Repositioning the Retail Market
Reposted with permission from constructionexec.com, July 29, 2019, all rights reserved. Copyright 2019.
In May, the latest Amazon Go store opened in New York City—bringing a state-of-the-art shopping experience to the East Coast. Customers log into an app, a super smart ceiling full of sensors and cameras adds any items picked up to their “cart,” and digital payment is deducted automatically upon exiting the store.
The experience was new for the construction team, too. General contractor Schimenti Construction Company had to keep the job confidential, even using the code name “Project Miami” on all documents.
“It was a first for our organization and for my 25-plus years in construction,” says President Matthew Schimenti, third-generation owner of the family business. “The technology was unprecedented, so that was a learning experience for us. But this approach isn’t a unicorn anymore; we’ll start to see more and more of it as stores right-size.”
The New York City metropolitan area has the busiest retail sector in the United States (largely thanks to Hudson Yards), with work under way valued at $1.3 billion in 2018, according to a study from the New York Building Congress. In contrast, double-digit declines occurred in seven of the top 10 metro regions, including Chicago, Dallas-Forth Worth, Houston, Los Angeles and Miami.
Overall, the market has already evolved from traditional storefronts and chain rollouts to the e-commerce only model, where retailers can serve customers without a brick and mortar base. Another 75,000 stores selling clothes, furniture and electronics are expected to close in the next seven years, when online shopping will comprise a quarter of retail sales, according to UBS.
Storefronts also have become more efficient and uncluttered, as well as experiential. In essence, fewer locations means amping up the offerings at remaining stores.In some settings, food or a coffee bar is being incorporated into the store, while other flagships that Schimenti Construction has built in New York City don’t even sell merchandise. For example, Samsung has a 55,000-square-foot “digital playground,” and Nike offers a five-story “personal sports experience” with space to customize and try out products.
And at a store like Indochino, which prefers the term “showroom” for its made-to-measure menswear, customers don’t even leave with their purchases (they are shipped directly after being custom made).
“Traditional retailers are reformatting stores to design standards that are working well today: comfort and convenience,” Schimenti says. “With all of the information that the retail and development community now has access to, it gives them the ability to make really smart decisions.”
And they need strong construction partners to help bring these repurposed and reconfigured properties to life.
“We’re being brought in earlier than ever because so much strategic work goes into these repositionings,” Schimenti says. “Sections of traditional malls are being ripped down, while movie theaters and even schools are being added. The complexion we’re seeing is mixed-use, residential and even has some distribution elements. We’re reacting to what’s happening in the market, and what’s happening is exciting.”
Developers must react to changing real estate trends as well, often in the midst of long-term planning. Case in point: River Landing Shops & Residences near downtown Miami was redesigned to incorporate technology and lifestyle advancements that weren’t prevalent when the project was conceptualized in 2012.
For example, the 2 million-square-foot mixed-use development, being built to LEED Silver standards under the development team of Coralee Penabad and Andrew Hellinger at Urban-X Group, will include dozens of electric vehicle charging stations for residents, shoppers, restaurant-goers and office workers to use once completed in April 2020. Balfour Beatty is the general contractor.
“We are prepared to add more stations as demand rises due to extra conduit run underneath,” Hellinger says.
The 2,200-car garage was also redesigned with horizontal plate parking, rather than ramps, to facilitate different uses in the future. Specifically, Urban-X Group expects the growing popularity of ride-sharing services to diminish the demand for parking spaces and open up the opportunity for a bigger residential footprint.
“Another technology that made us update our 28,000 square feet of riverfront restaurant space is the rapid proliferation of food delivery services like Uber Eats, Postmates and Instacart,” Hellinger says. “We added larger delivery and prep areas for drivers and altered the area outside restaurant row to accommodate short-term parking for pick-up and drop-off.”
Urban-X Group even planned for curbside delivery of food and groceries by boat given the development’s location along the Miami River.
River Landing’s tenant makeup also was renegotiated in late 2018. The initial plan was to build 421,930 square feet of retail in five stories, but about 7% of that was reallocated to office space for a total of 135,999 square feet over three floors.
“Our decision was in response to the great demand for office space in this sub-market, known as the Health District, about 5 miles west of downtown Miami,” Hellinger says. “The pent-up demand for office space is so much greater than anything else, and it’s fueling rental rates.”
From a retail perspective, the goal is to create an experience that feeds both consumers’ desire for the picture-perfect backdrop to social media posts and their desire for more human interaction.
“The need to socialize and share experiences with others is helping fuel the rise of mixed-use projects like River Landing,” Hellinger says. “That’s what we had in mind when we decided to allocate additional resources to create a waterfront linear park and restaurant row. These components will help create a social experience that will boost foot traffic for our retail tenants.”