Re-imagining the Neighbourhood Centre

Alex McCulloch, Director of CACI, sets out the key guiding principles for delivering the ideal neighbourhood centre.

First published in CoStar on 28 February 2022

Covid is not the first global affair to have gripped and forever changed the retail market. The world of retail has ebbed and flowed over several years, and the advent, and recent acceleration, of internet shopping is what has had the most significant impact on how we interact with places. In 2019 landlords were wrestling with what good looked like, and in 2022 that question is all the harder – how do you deliver the ideal neighbourhood centre today?

Accounting for these shifts, CACI has been exploring what a future-focussed retail landscape looks like, asking the constantly evolving question: what exactly is the ideal neighbourhood centre? For the purpose of this piece, we concentrate on a hypothetical centre, but one you will recognise.

So, close your eyes and transport yourself to the heart of a medium-sized, mid-affluence town, where there sits a shopping centre of circa 400,000 sq ft. Likely built in the last 40 years and over-spaced for the market it’s in, it’s anchored by a big department store that is now a distant memory, leaving a surfeit of retail space. It’s under single ownership by a REIT or long-term investor, who are facing the same questions all owners are right now: what do we need to do to maintain the relevance of this place, and how do we go about achieving it?

The reality: this centre has the ability to change and release genuine long-term value, but it requires both brave asset management and nimble thinking, as well as further investment. 

Your challenge, if you choose to accept it, is to imagine you are the owners of this struggling destination. What can you do to bring the shopping centre into this decade, and ensure it doesn’t get dated fast? What are your guiding principles going to be, to inform bold decision making and convince your board to splash some cash? I’ll take you on a journey through the things I believe to be vital for the function of a future destination.

Here’s my first hint: it’s 2022, and in case you haven’t noticed, sustainability is quite important. This has to be your first objective, not only to engage the ever-growing percentage of conscious consumers, but so you sleep well at night knowing you haven’t tarnished the world that little bit more. Your shopping centre needs to be environmentally sustainable. If you’re extending or re-adapting the existing space, think reusable or recycled materials, green walls and beehives on the roof.

Being sustainable also forces you to lead the way in building for the future. A CACI survey looking at perceptions of electric vehicles found 42% of people want their next car to be an EV.  Furthermore, 68% of people who intend to own an EV will visit retailers and businesses more frequently if they provide the right charging facilities. Now is the time to start putting the foundations down for an EV friendly retail destination. Your destination should also be socially sustainable and reflect the local community. Get to know your locals, understand what they want to see. Dig deep, because one size does not fit all, and this isn’t Free Guy – the community in this game control the players.

The last sustainable step, and by no means the least important, is economic. The end goal should still be to provide an appropriate rent and value for both you as the owner and your tenants. A bad deal can often be the reason shutters go up, so be creative. Turnover only is popular now, but as you look to sustain your place and generate value for everyone, it cannot be the only answer. Think about the things we know will be a big part of our future – online sales, cryptocurrency, even the metaverse! Some of these will be a hard sell to your financers, but history tells us that forward-thinkers win the day.

That said, one of the key rules of this game is to be realistic, for the market, the customer and the end goal. The hypothetical architectural dreams of re-wilded deer and community conference auditoriums are inspirational but often undeliverable. You need to hit that sweet spot between unique and aspirational, but not totally out of this world. You don’t need to implement canals throughout the shopping centre for gondola rides (yes, there is a mall in Italy where this is a thing), but there are cost-effective ways to continue to excite visitors, in turn attracting the best operators.

Much like that ever-popular quiz show, you are allowed to phone a friend and build alliances that get you to the finish line. Your shopping centre will need to have stakeholder support across as many groups as possible, including national and local government, community groups, residents, workers, as well as the owner and occupiers. It can be hard to keep everyone happy, but stakeholder engagement is key for long term success, so don’t underestimate its value.

Never forget, this is not a one-player game. Someone has just opened their version of the ideal destination across the road from you. In addition to the rules of sustainable, realistic and supported,  your destination must be adaptable and be able to exist in isolation as well as the surrounding context. Don’t oversaturate your market but have confidence that you can be better – your neighbour’s coffee shop doesn’t preclude you from having a café, roastery and experiential coffee sommelier centre.

Hit these four key principles, and you have your ideal destination. That’s game over, until you need to release the sequel, at least.