A recent article from the experts at AT Kearney makes for interesting reading – particularly for those of us in the retail real estate investment sector who are excited by rapid growth in mixed use developments. They suggest that there are still huge opportunities to be taken in the physical, bricks and mortar retail space – despite the growing power of online sales. Here’s what they have to say:

“Many observers of brick-and-mortar retail feel that shopping centres are crumbling at their foundations. But we believe that today’s world offers malls an opportunity to turn a new page. With swift and aggressive innovation and a customer focus, shopping centres can transform into “consumer engagement spaces”: mixed-use offerings designed to meet the needs of new and future generations of shoppers.”

A new kind of customer experience

I particularly love that idea of ‘consumer engagement spaces’ because I think that it goes right to the heart of the kind of transformation we need to see in shopping centre developments. Much of what this practically means for consumers comes down to a blurring of the lines between commercial and residential spaces – where once they were clearly defined, now mixed used sectors are becoming more and more popular. Mexico in particular is seeing real growth in this area, with KPMG suggesting that more than half a million square metres of offices are planned for this year, with much of it being built in mixed use developments.

Taking a step back for a moment, the context for all of this is that it is clear that the traditional idea of a shopping mall is under serious threat. In the US, for example, the birthplace of the shopping mall, 70% of the 950 malls studied in a recent report by Green Street’s Advisory and Consulting Group experienced a big drop in in national retail tenants. Businesses are leaving malls – often to set up shop virtually, online – and customers are following them.

A bright future

So why do I still feel so optimistic about the future of bricks and mortar shopping centres. Well, a big part of it that I have seen, first hand how things can be done radically differently, for example at our beautiful Vía Vallejo Park shopping centre in Mexico City – creating an entirely new kind of experience for consumers. Going back to AT Kearney’s point about consumer engagement spaces, it’s clear that if the next generation of shopping centres are to thrive, then they will need to show the same kind of innovation that we’ve seen from the industry leaders in the digital sphere. The signs, I believe are good, and there are a number of trends that I think are breathing new life into the traditional mall model.

One key point is about experience – something that online retailers really struggle to provide. I’m not talking here about the purchasing process, but rather the whole experience of going somewhere, not just to buy, but to enjoy a shared, social experience with other people. Some shopping centres are already doing this well, with the retail space built around some other kind of experience that draws people in – for example a museum or performance space.

Another area that shows there is a future for physical stores is around the opportunity it provides for data gathering – retailers are increasingly able to actually see and collect accurate data on the way that real customers interact with their stores and their products. This kind of information is invaluable, and can help retailers to test out new ways of working in the real world.

Targeted developments

Returning to the rise in mixed use developments we’re seeing in Mexico, there is also another logical step that can be taken on this journey. This is the creation of mixed use, residential and commercial developments that are specifically aimed at certain demographics or particular groups of people who share the same lifestyle and values. A great example would be mall for the older generation, with housing nearby to medical centres, shared communal spaces and places to stay fit and well.

These are all exciting possibilities for the future of shopping centres, and I’m excited that Mexico is one of the countries that is really leading the way in this area. For me, as a real estate investor, it seems that there still huge opportunities to be had in the physical retail space – and I’m looking forward to seeing how developers will continue innovate in order to stay relevant.