Still home to the second highest retail rent in the world along with some of the most unique brands and concepts in the world, the US retail market is still performing as the global superpower that it is. In the coming pages, RLI presents a detailed overview of the state of the market and highlights key retailers, new to market entries and emerging trends in the country.
Ahighly developed country, the US is the world’s largest economy by nominal GDP, the second-largest by purchasing power parity and accounts for approximately a quarter of global GDP. It is also the world’s largest importer and the second-largest exporter of goods. Long known as the cultural melting pot, the US remains at the forefront of retail market trends. US retailers and shopping centre owners are now global companies setting the standards for consumer business worldwide. The high streets of New York, Chicago, San Francisco and Los Angeles are more than ever, shopping destinations international visitors as well as local residents.
With access to unique and diverse range of property types in retail; for example luxury high streets like the aforementioned Fifth Avenue in New York City and Rodeo Drive in Los Angeles to enclosed shopping malls and open air centres, the US really is a place that has everything and offers the most variety in terms of retail schemes across the globe. According the ‘United States Global Retail Cities Guide’ by Cushman & Wakefield, the US is home to world’s best known brands such as Nike, GAP, Abercrombie & Fitch and Apple, that started in malls and high streets in the country. Despite still being known best for the burger, it continues to produce great restaurants whose diversity of cuisines matches the country’s multi-cultural population. “More global brands are making the transition to the States based on retail stagnation elsewhere and due to the voracious consumer in the USA.
Now, as is to be expected, Asian brands in both food and retail are making the trek over to plant their flags as European companies have been for decades,” explains Mike Reilly, Managing Principal at SRS SIGNATURE National Group. With annual retail sales greater than $6tn, the opportunities of the US market will continue to produce home-grown brands and attract foreign concepts looking for new consumers.
Research from JLL’s ‘United States Construction Outlook H2 2019’ highlights three trends affecting the US retail sector:
- Landlords continue to add more non-retail tenants to their shopping centres. The share of total shopping centre space dedicated to non-retail or restaurant tenants has increased from 19.2 per cent in 2012 to 24.5 per cent in 2018. This shift in the tenant mix is paying off. Shoppers have increased their visits to fitness & wellness (47 per cent), food & beverage (42 per cent), leisure & entertainment (39 per cent) and medical (35 percent) tenants, among others.
- Developers are building more mixed-use properties that combine multifamily with retail and entertainment. This is right in line with what consumers want. Approximately 78 per cent of US adults would consider residing in a mixed-use development, mainly because of convenience and time savings.
- More than 25.3 million square feet of Class A retail space is slated to be delivered this year. Of that number, 65.8 per cent will be general/freestanding retail, which includes urban projects. Malls comprise 16.7 per cent of the expected space delivery. In 2020, more than 40 million square feet of Class A retail will be delivered. General/freestanding retail delivered will rise by more than 50 per cent, while shopping centre deliveries will nearly double. Mall space delivered will remain relatively constant.
Mike Reilly observes that: “Eatertainment is still absolutely growing and evolving with new concepts across all markets involving a variety of content from axe throwing to mixology lessons to the abundance of dine-in movie theatres. As Americans continue to eat less and less of their own prepared food, the market for eatertainment concepts shall continue to rise.”
Two examples of eatertainment stateside are Starbucks, who have recently launched their largest Starbucks Reserve Roastery to date in Chicago. The world’s largest at 35,000sq ft has taken over the long-time Crate & Barrel store inside one of downtown Chicago’s most interesting buildings. A cocktail bar with Chicago-exclusive drinks, barrel-aged coffee, Princi’s savory and sweet Italian food, a seasonal rooftop patio, liquid nitrogen gelato, a 56-foot tall cask that distributes beans, the Midwest’s first curved escalator, and its ability to roast 200,000 pounds of coffee annually are among the reasons so many fans were eagerly awaiting its unveiling.
Meanwhile in Disneyland California, the recently launched Star Wars: Galaxy’s Edge is making fans of the sci-fi epic feel the power of the force like never before. The park features a host of exciting attractions, such as a Millennium Falcon flight simulator and the Rise of the Resistance trackless dark ride. But a key part of the themed experience is the food and drink options available as guests will be able to eat and drink at Ronto Roasters, Docking Bay 7 Food and Cargo, and Oga’s Cantina, iconic locations within the cinematic universe of Star Wars that fans will be eager to be a part of. Retail brands that are making waves in the US include new entrants such as Innisfree, which was launched by the largest skincare and cosmetics company in South Korea, Amore Pacific in 2002.
Innisfree has now begun opening stores in the US and its first two stores are situated in Manhattan. Fashion designer Gabriela Hearst last year opened its first flagship store on Madison Avenue, adjacent to the New York institution that is the Carlyle Hotel. Previously sold at more than 50 retailers in several countries, the New York store was claimed to be the most beautiful store in the city by lifestyle and fashion magazine Vogue.
Another brand that has joined Gabriela Heart on Madison Avenue is Sydney-based menswear label Joe Bananas. Launched in 1986, the high-design boutique is home to the company’s signature blazers in a wide array of colours and patterns that caters to the absolute individual that is both a risk-taker and global traveller. Brands that began life online but are now making inroads into the brick-and-mortar world include Canada Goose, which offers a wide range of jackets, parkas, vests, hats and gloves and opened its first showroom in New York City in December 2014 before quickly expanding across the country and abroad.
Originating in a third bedroom apartment in Hoboken, New Jersey, UNTUCKit has grown to operate over 70 stores in the US. The brand highlights casual shirts for men that have the perfect fit. The brand has since expanded to offer clothes for women and boys. Selling primarily online, Everlane is an American clothing retailer that is headquartered in San Francisco, California and designs clothes that are ethically made and created to last. Founded in 2010, the brand operates stores in SoHo and San Francisco.
Warby Parker is an American online retailer of prescription glasses and sunglasses that is based in New York City. While it primarily sells its products through its website, it also features retail locations in the US and Canada and was launched in 2010. Finally, Allbirds is an American company which uses a direct-to-consumer approach and is aimed at designing environmentally friendly footwear. Allbirds’ first shoe was the Wool Runner, which is made from New Zealand superfine merino wool. The company claims to keep the brand as eco-friendly as possible and is a certified B Corporation.
“Some brands like Allbirds have taken the US by storm and are quickly making noise in e-commerce (digitally native) and brick & mortar. Luxury obviously dominates the success trail of most cross border pollination, but there are definitely positive stories outside of luxe to be had,” observes Mike Reilly. A unique brand that has been in growth mode since its launch in 2015 is the tech-driven brand b8ta. After opening its first store in Palo Alto, the retail-as-a-service company has grown to 16 locations in the US, for further information on this brand, please see our article on the innovative retailer by clicking here.
“Of course, digitally native brands pushing a four-wall approach is growing by leaps and bounds as we’ve all seen. The continued desire to fuse on & offline and create a cohesive brand message while growing the fan base is still the primary driver toward double digit comps and sheer evolution,” explains Reilly. Research undertaken from PWC, explained in their ‘Emerging Trends in Real Estate – US & Canada 2020’ highlights that the shifting retail picture is notably more complex than other property types. The integration of new concepts, formats, channels and inventory management systems all cloud retail’s future.
As a result, traditional shopping centres are transforming into consumer centres with a new mixture of uses. The era of “one size fits all” seem to be ending. Shopping centres now have the ability to become hyper-customised, due in part to advances in technology. These make it possible to tailor merchandising and engage with brands, uniquely targeting individual and local preferences.
Cushman & Wakefield’s ‘United States Global Retail Cities Guide’ concludes that retailers continue to experiment with formats of every size and shape as they look to better compete. This even goes for digitally native retailers that are increasingly going omni-channel as well and opening physical stores to serve as embassies of their brands. Retail expansion in the US is currently being driven by concepts that don’t compete with online retailers, such as food (grocery or restaurant), entertainment and service-related retail. One of the hottest trends right now in the restaurant business, and retail in general, is the food hall. Food halls are popping up around the US at a breakneck pace; and are projected to reach over 450 by 2020.