Needs of prospective tenants change as retail industry evolves
The retail industry is in flux, and those who broker leasing deals must stay on top of the changing needs and desires of merchants looking for space.
Michael “Mick” Consalvo, a commercial real estate broker for 30 years and vice president of Tower Realty in Brookfield, said retailers are looking for smaller spaces, lower rates and flexible lease terms more than in past years.
“The lease term used to be 10 years, now five is what you see — sometimes even less,” he said. “Retailers’ needs are all changing. Landlords need to be open to dividing space and helping tenants with buildouts.”
Tom Torelli of Allied Property Group in Greenwich agrees, and said lease negotiations rank as the biggest shift he’s seen in retailers looking for space.
“Retailers have always had their wish list of location and frontage,” Torelli said, “but what’s changed is the terms. Tenants are negotiating harder to obtain terms favorable to them.”
Several brokers and landlords who handle downtown Greenwich leases have said retail tenants are, on average, taking longer to sign leases. They seem to be taking more time to consider all available space and to negotiate terms.
The makeup of merchants seeking to lease traditional retail spots is shifting, as well, Consalvo said. Those in the service, recreational and restaurant industries now account for a greater percentage of those looking to open a business. That creates its own challenges for brokers, he said.
“Nail and hair salons can’t pay as much as Gap or other national retailers, so landlords have to adjust their rates,” he said. “Our market (greater Danbury) has always done well because we have savvy landlords and they know how to adjust with the times.”
Other increasingly common requests from retail tenants include open floor plan, prominent signage and easy access to the building.
Innovation through technology
The Apple Store was a pioneer in the open floor plan as it eliminated aisles and checkout counters. Now Amazon, the online retail giant, is reshaping the traditional retail scene, debuting its new concept where a wireless tracking system allows customers to simply take what they want, with payments recorded as they walk out the door.
Despite innovations, Dominick Musilli, managing partner of True Real Estate in Wilton, has yet to observe any wholesale changes from a decade ago in the design of smaller storefronts in retail plazas or ground-level spaces in cities. The one exception would be the increased use of tablet technology at checkout, he noted.
“I think that retailers are starting to wake up to what works, in terms of a combination of bricks and mortar and online,” Musilli said. “The problem is Amazon is always coming out with something new.”
Of major new store openings in Norwalk in recent years, a few have created experiential elements to draw more patrons. At Wine and Beyond on Connecticut Avenue, it was a walk-in beer cooler billed as the largest in Connecticut, with the store having held regular tastings, as well. At Dick’s Sporting Goods next door, an indoor archery range beckons buyers to try bows before deciding on a purchase.
In Norwalk, the 1777 Co. is creating Americana’s Artisans Concept Shop, a retail outlet for its own consumer brands like St. Johns Co., Ranger Ready insect repellent and the 25th Gift Co. line of commemorative silver wares. The operation includes a sophisticated e-commerce floor, and later this year will have a cafe to draw in South Norwalk visitors and denizens.
Americana’s is also providing a retail floor for entrepreneurs to sell their locally made products, as the case with the new Collected Home on Rowayton Avenue, with both stores counting on a constantly refreshed product inventory to bring back repeat visitors.
Many innovations in the retail industry, such as Amazon’s payment innovation, involve technology, which makes a strong network with redundancy a requirement of new retailers.
Retailers’ needs for smaller space have created a puzzle that many landlords have yet to solve: What to do with large blocks of space when a larger retailer leaves?
Phil Kuchma of Kuchman Corp. in Bridgeport said said large fit-ups are not in high demand as they once were. Would-be tenants are looking to find spaces within 300 to 1,000 square feet within commercial hubs with pedestrian-heavy traffic, he said.
“A portion of the retailers, especially other artisan gift shop owners, don’t need huge spaces,” Kuchma said, adding that many owners create their products on site in small quantities.
“There is a tendency now these days with retailers not to necessarily stock as much product, so they want to have great space to showcase their products,” he said. “But they don’t necessarily want to pay for a lot of the space that would otherwise be back-of-the-showroom space.”
That leads to a larger demand from some retailers for unique-looking spaces where they can showcase their wares.
Alex Soule, Macaela Bennett, Paul Schott and Jordan Grice contributed to this report.
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