design:retail - June 2018 - 39

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and that the same historical forces that created the industry's Golden Age have now, almost
inexorably, become the reasons for its demise. Others counter that commercial institutions evolve
and that the future of shopping centers has never
looked more promising. The truth lies somewhere
in the middle. Retail real estate in the United States
is at a crucial evolutionary stage-a fact underscored
when you look at the industry on a global basis.

THE VIEW FROM ACROSS THE WORLD
The United States is dramatically overstored,
especially compared to nations such as the United
Kingdom, where urban planners place a limit on
the ratio of real estate to people. There are approximately 24 sq. ft. of commercial retail space for every
American, compared to 5 sq. ft. per person in the
United Kingdom, 3 sq. ft. per person in China, and
about 2 sq. ft. per person in South Korea (see Figure
1). Some of this has to do with how retailing evolved
in other nations.
In Asia, the adoption of mobile and internet
shopping occurred at a much faster rate. Traditional retailers became early e-commerce champions
and were therefore better protected against competition from digital pure plays. Asian department
stores transitioned their business models years
ago. Japanese department stores, for example, began morphing into shopping centers in the 1990s, a
movement mimicked in South Korea a decade ago.
Culture and lifestyle play significant roles in
shaping commercial development. As a result of
urban density and the size of many living quarters, Asian friends and families are more likely to
eat celebratory meals in a restaurant than at home.
And because of poor air quality in many Asian cities, indoor sporting facilities, often associated with
shopping areas, are very popular.
Where American site selection strategies are often
based on adjacency to highways or other main roads,
in Asia, proximity to foot traffic and transportation
hubs are the leading drivers of where shopping
centers are built. America also lags Europe when it
comes to mixed-use development and locating retail
in proximity to transportation hubs.

WHAT'S NEXT?
Whatever you choose to call retail-based real
estate in the future-malls, centers, collections or
CESs-they will be environments where people
gather to engage with friends, connect with likeminded shoppers, seek out unique experiences,
reaffirm values and interactively relate to brands
on a personal level. Transactions will be a byproduct of consumer socialization and engagement.
CESs may resemble today's shopping centers and

The industry's future
potential rests on the ability
of operators and retailers
to relearn the rules of an
ever-changing game.
malls, or they might look quite different. Traditional retail stores may anchor them, or they may
be anchored by purpose-built specialty residential living units, an entertainment complex, sports
center, educational institution or healthcare facility, or even organized around a theme or concept
(see Figure 2, page 40).
No matter how they are anchored, CESs have a
robust future, provided operators and tenants make
the necessary adjustments to make their spaces
more engaging. And, regardless of form, they will
be organized around consumer "pull," rather than
retailer and manufacturer "push." Their shared
emphasis will be less on selling things than on creating a platform that facilitates sales by recognizing
and understanding individuals, and affirming and
connecting them with affinity cohorts sharing their
core values and aspirations.
One thing is clear: the industry is facing an inflection point. There are many options going forward,
but standing still isn't one of them.

FORCES OF CHANGE
Looking toward 2030, we see the future of CES
defined by three primary change drivers: people-
who we are, how we live and how we interact with
each other; technology, especially those technologies that connect us to each other and to businesses
and innovative technologies that could threaten
business-as-usual by creating new consumer benefits; and commercial considerations, from how
and why we shop, and the nature of the competition the industry will face, to the organization, size
and location of the physical or digital space retailing
operates in.
This analysis begins with the consumer.

PEOPLE: THE HUMAN ELEMENT
The ancient Greek word ἀρχή (arche) means
"origin, first principle and the source of action."
In the future, all commercial activity will either
have the consumer as its arche, or it will fail. Retail

Figure 1

The United States is overstored compared to other countries
(sq. ft. per person)

United States
Canada
Australia
United Kingdom
Japan
Netherlands
France
Switzerland
Spain
China
Italy
Taiwan
Thailand
Germany
South Korea
Russia
Indonesia

23.5
16.8
11.2
4.6
4.4
4.1
3.8
3.6
3.4
2.8
2.8
2.4
2.3
2.3
2.2
1.4
1

Sources: ICSC country reports; A.T. Kearney analysis

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