Adaptive Spaces

Retail Tech: Four Ways Tech Is Innovating Retail Investment & Development

20 Jun 2022 5 Minute Read

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After successfully leveraging universally adopted technology like smartphones to better meet consumer demand, retail center owner-operators are exploring additional innovations that will enhance efficiency at the operations level and the physical retail experience for consumers. Here are four areas in which new technologies are providing opportunities for retail sales growth and operational efficiency:

Site Build-Out

Technology has helped retail centers adapt to changing consumer buying patterns, particularly during the COVID pandemic. Greater patronage of drive-thru restaurants is a prime example.

Mobility data from Apple shows that automobile use has increased significantly during the pandemic. After many restaurant dining rooms were closed, the drive-thru became an increasingly important asset for the survival of fast-food and quick-serve restaurants.

Drive-thru ordering is now available through mobile apps and third-party delivery services. This has heightened the importance of the drive-thru, with many fast-food and quick-serve restaurants now cutting back their dining room space to utilize more of the site for traffic patterns and additional pick-up/drive-thru lanes. Technology such as geofencing can automatically alert the retailer to have an order ready when a customer’s mobile device enters the site.

A recent consumer survey by geofencing service provider Bluedot found that the most desired fast-food amenity is a designated drive-thru for mobile app ordering, followed by the restaurant automatically knowing when the customer has arrived.

Drive-thrus are not limited to fast-food and quick-serve restaurants. In addition to drug stores and banks, grocery operators now are exploring use of the drive-thru format. Midwest grocery chain Hy-Vee, for example, is now using drive-thru lanes that were previously dedicated to pharmaceutical orders for grocery pickup.

Figure 1: U.S. Automobile Driver Index, January 1, 2020 = 100

Source: Apple Mobility Trends, CBRE Research, Q1 2022.

Drive-Thru Use

Figure 2: Pre- & Post-Pandemic Drive-Thru Comparison

Source: CBRE Research.

Energy

Tech-enabled building efficiency can save money and generate ESG benefits. Energy prices have been rising considerably, up by 35% for the year ending in May 2022. Smart building technologies can help ease that burden. From HVAC upgrades to advanced lighting controls, potential cost savings can reach as high as 60%.

The recent launch of 5G connectivity has enabled cost-saving upgrades in building technology. Buildings enabled by smart technology can increase the number of connected systems when powered by 5G.This comes at a time when retail centers are seeing a more diverse tenant base, with medical users and shared office spaces becoming common.

The 72 million 5G connections in North America at year’s end 2021 are forecast to grow by 140% in 2022. By 2026, total 5G connections in North America are expected to reach more than 500 million. Globally, 5G connections are expected to total 4.8 billion by the end of 2026.

A recent consumer survey by geofencing service provider Bluedot found that the most desired fast-food amenity is a designated drive-thru for mobile app ordering, followed by the restaurant automatically knowing when the customer has arrived.

Additionally, digital twin technology, which is a virtual replication of a physical property, can simulate detailed utility operations. Siemens Energy has created a form of this technology that it expects will improve predictive maintenance outcomes and maximize energy efficiency.

Figure 3: Building Cost Savings via Selected Technology

Source: "Smart Buildings: Using Smart Technology to Save Energy in Existing Buildings", American Council for an Energy-Efficient Economy, February 27, 2017.

Figure 4: North America 5G Connections in Millions

Source: 5G Americas, Omdia.

By the Numbers: 5G Connections

Source: 5G Americas.

Engagement

Emerging technology can encourage greater customer engagement with physical retail centers by providing a multi-channel experience that far surpasses the single-channel one of online shopping.

Many shopping centers now use Wi-Fi service to connect with shoppers’ mobile devices, providing directions to their desired stores as well as special offers at others along the way. Touch-screen technology, facial recognition and demographic identifiers for targeted offers can further engage customers while they are on site. These can provide “push content” to mobile devices that promote discounts, special offers and upcoming live events.

The use of touchless technology has become more prevalent in the COVID era. Practical uses include voice activation of elevators and doors, and wayfinding apps to not only guide shoppers but manage traffic flow and encourage social distancing.

This is another area where digital twin technology can provide value. As a virtual form of wayfinding, a digital twin could connect retailers and products with consumers to streamline a shopping experience, perhaps suggesting certain products or materials for projects they are working on. A digital twin also could be geared toward "gamification" of customer journeys by providing pop-up discounts or rewards for visiting a certain amount of stores within a center.

Figure 5: Examples of Retail Tech Currently In Use at Shopping Centers/Malls

Source: ICSC, CBRE Research.

By the Numbers: Smartphone Ownership

Source: Forrester.

The Metaverse

Will retail property investors and developers find alternative opportunities within the digital world?

The recent launch of 5G connectivity has enabled cost-saving upgrades in building technology. Buildings enabled by smart technology can increase the number of connected systems when powered by 5G.This comes at a time when retail centers are seeing a more diverse tenant base, with medical users and shared office spaces becoming common.

The metaverse is a live-work-play virtual community with a real estate component. Virtual land sites can be purchased, which in turn can be developed into virtual shopping centers and rented out to retailers.

The retail sector has been an early entrant in the metaverse. Digital developer Everyrealm (formerly Republic Realm) purchased a site last year within the Decentraland virtual world for $914,000 in cryptocurrency and is developing a virtual shopping district that mirrors the Harajuku fashion district in Tokyo.

Investors also are becoming active. Tokens.com, a Toronto-based publicly traded company that deals in digital assets, recently purchased a 50% stake in a digital real estate portfolio owned by the Metaverse Group and plans to create a virtual property REIT this year or next.

Building a metaverse business strategy can be challenging, as potential growth and innovation of this virtual environment is difficult to predict. However, the cost of being an early participant is relatively low, so investors may think that not being left behind is worth it.

Figure 6: Virtual Land Sales Volume in the Metaverse, $ Millions

Source: Statista, 2022.
Note: Includes sales of virtual plots of land from the metaverses The Sandbox, Decentraland, Cryptovoxels and Somnium Space.

By the Numbers: Value of the Metaverse

Source: 5G Americas.

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