You have to wonder how long these old physical business models can pretend to stand up. They obviously can’t, and have been on a weird cost base for decades. Residential rental is front and center of inflation headlines, but commercial spaces are facing a dinosaur-like future. Zoning isn’t helping, at all.
As far back as 2006, The New York Times was talking about fast food outlets and zoning in relation to diet. You can see what happened. 16 years later, New Jersey is still dealing with the twists and tweaks to zoning that allow these commercial deserts to spread.
The problem for planners is that these food-based monocultures are drowning out other businesses. It’s an own goal of monumental, and possibly fatal, proportions.
Cities around the world have this same basic problem:
- Rental costs for retailers vs turnover equal hits to property viability for owners. Everybody can lose, badly.
- A constant increase in single-stream businesses like food, at the expense of including other businesses in the shopping mix.
- The resulting dropoff in reasons to visit retail areas.
- Meanwhile, non-physical shops are eating into retail revenues.
This is the final bullet for the retailers – Online prices are going down, in exactly the same economic environment as costs of living and costs of discretionary spending are going up.
That’s a truly lousy combination for retail. You can see where this is going for old-style retail – Straight down the drain. Rental alone is a massive cost hit. Add to this premises and old-style supply chains, and the retailers can’t win.
(This is what’s weird about the current environment. Property owners can’t possibly have failed to notice these issues. Why not restructure rents? Kindly note that this make-or-break situation can’t be run by algorithms and mindless babble about “great numbers”. That’s what caused the problem to start with.)
The retailers know that. Most physical businesses are costed to forensic level for that reason. That, however, does not mean that yet another tedious streetscape of fast food and almost nothing else will work.
Fast food has one thing that helps it survive almost any environment; it’s a high cash turnover environment. It can usually manage changing overheads better than most in good environments.
The irony here is that freezing out other businesses doesn’t help the fast food guys, either. It’s either lack of imagination or lack of comprehension, but a sea of fast food doesn’t mean “Let’s go shopping” anymore.
Even disregarding the fact that fast food outlets also pull business away from each other, they create a vacuum other businesses can’t or won’t fill. The old shopping malls did it better. They were high-maintenance things with infrastructure issues, but they did create a more rounded, arguably commercially more efficient, environment.
The future of what, exactly? Planning, mainly.
The issue here is that commercial property is in the firing line on a daily basis. Non-physical businesses can do better and cost less to run. That could make a lot of commercial property redundant. A few trillion bucks worth of this class of property may suddenly be worth a lot less.
For planners, the problems are perhaps a bit worse. How do you plan for such a vague mix of possible business needs? How do you retain businesses and revenue in your area?
There are many theories, including one of mine – Try planning mixes of local businesses to avoid boring people to death. There’s only so much novelty possible in endless streams of food outlets.
Consider these issues:
- Can you deliver a good mix of business types, at sane rentals, in your available space? This can be tricky, particularly in older areas where space configuration can be limiting.
- Can you do shopfront businesses, just more of them than old-style stores? This is a better use of space and can drum up business without costing a fortune to do it.
- What’s the best mix of businesses for a given zone? You need more than a one-trick-wonder retail zone, after all.
- Do you have any unique industries or local businesses? These can be great attention-getters for retail zones.
The bottom line here, obviously, is that a good variety of businesses generates a lot more business locally. This is exactly where retail is truly suffering.
These useless, monotonous, spatial monocultures aren’t just lacking stimuli for business; they’re actually reducing consumer interest in retail areas. Do you go to a noisy food court for the aesthetics? No? Neither does anyone else. Point made.
Flexible spaces might help. In theory, if not necessarily in cost terms, you can make space for any kind of retail business. A flexible promotional space can bring in good money for property owners. That type of cost is covered by the promo budget. No threats to anyone there.
This flexible use also adds interest; people will come and see something new. That may well be the future of retail – Physical, costed to perfection, and good value in terms of space. Back that up with online sales, and you’re doing a lot better, for a much lower cost. For commercial property owners, it means not holding a worthless collection of empty spaces.
Future businesses and commercial property economies cannot run on the old models anymore. Time to start looking at better options.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.