As department stores shutter locations across the country, brands are reconsidering what the purpose of a physical store should be.
With the look and feel of the store changing, long-term leases for retailers are becoming less common, as brands look for more flexibility: The average length of a retail lease has shrunk to five years, down from 20 years in 1991, according to commercial real estate services firm CBRE. Pop-up shops and temporary experiential retail spaces are becoming increasingly appealing.
“The transition of shopping behavior is happening so dramatically that traditional shopping destinations are re-evaluating their models and considering new ideas,” said Drew Ungvarsky, CEO and executive creative director of digital agency Grow. “Long-term, massive real estate buildout is less prevalent, as retailers are looking to be more adaptive to short-term experiments and other inventive ideas.”
According to PopUp Republic, a retail marketing database, the pop-up industry was valued at $50 billion in 2016. Meanwhile, in its 2017 outlook report, CBRE forecasted that the future of physical retail would look like “rogue retailing”: a model that requires more flexibility on the behalf of both landlords and retailers in order to account for greater risk when setting up shop in the market. Overall, the cost of retail real estate is projected to climb by just 1 percent in 2017.
“People are very skittish about retail real estate locations. We’re in vastly changing times, where technology and behaviors are changing rapidly and long-term commitments to…