Landlords will develop new formulas for calculating rent that incorporates the role physical
stores play in a retailer's broader omnichannel efforts, including digital transactions, over the next five years, according to a report released by the International Council of Shopping Centers (ICSC).

The range of potential models includes more
traditional approaches such as fixed rent, and base plus percentage
rents, as well as models that include a proportion of click-and-collect
via in-store and online sales in the percentage rent.
The prediction is among “Eight Statements” made in Envision 2020, a report that outlines where leaders from around the globe believe the industry will be in five years.

This report is meant to help retailers, shopping center owners, and investors to plan and innovate with the future in mind. Its remaining seven statements are: 

  1. Unification of Bricks-and-Mortar and Online Retail: The convergence of physical and digital is occurring on both sides of the retail spectrum. Shopping centers now offer sophisticated digital interfaces, innovative websites, and mobile communications to fulfill the increasingly web-savvy consumer. Conversely, retailers like Bonobos and Amazon.com are among the rising wave of e-tailers who are rolling out brick-and-mortar stores.
  2. Unprecedented Intimacy with the Consumer: Developers and retailers are utilizing technology like mobile applications, social media, beacon and geo-fencing technology to get to know the consumer and increase consumer engagement.
  3. Conversion of Shopping Centers Into Communities: Retail properties are evolving into shopping, dining, and entertainment hubs that are central to, and fully integrated with, the communities that surround them. Centers are taking on mixed-use elements with residential, hotel, and office space, and entertainment options including cinemas, health clubs, restaurants, and recreational areas.
  4. Mall Environments that Engage Millennials: The millennial generation in the United States is projected to surpass baby boomers this year as the nation’s largest living generation, according to the Census Bureau. In order to appeal to this all-important generation, shopping centers are providing customized, personalized, and sustainable features. JLL reported that most millennials (82 percent) prefer to shop in stores, although they spend a great deal of time browsing and researching products online beforehand.
  5. Incorporating Distribution Into Shopping Centers: As landlords position their properties to stay relevant in the digital age, shopping centers are increasingly doubling as distribution centers to fulfill both in-store and online orders. Consulting firm A.T. Kearney reported that 23 percent of customers purchase additional items when picking up an online order in-store.
  6. Accelerated Developer–Retailer Collaboration: The landlord-tenant relationship will evolve into a more collaborative paradigm, resulting in a freer exchange of information and technology that helps both entities spend more wisely and avoid duplication.
  7. Arrival of a Retail–Friendly Investment Outlook: As new shopping center formats emerge, lenders will increasingly favor retail investment opportunities. Institutions now allocate nearly 10 percent of their portfolios to commercial real estate, a significant increase over the last several decades.

Founded in 1957, ICSC is the premier global trade association of the shopping center industry. Its more than 70,000 members in over 100 countries include shopping center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. For more information, visit www.icsc.org or thecenterofshopping.com.

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