MILLENNIALS AT FOREFRONT OF SHIFT TOWARD “EXPERIENCE-BASED” SPENDING, DRIVING OUTPERFORMANCE AT HIGH-QUALITY MALLS AND LIFESTYLE CENTERS
NEW YORK, June 09, 2016
The Millennial Generation is the largest in U.S. history and will heavily influence the fortunes of commercial real estate and the retail sector for the next half century, according toThe Age of Experience-Based Retail, a new study by the research arm of MetLife Investment Management (MIM).
The Millennial preference for acquiring experiences and memories over material goods will play a significant role in determining which retail formats will outperform in the future. The study concludes that high-quality malls and lifestyle centers are best positioned to capitalize on the shift toward experience-based spending.
Highlights of the study:
- An analysis of expenditure data from the U.S. Bureau of Labor Statistics shows that Millennials spend almost 15 percent more of their disposable income on experiences than generations past. As Millennials grow older and more financially stable their spending power will rise, likely increasing the impact of this trend on the retail landscape.
- Data from the National Council of Real Estate Investment Fiduciaries reveals that the benefits of experienced-based formats are already being felt, with malls and lifestyle centers achieving annual income growth more than double that of other retail properties over the last seven years.
- The attractiveness of high-quality malls and lifestyle centers is further enhanced by their defensive positioning against e-commerce as the experienced-based nature of the goods and services their tenants offer are extremely difficult to replicate online.
- A retail location’s format and tenant mix remain among the most important factors in its success. Well managed retailers with unique product offerings, high levels of service and quick delivery times will appeal to the Millennial Generation most, driving superior performance at the best centers.
By examining quantitative metrics and qualitative differentiators, the study details a set of criteria for selecting retailers likely to thrive in the new retail landscape. The criteria is separated into three distinct categories: experience, financial and distribution.
The study places emphasis on a retailer’s ability to offer unique products and deliver a high level of customer service, providing specific examples of retailers that successfully deliver both.
When combined with solid financial management, a strong customer experience should lead to outperformance, according to the study.
The study asserts that e-commerce retailers with strong distribution networks represent the strongest competitors many brick-and-mortar retailers now face. According to the study, brick-and-mortar retailers that adopt an omnichannel sales strategy and construct highly-efficient supply chains will be best positioned to compete.
A copy of the study is available upon request.
About MetLife Investment Management
MetLife Investment Management (“MIM”) leverages its size, scale and deep asset sector relationships to seek attractive investment opportunities for institutional investors. MIM’s investment methodology is based on a disciplined underwriting process, in-house research, and a seasoned investment team. Our expansive global footprint, with strong capabilities in key markets, keeps us well positioned to serve our clients’ investment needs.
MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates (“MetLife”), is one of the largest life insurance companies in the world. Founded in 1868, MetLife is a global provider of life insurance, annuities, employee benefits and asset management. Serving approximately 100 million customers, MetLife has operations in nearly 50 countries and holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.