This week, the Baker Program in Real Estate welcomed Richard Latella for his second time at the Distinguished Speaker Series. Mr. Latella has had a long and industrious career at Cushman & Wakefield, which he joined in 1983 as a Senior Appraiser. Today, he serves as an Executive Managing Director and leads the retail valuation and advisory practice, supervising 1800+ employees over 150 offices. As of 2017 this practice group at Cushman & Wakefield has appraised 240,000+ properties with a value totaling $3.74 trillion. The client services provided by the division also range from diligence advisory to dispute analysis, and financial reporting to property tax services.
Richard continued his presentation with an analysis of the future of retail. The biggest revolution today, he said, is the “amenitization” of the sector. Using food as an example, he presented how the concept of food courts from the 1990s were deconstructed and evolved to become a flexible, even pop-up, model. Today, Food Halls have become anchor tenants and draw foot traffic of their own right. In these new models, food preparation itself has become theatre. In addition, new ideas have taken the industry by storm, including farm to table, elevated retail, mashups between earlier distinct uses, rental clothing, and even virtual reality.
Today, the industry has moved to new concepts like “clicks to bricks” and “cool streets” where it is all about the user experience. As a result, parking lots are becoming town centers and malls are changing to include co-working and multi-family residential. Whatever be the change, Richard extolled that there was no room for mediocrity in retail – especially malls – and that the sector must create a reason to visit, become a center of the community, and, if not, actually build a community around the sites themselves.
In response to queries about recent retail failures and the 1.2% drop in December 2018 sales, the largest since 2009, Richard presented a multi-dimensioned reason that included the Amazon effect, the overbuilding of retail in the past, and the rise of the millennial generation, the industry has evolved to one of convenience, value, and most importantly, experience. Due to “race to the bottom” discounting practices in a context of shifting consumer spending patterns, this has not boded well. There is also a global context in which this has arisen, one where trade wars play with the surplus of available capital. The consequent high level of access to debt has led to a sharp increase in privatization through leveraged buyouts – a status that has not been able to sustain in trying times.
In his analysis of the sector, he shared how ecommerce and traditional brick and mortar retail have blurred lines. While new commerce is moving towards a seamless experience, Amazon has opened 500+ physical stores and are proposing to increase this number eight times. While ecommerce has led to a resurgence of the industrial sector due to its demand for warehouses and fulfillment centers, traditional big box stores are jumping ahead and reinventing themselves as last mile delivery centers for online orders and retail pickups. As a result, technology has become critical to the industry and one of its key drivers.
The Baker Program in Real Estate immensely benefited hearing Richard Latella’s extensive insights into the retail industry. We thank him for coming back to share his knowledge and experience at the Distinguished Speaker Series.
