Fashion District mall in Philadelphia
Diana Olick | CNBC
Millennials may have fled the malls, but brick-and-mortar retail is apparently more appealing to Generation Z.
People born between 1997 and 2010, particularly the teens in that group, are becoming big spenders, and they like to do a lot of that spending in actual stores, according to new research from commercial real estate firm CBRE.
Generation Z’s spending is now at approximately $143 billion per year, and they influence an additional $450.5 billion in spending by others, according to CBRE’s report, which uses data from eMarketer. While Generation Z spends a great deal of time online making purchasing decisions, 81% of them prefer to go to stores.
“They are huge fans of what’s known as click and collect, meaning they click online, and they like to pick it up in the store so they can get the tangible experience, they can get the social experience, and then the key is that they are buying more. People buy up to 70% more goods when they walk back into the store, than if they just buy it online” said Spencer Levy, chairman of Americas research at CBRE.
While most teenagers are obsessed with their phones, they are also more native to technology and e-commerce than any other generation, and are therefore more open to other options.
“The teenagers prior, the millennials, had a world where they were doing both, in-store shopping and then they saw the new phones, and they shifted more towards that. The Gen Zers grew up in a world with both, and they liked both at the same time not one or the other, but both,” Levy added.
Mall REITs, which own some of the most well-located and highly trafficked retail properties in the nation, are therefore changing their business models.
“While most of the discussion lately has been about the impact of online shopping on bricks-and-mortar stores, the mall REITs have adapted their strategies to the new consumer shopping patterns,” said Calvin Schnure, senior vice president, research and economic analysis at Nareit. “This includes more tenants that provide experiences like exercise clubs, restaurants and bars, that keep shoppers coming back. Many REITs have also upgraded their malls to keep a fresh new feel for the space.”
Marshmallow pit at Candytopia.
Diana Olick | CNBC
Philadelphia-based PREIT just sunk about $400 million into a redesign and rehabilitation of a downtown mall that spans three city blocks.
Philadelphia’s brand-new Fashion District is clearly catering to teens, featuring one of the nation’s three pop-up Candytopias — a fun house based entirely around sugar. The three-level mall will soon open Wonderspaces, a rotating, interactive art experience that partners with artists from around the world. This is in addition to several Instagrammable art areas, a bowling alley, movie theater and of course teen apparel stores.
“Young people, under 25 years old, are continuing to be a growing demographic at our properties. That doesn’t mean that all you need to do is lease it and they will come. That’s the old strategy. The new strategy is pick the right kind of dining, entertainment and experience, and they will come,” said Joseph Coradino, CEO of PREIT.
Fashion District was just one of three major projects in the company’s portfolio this fall. PREIT opened 700,000 square feet of new or remerchandised tenants, welcomed 1.6 million visitors and created 5,000-plus jobs throughout various stages of these projects.
“We’ve done a number of redevelopments over the past three to five years, and we’re seeing upticks in our traffic in the mid to high single digits,” Coradino said. “That’s not to suggest that every mall is going to win. That would be foolish to say right now. People have said that 40% of the malls in this country are obsolete, and I’ve sold off 50% of the malls I don’t want to own.”
Fashion District has the benefit of a subway opening right into the mall, not to mention several high schools nearby. It also has a co-working space, perhaps keeping an eye toward millennials, even as it focuses on teens.