How can retail ensure its survival after the pandemic?

By David Sheldon, Corporate and Commercial Practice Leader

This story is part of our insight series around the impact of the COVID-19 pandemic.

Retail is a cultural experience. It’s the programmatic “glue” that binds people and architecture’s ground floor. Yet this week, I heard something from a good friend and prominent retail landlord that was as painful as it was true: “If retail was a smoldering fire pre-COVID-19, we have now added gasoline canisters to the situation.”

While this is certainly the headline in today’s retail circles, our current moment offers the opportunity to innovate and evolve in a distinct, meaningful way. To serve our communities in this tenuous time, we as designers must keep our focus on revitalizing cities, returning to our city streets—and making them for everyone—and designing for maximum flexibility and potential space use.

"If retail was a smoldering fire pre COVID, we now have added gasoline canisters to the situation."

Understanding the Retail Ecosystem

To grasp how we got here—and unpack how we can recover—we must first understand the delicate retail ecosystem. It includes the following partnerships:

Consumer to brand: That relationship is one of loyalty—an interpersonal connection between people and the brands that serve them.
Brand to developer: This relationship is transactional. As brands succeed, so do developers and the places they activate.
Developer to city: Sales tax is what drives the relationship between developer and city, particularly in the United States. The more successful developers are at driving the economy of place, the more successful the cities tend to be.
City to consumer: And of course, provision—or serving basic needs—is what drives the relationship between city and consumer.

With each aspect working together, there is a symbiosis. But when external disruptions to this delicate balance arise, as we saw with the global financial crisis of 2008, everything can rapidly unwind. Specifically, in that recession:

The consumer lost spending power
As a result, brands closed by the thousands
Developers went bankrupt, and their land and assets sold in fire sales.
Many cities fell into economic despair.

We were disconnected and imbalanced. The crucial link between the elements was broken. Now, we’re in a global pandemic, and that disconnect has hastened.

An Accelerating Trend

The fact is, particularly in the United States, we’ve been grossly over-retailed—in some instances by a factor of 10. In the U.S. we have almost 25 square feet of retail per person. (Ponder that for a minute: There are 300 million of us here, each with 25 square feet of retail, all to ourselves.) This is troubling for many reasons, including the fact that so much of our population can’t afford the retail designed to serve them.

In contrast, China and Europe have 2.8 and 3.8 square feet of retail per person, respectively. As for the U.S., the pandemic is revealing the cracks in our excess retail model.

It is estimated that we will see 1.5 times more store closures in 2020 than originally anticipated. Upwards of 15,000 stores could close by year end. This means 1.5 more vacancies in our city streets.
In March, we saw a 23% uptick in e-commerce shopping. Of course, with store closures, and shelter in place policies, this spike is not surprising.
The once vibrant anchor of a mall, the department store could see a 30% to 40% decrease in holiday sales this year. While that may not seem like much, that decline could be the nail in the coffin for department stores.
While Simon, the largest retail REIT in the US reopened 59 properties last week, 40% of shoppers recently surveyed are scared to go back to the mall.

While this doesn’t definitively signal the demise of the mall, it certainly factors into the acceleration of closings. American retail consultant Jan Rogers Kniffen predicts that half the 1,000 malls in the U.S. will shutter or look completely different in two years. He then went on to clarify that pre-pandemic, he anticipated 300 malls to shutter over the next decade—so nearly twice as many closures, five times as fast.

So, what is our place in this as designers? How can we make a positive impact?

Revitalize and Reintegrate

Thousands of acres, millions of square feet—spread out among regional malls, urban malls, strip malls, and neighborhood town centers. With the inevitable retail vacancies and disrepair, we will have the opportunity to fast-track moves we need to make anyway. These shifts, which have been developing for some time, include a renewed focus on revitalization; an emphasis on hyper-localization; and the transformation of dead assets into supportive housing, libraries, and recreation facilities. By building on existing momentum, we can contribute to the revitalization of our cities.

Return to the City Streets

Numerous retailers are already talking about ditching the mall in light of the pandemic. Concerns over safety in enclosed spaces has sparked renewed interest in open-air city spaces. What were high streets will have the opportunity to become our streets—places for everyone. With equity, incubation, and resilience in mind, we can thoughtfully and strategically fill these vacancies to activate our city streets.

Spatial Agility and Flexibility

We’ve already seen in the response stage of this global pandemic how nimble we can be with real estate. Now, more than ever before, we need to design with spatial agility and flexibility. What is one use today needs to be another tomorrow. From medical office buildings, cultural facilities, housing, or any number of other places of gathering, the more flexible our design solutions are, the more resilient our retail places will be.

As stewards of the built environment—and ultimately, its impact on occupants—we have an opportunity to change our perspective. Innovation is often born from crisis. Let’s evolve how we think about retail and its role in our society. Let’s not miss the chance to re-envision retail and return its purpose to what it does best—being that cultural glue that binds our cities together.