By Tonya Creekmore, Avison Young 
This article originally appeared in the May 2016 issue of Shopping Center Business.
Outlet retail has long represented the epitome of value for real estate developers, retailers and consumers, but times are changing – and fast. In recent years, more retailers and developers have begun finding creative ways to expand value concepts beyond the traditional formula. Longstanding barriers between outlets and conventional retail shopping centers are being torn down in the quest to meet consumers’ ongoing appetite for value.
Consumer preferences are always changing, but what has not changed is their desire to experience a collection of nationally – and internationally – recognized brands all priced to allow aspirational shopping. Traditional perceptions about what outlets are, what they should look like and where they should be located have begun to break down quickly. It is becoming more common to see new outlet development happening in urban settings, mixed-use settings and within a once “hands-off” radius of 50 miles from existing retail. Additionally, an evolving commercial development landscape presents plenty of opportunities for outlets to successfully move into these environments.
All of these factors, including new concepts, locations, ideas and perspectives are helping to create profitable opportunities for all stakeholders. Today, outlets remain the fastest-growing retail sector in the real estate industry. These emerging opportunities continue to present themselves in meaningful ways for retail and real estate professionals who are willing to be creative, bold, capitalize on outlet momentum and embrace a marketplace that continues to evolve and be receptive to new and old ideas alike.
Consumer preferences play key role
While real estate development dynamics continue to have an impact on the rapidly expanding and diversifying outlet sector, changing consumer preferences have also played an important role.
In the wake of the recession in the late 2000s, the continuing emergence of a wide range of successful value-priced retailers and new value-based concepts has reinforced the notion that shoppers are demanding value and convenience levels that rival online shopping. Today’s outlet shopper expects more out of the shopping experience than ever before.
Outlet consumers prioritize and celebrate value, and outlet centers represent an opportunity to experience a massive collection of brands, all with accessible pricing, in one convenient setting. Far from a compromise, outlets are now seen as a priority, and outlet shoppers reflect some interesting demographic shifts.
So the demand is there. But what about the supply?
At the same time that consumer preferences are changing, traditional perceptions about what defines an outlet are starting to shift. Simultaneously, an evolving commercial development landscape is redefining merchandising mixes in strip centers, mixed-use developments, outlets and enclosed malls.
The traditional notion of a geographically distant outlet mall is being challenged as more outlet developments are being built closer to conventional retail centers. Tanger Outlets at National Harbor near Washington, D.C. and Horizon Group Properties’ Outlet Shoppes of Atlanta are clear examples of this trend. History tells us that close proximity can raise concerns about the potential cannibalization of nearby full-price stores, but we will not know the true impact – positive or negative – until the outlet stores and centers have stabilized.
There are other notable changes within the outlets themselves. Outlet retailers recognize that consumers are looking for an experience, and many outlets have responded by adapting to that experiential preference. The evolution of increasingly more sophisticated build-outs within the outlet sector is an example. Today’s outlets look more like traditional retail destinations, and consumers’ shopping experiences are similar to what they would get in the retail stores. Owners and landlords alike continue to make capital investments in older, more traditionally located outlet centers, too. These centers are like your favorite pair of jeans; shoppers utilize them because they are comfortable in them and crave their favorite brands consistently.
Other outlets have taken the experiential factor to a new level, presenting outlet retail as part of a strong mix of uses, such as seen at Assembly Row in Boston. Located just outside downtown, the 45-acre mixed-use project presents a diverse array of outlet retail options in concert with appealing dining and entertainment components, including an AMC theater anchor and more than a dozen restaurants. A significant residential component, an urban setting, and a nearby MBTA transit station make this Federal Realty Investment Trust project a potential game-changer for both the region and outlets as a whole.
Outlet retailers are also moving successfully into secondary and tertiary markets like Gainesville, Fla. and Bridgeport, Conn., where noteworthy mixed-use projects Celebration Pointe and Steelpointe Harbor, respectively, are both under construction.
Conversations spell creativity
For the outlet sector, the name of the game today is creativity. More and more outlet retail continues to find its way into conventional retail environments and existing projects. For centers that are not evolving or are tough to tenant with traditional retail, the addition of an outlet retail component – perhaps in concert with another demand driver such as dining or entertainment – is an increasingly attractive proposition. Repositioning and redeveloping enclosed malls with outlet retail can also be an effective strategy, although product-overlap challenges between a manufacturers outlet concept and a large department store anchor need to be addressed.
It is remarkable how active the outlet market has been. At Avison Young, we spend a significant amount of time conducting feasibility studies for property owners and investors trying to integrate outlet retail as a way to repurpose, revitalize or re-tenant their assets. Conventional retail owners and investors are increasingly willing to explore outlet options or mix outlet with entertainment, hospitality and even office and residential to add extra horsepower to the shopping experience and, ultimately, revenue generation. On the outlet side, retailers are similarly enthusiastic and open to capitalizing on new opportunities to expand their concepts.
What is particularly exciting about these conversations is the willingness of retailers and real estate professionals to be increasingly creative. All parties are genuinely interested in finding innovative ways to make outlets work. It is clear that the outlet playbook has changed. In today’s evolving retail marketplace, it pays to be bold, to think outside the “big” box and to look at things from different angles to find a solution. The bottom line is that there are very real opportunities out there for outlet retailers and commercial real estate professionals to be creative with new markets, new locations and new project types.
Tonya Creekmore is a Principal with Avison Young where she is a member of the firm’s national retail services group with an emphasis in outlet retail. Based in Atlanta, Georgia, she has more than 20 years of experience in the retail real estate industry. Avison Young is the world’s fastest-growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 2,100 real estate professionals in 75 offices, providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties.
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