The retail real estate industry is undergoing significant changes, driven by evolving consumer preferences, technological advancements, and shifts in the economic landscape. Shopping centers, once primarily destinations for in-person shopping, are now adapting to new demands and expectations. As e-commerce continues to grow and consumer behavior shifts, shopping centers are being reimagined to meet the needs of today’s diverse market. Understanding these trends is essential for investors, developers, and retailers alike to navigate the future of retail real estate and ensure long-term success.

I’m Matt Morgan, and with over a decade of experience in retail real estate, I have witnessed these trends reshape the shopping center experience. Stay tuned to explore how these dynamics influence retail strategies and investment opportunities.

Experiential Retail and Mixed-Use Developments

In the Inland Empire of California, experiential retail and mixed-use developments are becoming key drivers of change in the region’s retail landscape. As consumers increasingly seek more than just products, shopping centers are evolving into dynamic spaces that offer unique experiences. From interactive stores and entertainment venues to local food markets and cultural attractions, these developments aim to create destinations that engage visitors on a deeper level. The Inland Empire’s growing population and its proximity to major metropolitan areas make it an ideal location for mixed-use projects that combine residential, commercial, and recreational spaces. These developments not only provide convenience for residents but also attract visitors, driving foot traffic and boosting the local economy. As the region continues to expand, experiential and mixed-use retail spaces are becoming a central part of the future of shopping in the Inland Empire.

Sustainability and Technological Integration

Sustainable Practices and AI Adoption

In retail real estate, sustainability is more than just a buzzword—it’s a necessity. Shopping centers are increasingly focusing on energy-efficient infrastructure to reduce their carbon footprint and appeal to eco-conscious consumers. This shift is not just about meeting regulations; it’s about creating a healthier environment for shoppers and employees alike.

One standout example is the Mall of America, which has embraced sustainability with initiatives like vintage clothing sales and environmental activities during Earth Month. They partnered with One Tree Planted, allowing customers to plant a tree with every purchase receipt scanned. Such initiatives not only promote sustainability but also engage consumers in a meaningful way.

Advanced technologies like AI and the Internet of Things (IoT) are also playing a crucial role in changing shopping centers. These tools help optimize energy use, manage resources efficiently, and improve the shopping experience. For instance, AI-driven tools can predict foot traffic with up to 90% accuracy, allowing malls to adjust lighting and HVAC systems accordingly, saving energy and costs.

The rise of AI is reshaping retail by offering personalized shopping experiences. For example, Target uses AI to power a personalized gift finder on their app, enhancing customer engagement and satisfaction. In-store, AI can improve inventory management and offer personalized recommendations, ensuring that stores are stocked with the items customers want.

IoT devices further improve operational efficiency. They can monitor everything from energy consumption to customer behavior, providing real-time data that helps malls operate more sustainably and effectively.

As shopping centers continue to evolve, the integration of sustainability and technology is proving to be a winning combination. By going green and getting smarter, malls are not only reducing their environmental impact but also creating more engaging and efficient spaces for shoppers.

The Rise of Specialty Grocery Stores and Luxury Outlets

In the Inland Empire of California, the rise of specialty grocery stores and luxury outlets is transforming the region’s retail landscape. As the population grows and consumer preferences shift, more shoppers are seeking out high-quality, niche food items and luxury goods. Specialty grocery stores, such as organic markets and health-focused grocers, are becoming increasingly popular as residents embrace healthier, more sustainable lifestyles. These stores cater to the demand for locally sourced produce, gluten-free products, and unique gourmet items. Additionally, luxury outlets are seeing a surge in popularity in the region, attracting shoppers looking for high-end brands at discounted prices. With the Inland Empire’s growing affluence and its strategic location between major cities like Los Angeles and San Diego, luxury outlets are capitalizing on both local demand and the influx of visitors. This trend is not only reshaping the retail scene but also contributing to the region’s economy by creating jobs and drawing in consumers from surrounding areas.

Omnichannel Retailing

BOPIS and Retail Consolidation

The retail landscape is rapidly changing, and omnichannel retailing is at the heart of this change. This approach seamlessly blends online and offline shopping, allowing consumers to enjoy the best of both worlds. With omnichannel strategies, retailers are not just selling products; they’re creating integrated shopping experiences that cater to modern consumer habits.

One prominent feature of omnichannel retailing is Buy-Online-Pickup-In-Store (BOPIS). This service allows customers to purchase items online and pick them up at a physical store, combining the convenience of e-commerce with the immediacy of in-store shopping. Malls are increasingly becoming fulfillment hubs for these online orders. This shift is crucial as it helps malls stay relevant in an era where digital shopping continues to grow.

Retail consolidation is another aspect of this evolution. As weaker stores close, malls are focusing on high-performing tenants and alternative uses for their spaces. Some malls are changing into community hubs, incorporating healthcare clinics, fitness centers, and educational facilities to maintain foot traffic and relevance.

Open-Air Shopping Centers and Investor Strategies

In retail real estate, open-air shopping centers are becoming the new stars. These centers, often anchored by grocery stores, are proving to be resilient in the face of economic pressures and the rise of e-commerce. Their appeal lies in their ability to attract steady foot traffic and offer services that online retailers struggle to replicate, like dining and personal care.

Investor interest in these properties is on the rise. In 2024, foot traffic to grocery stores in open-air centers grew by 12% compared to 2019, according to Green Street. This makes them attractive to investors looking for stability in a changing market. In fact, CBRE predicts over $10 billion in open-air retail portfolios will be bought and sold in 2025.

Recent high-profile partnerships highlight this trend. For example, Bain Capital Real Estate and 11North Partners teamed up to acquire and manage open-air centers across North America. Their focus is on necessity-based tenants, such as grocery stores, which consistently draw customers.

The economic landscape is putting pressure on retail real estate, but open-air centers are holding strong. Rising operational costs and shifting consumer habits are challenges, but these centers’ adaptability and community appeal provide a hedge against volatility.

As the retail sector continues to evolve, investor strategies are increasingly focused on properties that offer resilience. Open-air centers are not just weathering the storm; they are thriving by meeting consumer needs for convenience and community engagement.

Are malls becoming obsolete?

No, malls are not becoming obsolete, but they are changing. The traditional mall model, heavily reliant on department stores, is evolving to meet modern consumer demands. Many malls are shifting towards mixed-use developments, which blend retail with residential, office, and entertainment spaces. This approach turns malls into vibrant community hubs rather than just shopping destinations.

What is the impact of e-commerce on shopping centers?

E-commerce has significantly impacted shopping centers, pushing them to innovate and offer more than just retail. Consumers now expect shopping centers to provide unique experiences that online shopping cannot replicate. This has led to the rise of experiential retail, where shopping centers incorporate entertainment, dining, and interactive activities.

To combat e-commerce competition, malls are also embracing omnichannel retailing. This includes strategies like Buy Online, Pickup In-Store (BOPIS), which encourages online shoppers to visit physical locations.

Shopping centers are adapting by focusing on experience and convenience. They are integrating advanced technologies like AI and IoT to improve the customer experience. For instance, AI-driven tools are used for personalized shopping experiences, while IoT optimizes energy efficiency and operations.

Additionally, there is a growing emphasis on sustainability. Malls are adopting energy-efficient practices, such as installing solar panels and promoting circular economy initiatives. This not only attracts environmentally conscious consumers but also aligns with broader societal shifts towards sustainability.

By embracing these changes, shopping centers are staying relevant and appealing to modern consumers, ensuring they continue to thrive in a rapidly changing retail landscape.

Why Choose IPA Commercial Real Estate?

As we look to the future of retail real estate, it’s clear that shopping centers are undergoing a significant change. At IPA Commercial Real Estate, we understand that staying ahead of these changes is crucial for success. Shopping centers are no longer just places to shop; they are becoming vibrant community hubs that offer a blend of retail, entertainment, and residential spaces.

Retail evolution is being driven by several key trends. The shift towards experiential retail and mixed-use developments is creating spaces where people want to spend time, not just money. These centers are integrating experiences that can’t be found online, such as immersive pop-ups and entertainment complexes, making them destinations in their own right.

Sustainability and technological integration are also shaping the future. Shopping centers are adopting energy-efficient practices and advanced technologies like AI and IoT to improve customer experiences and streamline operations. This not only attracts a new generation of environmentally conscious consumers but also improves the efficiency and appeal of these spaces.

Looking ahead, investor interest in retail real estate remains strong. As shopping centers continue to evolve, they present unique opportunities for investment and development. Open-air shopping centers, in particular, are gaining traction as they offer a more flexible and appealing environment for both retailers and consumers.

At IPA Commercial Real Estate, we are committed to helping our clients steer these changes. With our extensive knowledge and personalized service, we are well-positioned to guide you through the dynamic landscape of retail real estate. Whether you are looking to invest, develop, or manage a property, we are here to support your goals and ensure your success.

For more insights into retail real estate and to explore how we can assist you, visit our brokerage services page.

The future of shopping centers is bright, and with the right strategies, they will continue to thrive as essential parts of our communities and economies.