Greg Englesbe
Real Estate Investing

Could pop-up retail become a COVID-19 solution for commercial real estate?

With cyber shopping 2020 in full swing, the dash for the best deals online is a stark reminder of the trend toward e-commerce and away from brick-and-mortar retail.

That shift has been on hyperdrive since the start of the COVID-19 pandemic, which has hammered retail establishments through lockdowns, restrictions, second waves, and cautious consumers opting to buy online.

As businesses vacate their stores, there’s growing concern that commercial real estate will be hamstrung for the foreseeable future, unless it manages to adapt.

One potential solution gaining traction could be short-term leases and pop-up retail locations, which have generally been reserved for holiday promotions such as Halloween or the winter holidays.

In New York City, the landlord at the high-end Rockefeller Center has developed a six-month lease program that will offer turnkey commercial space. The program from Tishman Speyer is called RC CAPSULE.

“Welcoming brands that don’t have a physical presence in Manhattan, the program allows them to take up residence at Rock Center for six months at a time, introducing them to citygoers right in the middle of Rock Center’s well-established retail experience,” the landlord wrote.

The first RC CAPSULE tenants were revealed to be Steven Alan and Jilly Lindsey, both fashion-forward brands that could benefit from the high visibility of the location without the long-term commitment.

Last year, real estate services firm Cushman and Wakefield had already predicted that pop-up retail would have a major role in the future of retail.

“Pop-up shops, whether they are promoting a new digital brand or a new Netflix show, will be a permanent part of the retail landscape going forward,” the firm’s vice president of retail intelligence, Garrick Brown, said in a Sept. 2019 report.

With both landlords and retailers in a bind during the pandemic, alternative leases and packages on ready-to-use spaces could prove to be the perfect marriage.

Flexibility will be the lynchpin of keeping both industries on a path to recovery — and perhaps innovation will be found in the process.

As The Motley Fool’s Deidre Woolard wrote Monday, such flexibility can be a service, and the nimble evolution of retail could prove that some businesses are better suited to short-term arrangements.

“While the current trend for shorter leases is definitely pandemic-inspired, the future of retail may be less about stores that have been in the same place for decades and more about stores that come and go,” Woolard wrote. “Like food trucks, successful pop-up stores can rely on a robust social media presence to help keep them connected with their customers no matter where they roam.”

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