A Different Approach to Retail Real Estate

As more consumers turn to online shopping, retailers find themselves struggling with the associated costs of a physical store.

As more consumers turn to online shopping, retailers find themselves struggling with the associated costs of a physical store. Even in the food world, where brick and mortar remains more important than say apparel and electronics, increasingly online sales and home delivery are appealing. So what do retailers do about rent?! How about this; instead of committing to long term real estate, (say, 20 years or more) how about leasing sites for the short term (say, two to five years)? Why? Because you give shoppers a sense of urgency. Imagine food stores giving shoppers an ultimatum to ‘visit and buy from us or we’ll leave.’ ? By letting customers know that demand dictates a store’s commitment to a location, The Lempert Report believes retailers would, in turn, encourage a commitment among shoppers who like the store and prefer that it stay. While locking in low rents for decades at a time seems like a good idea, in our view, the past few years have reinforced the risks retailers face. When neighborhoods change, laws change, demographics shift, and economic fortunes shift, locations can change from good to bad. Retailers might be better off with an exit strategy in case a situation worsens—so they could pop up, say, a mile or a few away in a much more favorable spot. By being nimble in real estate, supermarkets avoid having to chase trends with different pricing, marketing and merchandising strategies to suit changes in trading areas. There could be something said for a little retail real estate freedom!