenient parking (52 percent). Only 44 percent of retailers
believe a compelling architectural design and physical environment
are important. The biggest disparity in priorities is found in the
value of flexible store configuration – 40 percent of retailers say
this is important compared to only 10 percent of landlords.
“While it may not come as a total surprise that landlords place
a greater value on the physical location of the store than
retailers do, these variations in perceptions present a real
opportunity for landlords to work more closely with their retail
tenants to explore how they can support their growth plans,” said
Cynthia Nelson, a Senior Managing Director in the Real Estate &
Infrastructure industry group at FTI Consulting.
Christa Hart, a Senior Managing Director in the Retail &
Consumer Products practice at FTI Consulting, added: “Our research
also suggests that many retailers are in denial about deep and
pervasive shifts in consumer trends affecting the state of the
industry.” Ms. Hart noted that one of the greatest disconnects
between landlords and retailers is the concern over evolving
consumer demographics and preferences: 70 percent of landlords cite
this concern, compared to only 40 percent of retailers. Further, 60
percent of landlords agree or strongly agree that retail customers
are shopping in stores less often, while only 37 percent of
retailers agree or strongly agree.
As a result, the approaches of retailers and landlords to
attract shoppers and boost revenue in the online era and their
specific concerns differ. Retailers expect to implement
significant, transformative changes to their brick and mortar store
locations to meet customers’ demands, including inventory
management (74 percent), store upgrades/refreshes (69 percent),
flexible return policies (67 percent) and free shipping of in-store
purchases (64 percent). Retailers also cite store staffing levels
(53 percent) and the check-out experience (44 percent) as ways to
meet new customer demands in the online era.
Not surprisingly, landlords are far more concerned than
retailers about the shift to online shopping and changing consumer
preferences (80 percent of landlords, compared to 57 percent of
retailers). Landlords’ concerns about online retailing may, in
fact, not be misplaced. Retailers expect e-commerce to account for
23.6 percent of their sales in three years, up from 16.1 percent
today.
“This concern is understandable since landlords’ real estate
assets can’t be modified to succeed in the digital era as readily
as can retailers’ ability to become omnichannel merchants,” Ms.
Nelson said.
Ms. Nelson added: “Perhaps the most important finding to come
out of the FTI Consulting Retail Real Estate Beat is the mandate
for landlords and their retail tenants to develop a better
understanding of each other’s needs and how the evolving nature of
retail will affect both sides of the equation. In so doing, mall
owners and their retail tenants can purposefully focus on ways to
work together to more effectively compete with the existential
threat posed by retail game-changers like Amazon and Walmart, and
thrive for years to come.”
About the Survey FTI Consulting conducted the
Retail Real Estate Beat survey among 30 of the largest U.S.- based
REITs and shopping center and mall landlords and 90 U.S.-based
retailers in Q2 2017. At the retailers specifically, those who had
either regional or corporate-level decision-making authority about
their company’s real estate and leasing decisions participated in
the survey. Retailers representing the following segments
participated in the survey: clothing, shoes and accessories;
department stores; home-related; big box/electronics/sporting
goods/toy and hobby; discount and dollar stores, and consumer
services (e.g. fitness clubs, salons).
About FTI ConsultingFTI Consulting, Inc. is a
global business advisory firm dedicated to helping organizations
manage change, mitigate risk and resolve disputes: financial,
legal, operational, political & regulatory, reputational and
transactional. With more than 4,600 employees located in 28
countries, FTI Consulting professionals work closely with clients
to anticipate, illuminate and overcome complex business challenges
and make the most of opportunities. The Company generated $1.81
billion in revenues during fiscal year 2016. For more information,
visit www.fticonsulting.com and connect with us on Twitter
(@FTIConsulting), Facebook and LinkedIn.
FTI Consulting, Inc. 555 12th Street NW
Washington, DC 20004 +1.202.312.9100
Investor Contact: Mollie
Hawkes+1.617.747.1791mollie.hawkes@fticonsulting.com
Media Contact: Nina
Dietrich+1.201.493.8944Nina@ninadietrich.com
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