To get a sense of what is happening in Southeast Michigan retail these days, the place to start looking is the past. It’s interesting and important to recognize that the seeds of many of the retail trends manifesting themselves today were planted years ago.
Fortunately, the overall retail marketplace in Southeast Michigan remains generally strong. The marketplace may change over time, but one constant that remains unaltered is that quality rises to the top.
Thoughtfully designed and developed retail projects in favorable locations have always done well — and that has remained the case through recessionary ups and downs and the whims of a consumer base that can be quick to change.
Rethinking e-commerce
Andy Farbman, Farbman Group
Today, one of the most discussed topics of conversation for any retailer is the competitive pressure of the online and mobile marketplace.
The convenience of virtual transactions, the rise of Internet powers like Amazon, and an increasingly tech-savvy population of shoppers who are comfortable and confident shopping online for a wider variety of goods and services has prompted the vast majority of brick-and-mortar retailers to work hard to carve out their own space in the digital marketplace.
Online and mobile growth has had less of a direct impact on brick-and-mortar sales than many predicted. While sales online continue to grow, that growth has slowed, and the percentage of overall sales remains small.
There is an argument to be made that brick-and-mortar has had more of an impact on digital sales than the other way around, something we see reflected in the spate of formerly online-only concepts making the move to new brick-and-mortar locations.
E-commerce brands like Birch Box and Warby Parker have recognized that a brick-and-mortar presence keeps people interested and provides a tangible and valuable presence in the marketplace.
The value of giving consumers an opportunity to play with new products and experience them firsthand is something that tech brands, such as Apple, have been successfully deploying for some time.
Experiential retail to stay
Online competition is far from the most pressing issue in Southeast Michigan. Here, neighborhood retail remains strong across the state, and staples like groceries, markets, restaurants and service retailers continue to perform well.
Without many new malls in the region, we are seeing lifestyle centers and neighborhood centers finding ways to introduce some of the destination-focused experiential elements that were formerly exclusive to larger malls.
Developers, owners and operators are getting more creative and bringing in more restaurants, service and entertainment retailers and other non-traditional retail tenants like health and fitness brands. We are also seeing more money invested in keeping centers fresh and updated.
While quality product in premium locations remains healthy, pockets remain overbuilt. Some value retailers have taken advantage of vacancies in quality markets and capitalized on favorable rents. But surplus supply — especially in B and C centers — is still somewhat of an issue.
Empty spaces get backfilled
Among the group of nontraditional retailers and concepts that has taken good advantage of these larger vacant spaces is storage. In Southeast Michigan, storage brands have been successfully converting big-box spaces into storage and rental businesses.
At the intersection of Telegraph Road and 8 Mile Road, Storage USA has taken over a 150,000-square-foot facility that was once a Super Kmart, converting it into a storage, truck rental and retail moving store.
As more retailers become leaner and more efficient, a focus on quality over quantity has exacerbated the size issue and made big-box sites tougher to backfill. Regardless of the overall health of the marketplace, that dynamic is unlikely to change in the near future, and creativity will be needed to find a solution.
Converting to alternative uses like light industrial or office is one possibility, and Michigan municipalities will need to be flexible and creative in order to modify zoning, evolve along with new marketplace drivers, and accommodate changing retail and mixed-use demands.
Detroit is not Chicago
Another area where creativity is playing a role in the changing landscape of Southeast Michigan retail is in the growing trend of localization. It isn’t just local and regional retailers catering to local consumers anymore. Some of the biggest national and international brands are recognizing that localization can pay dividends.
The recently opened Nike store in Detroit is not quite the same as the global brand that you see in the Chicago location — there is more of a blue-collar sensibility. We will likely see more of this going forward as brands look to tailor their offerings to a city or a region, targeting spendable dollars in a very specific and focused manner.
One noteworthy area of growth in Southeast Michigan is outlots adjacent to larger office buildings and retail developments in cities with a strong daytime presence like Troy and Southfield.
Michigan developers, not to mention cities and planning departments, have recognized that many of these facilities are somewhat overparked. They have unlocked new value by creating and developing new outlots along places like the Big Beaver Road corridor and Telegraph Road. Fast casual brands and smaller service retailers are the most common beneficiaries of these new outlot opportunities.
New era, arena for Detroit
By far the biggest story in Southeast Michigan remains Detroit. The Motor City is in the midst of a welcome and long-awaited retail and mixed-use renaissance. Optimism is on the upswing, and that has very real and very positive implications for a city that is packed with opportunities, and has seen developers and investors capitalizing on those opportunities in a thoughtful and logical manner.
Detroit’s central business district remains the center of greatest development activity, but action is picking up and moving outward. A number of high-profile redevelopments have brought new residential and mixed-use structures to downtown.
The positive momentum is especially noticeable in the Foxtown area and along Woodward Avenue, with the $627 million Little Caesar’s Arena (the future home of the Detroit Red Wings) joining existing downtown football and baseball stadiums. Additional retail will certainly follow, and the future looks bright for Michigan’s most iconic city.
Ironically, one potential fly in Southeast Michigan’s ointment isn’t a local or regional factor. It’s a national one — the upcoming 2016 presidential election. The industry as a whole seems somewhat uncertain as to how the next four months will play out.
While it’s never easy to predict exactly to what extent big political happenings will resonate in the retail world, it definitely bears watching. Retail sales are obviously largely dependent on consumer sentiment, and what is certain to be a blizzard of nonstop media chatter about the election could have an unpredictable influence on the marketplace. At least for now, however, the most important color in Michigan isn’t blue or red — it’s green.
— By Andy Farbman, CEO, Farbman Group. This article originally appeared in the July 2016 issue of Heartland Real Estate Business.