Retail development continues to be reliant on the anchor tenant, defined in the ICSC Glossary of Terms as the primary tenant and consumer draw in a mall or large shopping center that makes the overall development economically viable. Visit your nearest shopping center in Anytown, USA and these businesses, your department store or grocery chain, intentionally overwhelm the smaller, adjacent tenants. Anchor tenants are thought to be the linchpin for success of retail center – they draw customers into the retail development and drive traffic towards neighboring establishments. Similarly, if the anchor tenant fails, this can have a devastating impact on the other, smaller tenants that remain, decreasing rental rates and the overall value of the development. The recent spate of store closings in already struggling shopping malls across the United States illustrates what happens when anchor tenants go dark.
In response to the economic recession and increased competition from online retailers, shopping centers developers are beginning to shift this paradigm and seek out non-traditional anchor tenants, such as a public library. These non-traditional anchor tenants improve the possibility of reinvestment in declining retail centers while also re-characterizing today’s retail development. Exploring these market trends offers a glimpse into future development in local communities around the state.
Responding to the Great Recession
In 2009, CoStar’s Sasha Pardy offered thoughts on the “Consumer Shift to Value Affecting Anchor Tenant Mix.” During this time, retail development responded to the economic changes of the nation, reverting from high-end, anchor tenants to value-oriented (or discount) retailers to fill vacant retail space. Developers had to respond to the uncertainty in the retail market, as more consumers desired value-oriented options. Pardy pointed to the unprecedented success of Forever 21, H&M, and Dollar Tree as retailers that could adapt to changing demographics by offering different “value-formats.” The most active, non-traditional uses were fitness centers and family entertainment centers, both tenants that drew people into previously vacant space. Pardy also listed satellite college campuses and vocational schools, medical clinics and rehabilitation centers, churches and community outreach centers, and call centers as tenants that could be successful in large vacant spaces.
While Pardy responds to trends effecting retailers after the Great Recession, North Carolina’s smaller communities can look towards non-traditional anchor tenants as an opportunity to spur or redevelop in today’s untapped retail markets. McAllen, TX’s McAllen Public Library offers a great example of repurposing retail space in a vacant building. The City converted a vacant Walmart into a 123,000 square foot public library, complete with a computer lab, café, meeting space, and auditorium. Additionally, a recent blog post on Reimagining Shopping Malls provides other great examples.
Responding to Online Retailers
In recent years, retail developers have also looked towards the increase in online retailers as a threat to traditional shopping centers. Rather than looking to provide everyday necessities in big-box retail centers, developers have to provide an experience that is not available online. In creating this experience, retailers in California are looking toward a marketplace concept that tailors to small retailors, local restaurants, and boutiques within a larger marketplace of retailors. In this concept, a “hip or trendy restaurant” was described as a key non-traditional anchor tenant. As a result, consumers are offered a distinct shopping experience where the food, services, and products attract return business.
How does this affect my community?
Many communities are looking toward real estate development to improve the quality of life and local amenities throughout their neighborhoods. In the process of redeveloping one’s downtown or filling currently vacant space, non-traditional anchor tenants could have a strong fit. Thinking outside of the ‘big box’ retail model allows for communities to reinvigorate vacant spaces or redevelop underutilized properties with unique retail products.
Maggie Parker is a candidate for the Master of Public Administration and the Master of City and Regional Planning graduate degrees at UNC-Chapel Hill. She is also a Community Revitalization Fellow with the Development Finance Initiative.