“The important thing to think about is that the biggest threat to brick-and-mortar retail is really the current version of themselves,” says Caruso CEO Rick Caruso. Caruso is one of the most successful retail developers in the United States. “Many of them have to evolve and many of them have to change because the consumer is going to change. This crisis, I believe, is going to change consumer culture, their expectations, and what they want from retailers in a really significant way.”
This Crisis Is Going To Change Retail
I hope (retail jobs) come back I think some are going to be lost. The retail environment is tough out there right now. The important thing to think about is that the biggest threat to brick-and-mortar retail is really the current version of themselves. Many of them have to evolve and many of them have to change because the consumer is going to change. This crisis, I believe, is going to change consumer culture, their expectations, and what they want from retailers in a really significant way.
They’re going to be winners and they’re going to be losers. I think the winners are going to be very connected. They’re going to be curated and feel more local. They’re going to feel more personalized and they’re going to have a better value proposition. There are many out there that we’re doing that before this crisis began and they’ll continue to do it. I think they will be rewarded with great success and hopefully, they will drive a lot of hiring. There will be more retail jobs coming back into the current economy.
People Are Going To Want More Physical Space
I do think that people are going to want to have more physical space (after this crisis is over). I think they’re going to operate differently. Listen, 9/11 fundamentally changed our habits as human beings. But the one thing that is always crystal clear is we’re human souls that want to have a sense of connection and community and our properties provide that. The challenge for retailers inside their four walls is going to be to meet the customer where the customer wants them to be.
The very innovative and very smart retailers are going to do very well. When you get to crowded restaurants and things like that I think they’re going to have to change how they operate. Movie theatres may have to change how they operate for a while. There’s certainly going to be a shift. What we have seen is the isolation gets very tiring very quickly. So I think people are going to want to come out and they’re going to want to celebrate life and they want to connect with their community.
Economy Is Built On The Back Of The Entrepreneur
Some (of our retail tenants) are and some aren’t (paying rent right now). The ones that I worry about the most and I care about a lot are the smaller ones. These are the entrepreneurs and the people that have started a small business or a small restaurant. We’re leaning in with all of those to support them. I’m a big believer that the economy is built off the back of the individual entrepreneur.
We’re going to support them to get them reopened so they can rehire and move forward. The tenants that are more creditworthy, which is a big chunk of our portfolio, they have been paying. My expectation is that they should, given these times, so that we can put more resources into the smaller businesses which clearly will need our help.
We’re Giving Smaller Tenants Concessions On Rent
We’re meeting with each of (our small business tenants) individually. It depends on certain circumstances but we’re going to give them concessions on rent. We certainly may give them concessions and investment in terms of TI’s and maybe upgrading their stores. Whatever they need to do. Our properties are very popular for a number of reasons but one of them is the small retailers, the entrepreneurs, the restaurant tourism. They’re the soul of the properties and they’re the fabric of the properties. We need those to survive.
What we don’t want to do is have successful properties that are just full of national retailers. National retailers could be great but they don’t have the same connection to the community and the same soul that a local entrepreneur has. Those are the ones we’re very focused on supporting and working with.