Big Plans for Small Format

December 28, 2023

Consumer Outreach, Commercial & Investment Real Estate, Retail Properties

Consumer trends drive changes in space, size and experiences.

Smiling shopkeeper helping client at counter in boutique

Retailers and investors are quickly pivoting based on consumer changes, with retailers redefining the use of their space, size and experiences, says Anjee Solanki, national retail director for the U.S. for Colliers, as reported by GlobeSt.com. Forty-nine percent of retailers plan to expand their footprint over the next five years versus 28.5% looking to reduce space, according to Colliers’ Fall 2023 Retail Report.

“Pickleball is the new frontier in commercial real estate. The rapid growth of the sport is similar to what tennis did in the 1970s and 1980s. Landlords love it because it brings more foot traffic from people with spending power. And it’s also good for attracting and negotiating new leases.”

-Diego Pacheco, chief growth officer for Ace Pickleball Club, from
“Pickleball Courts Serve an Ace for Vacant Malls, Retail Stores,”
REALTOR® Magazine, Sept. 13, 2023

Why Small Format?

Retailers are expanding by opening more small-format stores to optimize their operations and streamline their costs, GlobeSt.com reports. A case in point: Macy’s department store announced in early October that it plans to open as many as 30 new small-format stores over the next 18 months.

“Our small-format stores are efficient to operate, provide the customer with a shopping alternative within our omnichannel ecosystem and present a unique opportunity to target high-traffic shopping centers,” Macy’s COO Adrian Mitchell said in a statement.

Macy’s isn’t alone. Bloomie’s, the smaller store concept by Bloomingdale’s, opened its third location in November, according to Macy’s, which operates Bloomie’s locations.

In addition, Ikea announced the addition of a “plan and order” store to its portfolio. The footprint is less than 5% of the original flagship store size, according to the GlobeSt.com report. Maxing out at 8,900 square feet, the new format will be designed to simplify shopping for urban consumers by prioritizing convenience, public transportation and delivery, says Nicole Larson, national manager of retail research at Colliers, as reported by GlobeSt.com.

Adapted from “Retailers Have Little Appetite to Shrink,” written by Brian A. Lee and published in the Sept. 19, 2023, edition of GlobeSt.com.

Tip Wrangling Moves to the Next Course

Wage laws help workers but may hurt cities’ draw as restaurant hubs.

Restaurant owners forecast negative consequences from the Chicago City Council’s Oct. 6 passage of the One Fair Wage ordinance, which eliminates subminimum wages, also known as the tip credit, for tipped workers. The ordinance requires the minimum wage for tipped workers to increase by 8% every year until wages reach the city’s $15.80 minimum wage. But an Illinois Restaurant Association survey, conducted in August, shows that the increase in labor costs could end expansion plans, lead to moves or cause closures for some restaurateurs.

In the survey of restaurant owners, 77% said elimination of the tip credit would have a “very negative” impact on operations. Mario Ponce, founder of Takito Brands Restaurants, which has three locations in Chicago, told Biznow that some full-service restaurants will close as a result of the increased costs, more fast-casual restaurants will open, and some full-service restaurants will transition into quick-service.

Chicago isn’t the only place increasing the minimum wage for tipped workers. Washington, D.C., approved a 2022 initiative to eliminate subminimum wages by 2027. And several states—including Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington—mandate that employers pay workers full minimum wage, even if they receive tips.

Adapted from “ ‘It’s Going to Dismantle Our Industry’: Restaurateurs Say New Chicago Wage Rule Will Close Venues, Kill Expansion,” by Ryan Wangman, published in the Oct. 12, 2023, edition of Bisnow.

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Big Plans for Small Format

Why Small Format?

Tip Wrangling Moves to the Next Course

Percentage of owners who said they would open future locations in surrounding jurisdictions or other states to offset the higher cost.