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article imageOp-Ed: Will Apple's new stores model save dying retail space?

By Paul Wallis     May 17, 2017 in Business
Cupertino - Apple are re-purposing their stores as learning centres, as well as retail outlets. If this approach can restart retail spaces, as retailers disappear, it might save a lot of money for commercial property investors.
Apple’s move comes as retailers close in droves around the U.S. The retail model, like most other business models, is now basically obsolete. The need is to develop new uses for these spaces, and the service component might be the right move at the right time.
The story is simple enough. Retail spaces need local foot traffic. They also generate traffic for other retailers. As retailers close, those that remain are losing their collateral foot traffic, too. That’s not the only problem. Old-style retail is truly dead. The emergence of the Amazon stores and variations on that theme, real category killers, is likely to decimate the commercial property market. Something has to give, and so far it’s the retailers.
So – Change the nature of the business, add a service, like free courses as Apple is doing, and you can prevent the decay of these valuable commercial spaces. That is a very big deal, if it works.
The amount of capital invested in commercial and retail properties in the U.S. is truly gigantic. If this market goes in to a nosedive, it can take a huge volume of capital with it. That would be an unprecedented, and very hard to correct, major downturn for the U.S. economy. The possibilities are truly bloodcurdling.
Now the good news - The somewhat-too-chic/ not explanatory enough idea of “reinventing the town square” does have some traction in the new economy. New businesses don’t need to use commercial space in the same way. They also don’t usually need as much space as conventional businesses.
That said, the likely new users of commercial spaces aren’t retailers. They can create a demand for things like food stores, restaurants, and support a population of shops. They don’t need as much space, but they do need space to do business.
The downside is that they’re not likely to create of themselves a demand for department stores, or other major draws to retail shopping zones. That means a big hit to retail employment, too, which also undermines local economies.
The trend in store closures is global. Online shopping is doing the heavy lifting. A solution to the risk of commercial dead zones is desperately needed, ASAP.
Develop the idea of learning centres in to a mix of related and extrapolated services. In a city, you could have a mix of higher demand stores in multi-block-based sizes, delivering viable services. In towns, you could simply remix the existing space usage.
For example a mix could look like this:
Apple store
Amazon store
Clothing boutique/cost viable space
Financial services
Day care
Hotels/travel accommodation
Speciality consumer shops outside the online distribution framework
Offices for new economy businesses
Almost none of this, you’ll notice, has much in common with the old shopping strips and malls. Anything which can be bought online probably will be. The idea is availability of actual needs, in easy reach.
The alternative is a messy, likely to be ugly and expensive, property slump, in very high value capital properties. You can convert some spaces in to residential, but can you really replace both the capital and the cashflow that way?
If Apple gets this right, and the new stores do attract people to these dying deserts of retail space, it’ll solve a lot of problems. If the commercial spaces turn in to death traps for capital, you’re looking at a big hit which could make 2008 look like a baby shower.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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