Generation Y Tastes Have Mall Owners Shifting to Entertainment

ByKris Hudson

Contrary to the popular assumption, mall owners needn’t worry about young adults doing all of their shopping on their smart phones. However, the rapidly changing tastes of Generation Y has retail landlords considering adding more restaurants, entertainment venues and even dog runs to appeal to fickle young shoppers.
The Urban Land Institute on Thursday released the results of a survey showing that members of Generation Y, also called Millennials, prefer dining and entertainment as part of their shopping trips. They often shop online but also frequent discount department stores and warehouse clubs.
The survey, of 1,251 respondents between 18 and 35 years old, found that 45% spend more than an hour a day viewing retail-related websites. But they often leave the computer for social reasons, with 46% saying they dine out with others at least once a week and 25% saying they do so several times a week.
Such survey findings are important for the U.S. shopping center industry as it labors to recover from decades of overbuilding, tempered consumer spending since the recession and the growth of online shopping. The average vacancy rate for centers in the top 63 U.S. markets registered 6.8% in this year’s first quarter, according to research firm CoStar Group. That’s less than the 7.5% vacancy rate in 2010, but still more than the recent low of 5.8% in 2006.
Mall owners are keen to lure Generation Y because it is a massive group numbering nearly 80 million, and its formative earnings years are ahead of it. Thus, retail properties are seeking to woo Generation Y by adding more off-line tenants such as grocery stores and more gathering venues such as restaurants and upscale theaters.
“This generation is more about experiences than acquisitions,” said M. Leanne Lachman, a real-estate consultant who organized the survey with ULI, speaking Thursday at ULI’s spring conference in San Diego. “So mall owners need to think about how to create fresh sensory stimuli without spending a lot of money.”
One of Ms. Lachman’s suggestions: More than 71% of respondents in the survey own pets, so mall owners should consider adding dog runs or pet shows.
The survey also reveals that 91% of respondents had made a purchase online within the past six months. The type of retailer they most often visit in-person is discount department stores and warehouse clubs. Financially, more than a third of respondents were receiving some assistance from their parents. But less than 9% had debt exceeding $6,000.
Federal Realty Investment Trust , which owns 20 million square feet of U.S. shopping centers, is among those trying to appeal to young shoppers by adding restaurants and experience-oriented retailers like Lululemon Athletica , which sometimes hosts yoga classes in its stores.
“Everybody will buy commodities online; that’s just how they shop,” said Jeff Kreshek, Federal’s vice president of West Coast leasing, at the ULI conference. “But, until we invent a way for you to eat dinner online, they’re going to demand experiences” at malls like dining and movies.
Abby Lancaster is the type of Generation Y shopper that mall owners covet. A 31-year-old court reporting student in Thornton, Colo., Ms. Lancaster does half of her shopping online. When she ventures out to shop, she visits the grocery store twice a week and a mall or big-box store maybe three or four times a month. She and her husband meet friends or family to dine out two or three times a week.
“If I find something I like, I’ll buy it,” said Ms. Lancaster, who owns a home with her husband, a restaurant general manager. “Usually, if I’m sitting at home and I need something, I’ll go online to see if Walmart or Target has it.”
Courting Generation Y can be tricky because younger shoppers are fickle, especially with technology at their disposal.
“Their higher rates of adoption of technology will accelerate the life cycle for retailers,” said Suzanne Mulvee, director of retail research at CoStar. “Retailers will move more quickly from hot to not. That will drive higher turnover and (capital spending) for owners” of shopping centers.
In the Denver suburb of Longmont, Colo., a developer is recasting an aging mall with a lineup of stores seemingly tailor-made for the Generation Y preferences outlined in the ULI survey. Newmark Merrill Cos., which bought the half-empty Twin Peaks Mall in 2012, currently is preparing to demolish much of the mall to make way for new tenants it announced this week: a Sam’s Club warehouse, a Whole Foods Market and a 12-screen theater.