CLOSING ENTRY: Stronger than ever

Brick-and-mortar retail in New Jersey is having a moment. Anyone driving by or visiting open-air shopping centers in any number of the state’s densely developed retail corridors will see fewer vacant storefronts and an array of new brands side-by-side with established favorites.

For the first time since 2017, retailers opened more physical stores than they closed nationwide in 2021, an achievement trade association ICSC reports is on course for a repeat in 2022. That’s good news for New Jersey, a state where retail serves as an important economic driver, affecting jobs, consumer spending and sales tax revenue.

The industry’s notable post-pandemic momentum is, of course, not without challenges. Retailers are facing rising inflation, ongoing labor shortages and continued, though lessening, supply chain issues. But through that, they remain focused on responding to shifting consumer priorities and expectations. Within that context, some trends worth noting have emerged.

Tenants are capitalizing on space availabilities that came online due to the pandemic.

National brands and franchisees – including discount retail, pharmacies and home furnishings stores – are expanding their footprints. A combination Family Dollar/Dollar Tree, CVS Pharmacy, Fortunoff Backyard Store and Mattress Warehouse are among recent illustrations within our own leased and managed portfolio. Fast-casual concepts like Jersey Mike’s Subs, Popeye’s Louisiana Kitchen and Five Guys are also among the most active on the expansion front.

At the same time, momentum among independent retailers speaks to an influx of startups as well as established concepts expanding operations or moving to improve location. From boutiques and jewelry stores to martial arts studios and tattoo parlors, these specialties add flavor and distinction to a shopping center’s mix.

Personal care and services concepts also represent a bright spot in the leasing landscape. While some forms of beauty retail have always been a staple of shopping centers (think nail salons) many today are adapting and diversifying. By offering consumers additional spa-like services such as facial treatments and massage under one roof, neighborhood nail salons are creating an experiential atmosphere. At the same time beauty retailing is blossoming under this new demand, becoming more flexible to meet consumers’ needs and shopping preferences.

Big-box retailers are aggressively upgrading their beauty offerings to attract in-store shoppers; “shop-in-shop” partnerships are bringing Ulta into Target and Sephora into Kohl’s locations. These leading beauty brands are opening stand-alone locations as well. It’s worth noting the outcome Kohl’s is seeing from its decision to partner with Sephora: Visits to Kohl’s locations with Sephora store-in-stores consistently have outperformed those without, according to data from Placer.ai.

That’s retailtainment

Entertainment has long been an element in shopping center tenant mixes, and this category’s post-COVID resurgence speaks to the viability of “retailtainment.”

Experiential concepts are leasing spaces of all sizes. These tenants bring added value to a retail property by providing consumers of all ages with the opportunity to shop and have fun all in one convenient location. Trampoline parks and children’s indoor playgrounds are creating family-friendly destinations, while fitness concepts of all sizes (from national gyms to spin studios) are driving traffic and new business for entire properties.

Across the board, a paradigm shift has taken hold in the way retail tenants are doing business. Traditional brick-and-mortar brands are investing in high-level training and tech to establish thriving e-commerce operations and stepped-up customer service. Physical stores have become integral in fulfilling e-commerce orders as mini distribution hubs and places where shoppers can pick up and return online purchases.

Even essential, internet-resistant retail categories are evolving to serve changing consumer shopping preferences. Supermarkets are a great example of how changes made out of necessity during the pandemic – such as delivery service, curbside pickup and “click and collect” – are being kept as best practices.

Within this larger picture, open-air centers have secured their position as fan-favorites among shoppers, tenants and investors. How? Open-air centers accommodate tenants of all shapes and sizes, and properties that offer a mix of convenience, value and experience are thriving. By nature, neighborhood, community and power centers provide a higher level of operational flexibility than other product types.

For example, during pandemic-fueled business interruptions, open-air environments enabled tenants to be more creative and accommodate new or expanded uses. This included increasing outdoor space for dining or fitness classes; or expanding fulfillment options by setting up curbside pick-up.

Blue skies ahead?

In Levin Management’s mid-year store managers poll, nearly 75% of respondents reported sales levels at or above 2021’s mid-year total, well above our decade-old survey’s historic average. Notably, nearly 71% said shopper traffic volume is at the same or at a higher level year over year, marking the second-highest percentage for this performance indicator.

Of course, the economy has changed a bit over the past few months, but this velocity was encouraging and also supported by forecasts from organizations like the National Retail Federation, which anticipates that retail sales will grow 6% to 8% to more than $4.86 trillion in 2022.

The takeaway? People ultimately like the experience of shopping in physical stores and that will never change, as evidenced by retail’s post-pandemic resurgence.

Despite ongoing challenges and lingering uncertainties, retail is on a positive trajectory here in New Jersey and nationwide. And time and again, brick-and-mortar properties have proven an ability to adapt and serve in any market climate.

Matthew K. Harding is CEO of Levin Management Corp. in North Plainfield.