Any marketer worth his/her salt can tell you about the product life cycle. Typically, that cycle is described in four stages—introduction, growth, maturity, and decline. Product marketing managers use this construct to decide when to increase advertising, reduce prices, expand to new markets, or redesign packaging.

Life of a Retail Product

Commercial real estate investors are faced with a similar task in managing the life cycle of properties. In particular, retail property owners and managers must, on some regular cycle, make decisions similar to those of the product marketing manager above. External macro variables like re-gentrification, infrastructure changes, consumer behaviors, competing new development, and re-zoning are the types of catalysts that force decision-making. While the impacting variables are outside the control of investors, what becomes of their property, despite these factors, is when repositioning and redevelopment are needed.

Challenges and Opportunities for Retail Transformation

Anyone involved in retail investment for more than a moment has experienced the effects of transformation. Malls, strip malls, or free-standing establishments that at one time were profitably situated along a major traffic corridor eventually suffer the consequences of a transforming region. Redeveloping a retail location presents some unique challenges and opportunities.

Challenges

Retail locations, and malls, in particular, have been the subject of voluminous discussions about the future of retail lately. Industry concerns and public interest have both been headlines in the media for several years now. A study conducted by Loopnet explored this topic from both industry and community perspectives. Not surprisingly, the online marketplace for commercial property attributes the decline in brick-and-mortar retail to three things:

• The growth of e-commerce.
• The shift from purchasing goods to buying services and “experiences.”
• Too many stores per capita.

Each of these reasons exemplifies external forces beyond the investor’s control. While they are frustrating, they are not without opportunity.

Opportunities

Repositioning or redeveloping a retail location takes an understanding of the marketplace. Successful redevelopment can take several forms and years to take-off the ground.

Introducing new uses for the property. Vacancy rates or high turnover are often signs that a location is struggling to be exclusively retail. In this case, complementary uses for the space may include introducing medical, office, hospitality or (in the case of bigger properties), some form of entertainment. The cross-traffic between retail and other types of business becomes a win-win for all involved. Alternatively, developers may decide to remove retail in favor of an alternative product.

Consolidate to concentrate traffic. Co-locating existing retailers into smaller spaces can concentrate foot traffic. In the U.S., fast food retailers like Dunkin Donuts and Baskin Robbins have worked under this model for more than a decade in many locations. Food courts, like the one at the Eaton Centre in Toronto, have this same effect. The consolidated location creates increased patronage for all companies involved. This strategy also makes room for complementary uses of the property.

Think pop-ups and pads. Leasing a property that stands vacant on a short-term basis while you complete zoning and municipal approval simultaneously can help to generate revenue that can go toward a larger redevelopment effort. Spirit Halloween has been seasonally using space on King Street in Toronto and other markets in the GTA. By some estimates, the company pays upwards of $30,000 for a two-month rental. Malls have similar opportunities for filling vacancies, at least temporarily. Still, they may also be able to create pad sites for additional redevelopment options and generate renewed interest in the existing retail.

Empty Buildings and Vacant Parking Lots

The symbols of a transforming region are apparent. We see the empty buildings and vacant lots in our daily commutes about town. But, while these are hard to look at, the underlying land and infrastructure of these locations hold promise for redevelopment. Across the United States and Canada. Developers are showcasing a range of possibilities for re-purposing or redeveloping struggling retail locations.

Understanding the changes in the communities of once-prosperous retail locations is critical to redevelopment success. So too is working with local government and its officials. These relationships will help to maximize a project’s value. Successful retail redevelopment often benefits the community with jobs, affordable housing, revitalized business districts, and tax relief for citizens.