As consumers’ preferences shift, what they need from their brick-and-mortar experiences is also evolving, driving power and lifestyle centers to adapt. Once dominated by big-box retailers and department stores, these centers are now pivoting to keep up with shifting demands.
“The emergence of online retail and the ease of purchasing goods and services online has made some former retail concepts irrelevant in the brick-and-mortar landscape,” says Tony Pierangeli, managing principal at SRS Real Estate Partners. “This shift has led to lower sales per square foot in some of these shopping centers and fewer customer visits.”
As a result, the retail sector is reinventing itself, with landlords and investors rethinking strategies to stay relevant, attract more foot traffic, and maintain occupancy rates and rents.
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Retrofitting: A Cost-Effective Solution
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Retrofitting existing spaces has become a popular strategy for retail modernization, offering a lower cost-of-entry (versus new construction) while allowing retailers to access established markets with built-in density and foot traffic.
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“In many cases, these centers already have the density, traffic, and road access,” says Erik Christopher, managing principal at SRS Real Estate Partners. “Retailers see this as an opportunity to implement a retrofit, providing a lower cost of entry compared to building new.”
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Christopher also highlights a shift in demand, with fewer specialty retailers seeking larger spaces. Instead, there’s growing interest in smaller spaces, particularly in the 1,500- to 3,000-square-foot range. This trend reflects a move toward size consolidation, increased store efficiency, and greater tenant diversification.
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Diversifying Tenant Mix
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As more tenants seek smaller spaces, Christopher has observed that some larger power and lifestyle centers are splitting a single large retail unit into multiple smaller ones, creating more opportunities and diversity within existing centers.
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Pierangeli further notes that as these centers evolve, the types of tenants they attract are also changing. “These centers are now appealing to tenants that historically wouldn’t have considered power centers as a viable option,” he says. “With shopping center rules and regulations changing, we’re seeing health and beauty centers, fitness facilities, and even medical offices occupying spaces once reserved for traditional retail.”
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Pierangeli adds that the closure of big-box retailers isn’t always a negative indicator for the retail sector; it can actually create opportunities to revitalize the entire center.
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“Many of these older concepts are antiquated,” he says. “When big box stores close, we can repurpose those spaces by splitting them into three or four units, creating something fresh and dynamic that revitalizes the whole center. While the public might see closures as a setback, they can actually be a positive move toward maintaining relevance, meeting changing consumer expectations, increasing foot traffic, and supporting rental rates.”
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Visit SRS Real Estate Partners at ICSC New York, booth 435.
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