Not so long ago, the concept of serving up experiences with retail products was a “nice to have” strategy. According to a Lee & Associates write-up, that “nice to have” is now a “need to have,” especially for retailers who want customers.

“The New Logic of Retail Leasing” explained that the goal of physical retail is to attract more customers and keep them longer. As such, “every property is being judged on whether it feels like a place people choose to spend time, not a box they pass through,” the Lee & Associates analysts said.

Experience: An Economic Variable

The report noted that quick-service restaurants are consistent traffic drivers, as they benefit from “convenience, price sensitivity and daily relevance.” At the same time, grocery, fitness, wellness and service-oriented concepts remain the strongest demand generators.

The concepts expanding today are successful in combining retail with “service, memberships, events and product add-ons,” The Lee & Associates analysts pointed out.

As a result, tenants and owners underwrite for more than sales per square foot. They’re focused on frequency, dwell time and adaptability. The report said that sales per square foot rose 4.2% year over year, and occupancy cost ratios have mostly normalized. “That gives well-positioned tenants room to invest in buildouts and programming when the payoff is repeat business,” the report noted.

Then, there is Placemaking

Mention “placemaking,” and what might come to mind are massive malls and mega-mixed-use environments. Lee & Associates analysts threw out another definition: “the combination of tenant mix, shared-space investment and ongoing activation that turns retail real estate into a destination.” It also involves whether a property remains relevant over time.

At a stand-alone level, placemaking offers promenades, shade, seating, and flexible storefronts that evolve with demand. The write-up noted that rotating kiosks, temporary activations, and outdoor programming are good examples, especially if they serve as gathering spots. “The point isn’t spectacle,” the report added. “It’s usability.”

The Takeaway

The analysts pointed out that the question for owners isn’t necessarily who will pay the most rent for space. Rather, it involves determining which mix, environment, and operating plan will keep the space relevant (and financeable) during the next cycle.

As such, it doesn’t matter if a property has experience. The issue is whether the experience is repeatable and aligned with how people live. “That means prioritizing uses that monetize frequency, reducing friction with realistic buildout pathways, using data to understand behavior patterns, and maintaining flexibility in a market where construction costs and time-to-open often determine whether deals get done,” the report concluded.