It’s time that retailers learn what real estate investors already know: Mixed use retail spaces are the mall of the future. Mixed use retail spaces refer to spaces with more than one function, such as: dining, grocery, fitness, leisure, pet care, coworking spaces, and/or medical facilities. And those real estate folks were definitely onto something when they named mixed use retail spaces the highest-rated investment niche of 2017. Mixed use retail spaces reflect the preference of the times and a staggering 44 percent of adults say their shopping center visits are more likely to include a variety of activities than they were just two years ago.
And millennials are mixed-use retail spaces’ biggest fans, which shouldn’t come as surprise considering that millennials are reportedly happiest in urban areas where everything they need is within walking distance. When millennials come across customized, niche stores located in close proximity to one another, it commands their loyalty in a way that traditional malls can’t.
Customers Need Sustenance
Most people need to eat every three to five hours and, people with blood sugar conditions may need to eat even more often than that. And most millennial HENRYS need a caffeine infusion even more often than that. The in-store eatery is a retail trend the peaked in the nineties and is coming back full-circle, albeit with a modern twist, in mixed use retail centers. Smaller stores are getting in on the trend, opening cafes that are less ornate, and more community-oriented and accessible. But it’s not just retailers that are boosting their bottom lines by bringing quirky cafes in-house. Just take a look at Capital One bank, which now has 36 cafes serving Peet’s coffee cafes in 15 cities cross the U.S.
When millennials come across customized, niche stores located in close proximity to one another, it commands their loyalty in a way that traditional malls can’t.
Specialty apparel retailer Anthropologie’s Terrain Café. A spokeswoman for URBN, Anthropologie’s parent company, told The Washington Post that cross-traffic around special events could create quite the boost for their bottom line. “We see a correlation between increased foot traffic within the cafe on days when the stores are seeing a high volume of customers, like the winter holiday season,” she said. “Likewise, on bigger holidays – like Mother’s Day, Father’s Day, graduations – it’s likely the store will see an increase of foot traffic from our diners.”
Mixed Use Retail Spending Breakdown
So, what else do young consumers like to see (and where do they like to spend) when they come across mixed use spaces? ICSC reports that, since January of 2019, 81 percent of shopping center visitors spent on food and beverage services, 80 percent purchased from traditional retailers, 42 percent spent on leisure and entertainment, and 37 percent spent on fitness or wellness visits. But these sectors would not be viewed as in competition with one another for millennial wallet-share. Instead, they can be viewed as complementary establishments that work in tandem to lure in that ever-pursued millennial brick-and-mortar spend.
This means that shopping centers need to offer interactive components where digitally inundated millennials can dig their feet in the ground and get sweaty for a few hours. Fitness centers provide this and traditional gyms, yoga studios, fad fitness classes (SoulCycle, anyone?), or CrossFit studios like Orange Theory can be just the draw a mixed-use retail space needs to get millennial consumers interested in their inventory.
A New Kind of All-in-One
It’s funny, because analysts are always talking about how millennials are “killing” department stores and gravitating towards specialty retailers. But millennials’ preference for retailers with an expertise in one particular niche and their appreciation of mixed-use retail spaces is not mutually exclusive. Think of it this way: Would you rather purchase products from a symbiotic community of hyper-local product experts, each with a unique in-store experience and specialized knowledge in every unique inventory category you need; or would you rather buy from a couple of high-school kids with little to no familiarity with the inventory they’re selling?
The good news is that department stores can also capitalize on the mixed-use retail space trend. There are multiple ways for department store owners to do this that go beyond hiring more experienced staff members and implementing more rigorous training initiatives. Here are a few of them:
- Start seeing potential in those abandoned strip malls. Mark my words: they’re coming back and that decrepit old Blockbuster will soon be prime retail real estate once again. Bonus points if the strip mall just got a new fitness center.
- Have niche experts come into host in-store events. I’m talking about fit specialists, traveling make-up artists, chefs, jewelry makers, and yoga teachers when there’s the square footage and low noise level for a class. Retailers can even sponsor outdoor yoga classes to boost customer engagement.
- Cafes and coworking spaces are millennial bait, so bring a coffee shop or an on-brand healthy eatery (with a great WiFi signal!) in-house.
- The furbaby movement is real. Choose locations with small fenced-in dog parks, real grass potty pads, and/or doggie daycares. At the very least, every mixed-use retail space needs a patch of grass, a dog bag dispenser, and a trash bin.
- Consumers spend money where they spend their time, so create areas with indoor/outdoor seating and phone charging stations where customers are encouraged to kick back and engage.
Millennial consumers are the most likely to spend more than $50 per visit in-store (74 percent). But it’s getting them to make the trip that’s the real challenge. Millennials expect retailers to know them better and to reflect their shopping habits more precisely than ever before. Half of the battle is utilizing individual consumer data correctly, but the other half is knowing how to create a space where these customers feel comfortable and at home. This is why mixed-use retail spaces are making a resurgence: the old one-stop-shop has evolved into the one-stop-shopping center. By giving millennials everything they want in one place, retailers can once again make their stores worth the trip–and be well on their way to becoming vibrant (and profitable) community epicenters once more.
Millennial consumers are a lot less complex than retailers make them out to be. They want to be comfortable and they want to go places that cater to their evolving lifestyles. And millennials set the pace for the purchasing behavior of other generations–soon the generations that come before and after millennials are looking for the exact same one-stop-shopping center experience.