Three major trends that will affect retail in 2024

QSR openings will drive leasing in 2024

Since the pandemic, we’ve seen a marked shift to dining out. While consumers spent more on groceries during lockdown, they also got acclimatized to drive-thru lanes and deliveries from QSRs and other restaurants. As the price of groceries spiked relatively higher than other food categories, consumers have shifted more of their dollars to restaurants. Dining spending rose 11.7% in 2023 compared to only a 2.6% gain for groceries. Restaurants have responded by aggressively expanding. In 2023, F&B openings accounted for nearly 20% of all leasing activity.

To underscore this point, announced restaurant openings in 2024 already tally almost 2,000 locations, mostly from QSRs like McDonald’s, Chipotle, WingStop, and coffee chain Dutch Bros. Notwithstanding Dollar Tree’s recent closure announcements, dollar stores still have high announced openings so far this year with Dollar General’s and Five Below’s expansion plans.

Pickleball concepts will continue meteoric growth

Pickleball has existed for a couple of decades but really took off when we were all staying close to home during the lockdowns as a fun, easy way to get exercise outdoors, using existing tennis courts. Now, over 13 million Americans play the sport with a growth of 52% in 2023; and 2022 numbers grew over 80% from the previous year. There are now official player leagues and tournaments. And celebrities are getting in the mix here too. LeBron James and Tom Brady have invested in Major League Pickleball. And Rob Gronkowski has invested in a new pickleball concept Crush Yard which plans to open more than 50 locations nationally.

With adoption surging and courts scarce, operators are opening new locations wherever they can, including retail. According to CoStar data over 40 locations have opened in retail spaces since 2020, representing over 1.3 million square feet.

There are two main types of concepts:

All Business: which functions much like a sports club or gym: courts, locker rooms, maybe a snack bar. An example of this would be PickleMall, which opened a 104,000 s.f. space in Arizona Mills mall, taking over a vacant At Home store. The owner plans to open 50 such locations in the next 2 years.

Food & Fun: which is more of a restaurant/eatertainment concept combining great food, drinks, pickleball, and other activities. A good example of this would be Chicken N Pickle which has roughly 10 locations, with plans for more.

Both formats present good opportunities to fill vacant space within retail. All business concepts, in particular, would be useful for backfilling empty big boxes or even anchor space at malls.

Retail executives will invest in genAI to drive innovation

Experts expect investment in generative AI (genAI) to explode in the next 10 years growing from $40 billion in 2022 to $1.3 trillion by 2032 (Bloomberg Intelligence). Almost ¾ of retail decision-makers are implementing genAI tech this year. So, what can it do?

Generative AI is a fancy term for a type of artificial intelligence that can create new stuff that looks and sounds like something humans made. It uses clever algorithms to learn from existing data and then generates new things based on what it learned. So, where traditional AI functioned more like the left hemisphere of the brain, with pattern recognition and analysis, genAI is more right-brained, related to more creative endeavors and idea generation.

For example, Google has released a new virtual try-on tool using genAI that will show shoppers how an article of clothing will look. So, a shopper can choose a blouse and see how it would drape, fold, cling, stretch, and form wrinkles and shadows on a diverse set of real models in various poses. It can show a very large range of sizes (XXS-4XL) and represent different skin tones.

Generative AI is also handy for making innovative marketing content. Companies can feed the AI with their old ads and branding content, and then it can come up with new images and words that match their style. A very interesting example of this kind of idea creation is genAI-created Nike concept stores.  The founder of social commerce platform, Drop, wanted to use these “Impossible Stores” to help inspire real-world retail design that pushes beyond the norms. One such “impossible store”, for instance, was Mars-themed and featured red lighting, minimalist displays, and mannequins in space suits and sneakers. So, this could be a useful way to explore new concepts that we previously have not imagined and make physical retail even more immersive and engaging.