In its "Envision 2020" report, the International Council of Shopping Centers (ICSC) predicts rent calculations across retail will evolve into a new formula that incorporates how physical stores are driving digital transactions.
The range of potential models includes more traditional approaches such as fixed rent and base plus percentage rents, as well as models that incorporate a calculation of click-and-collect via in-store and online sales into the percentage rent.
"The provision of the real estate itself will only be one part of the overall service that real estate providers will be able to offer to retailers," said Steven Lowy, co-CEO, Westfield Corp, in ICSC's statement. "That will require leadership on behalf of leading retailers and real estate providers. Both are starting to invest heavily in technology, and for that technology to work together, commercial arrangements will need to be put in place."
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The report, outlining where the industry will be in five years, includes other predictions about how technology will reinvent shopping centers:
Unification of brick-and-mortar and online retail: Shopping centers are already offering sophisticated digital interfaces, innovative websites, and mobile communications for web-savvy consumers. Conversely, Bonobos and Amazon.com are among a number of e-tailers rolling out brick-and-mortar stores.
Unprecedented intimacy with the consumer: Mobile apps, social media, and beacon/geo-fencing technology are helping centers engage with shoppers. Last year, the Westlake Shopping Center, owned by Kimco Realty, found that consumers who logged into the center's free Wi-Fi stayed twice as long as consumers who did not log in.
Mall environments that engage Millennials: Customized, personalized and sustainable features are being added to shopping centers for Millennials, projected to surpass Boomers this year as the nation's largest living generation.
Incorporating distribution into shopping centers: Shopping centers are increasingly doubling as distribution centers for online orders. According to a A.T. Kearney, 23 percent of customers purchase additional items when picking up an online order in-store, and up to 20 percent make an additional purchase when returning an online order in-store.
Accelerated developer-retailer collaboration: General Growth Properties finds retailers much more willing to share information once considered proprietary, such as traffic patterns and demographic data, helping both sides spend marketing funds more wisely and avoid duplication. Through its "Clicks to Bricks" program, Kimco offers qualified online retailers one year of rent-free tenancy and provides merchants with a "personal business counselor" to assist with site selection and store build-out.