REIT boss Barry Sternlicht believes mall owners need to create some drama to rule retail and deflect internet upstarts.
“We own 25 malls now. We make a lot of money in our malls and we own a large portfolio of very large strip shopping centers,ˮ said the chairman and CEO of Starwood Capital Group during the Schack Institute of Real Estate’s REIT Symposium last week.
“We as owners of the common area, we have to create theater in our properties, so people get off their computer in their home and have to come physically to this space.”
While some considering entering the REIT sphere may question the viability of certain types of commercial properties, Sternlicht feels that, with the right amount of effort and attention to detail, any property can become a money maker.
“I think in real estate we have to up our game,” he told the Symposium, making clear that this strategy did not apply to just shopping malls and saying that, in order to make money with a property, it must be individualized.
“You have to make it not commodity, so people don’t just price you out of the market.”
While Sternlicht and Starwood apply this strategy to all of the properties under their umbrella, including their “experiential” hotels, he pointed specifically to Alibaba and other digital retailers which could theoretically threaten the brick and mortar sales space.
“Create great experiences for people,” said Sternlicht, “every store, every shop clerk, everybody in your mall. Everybody has to up their game,” in order to combat the convenience of online shopping.
“People can’t be intermediated on the web,” said Sternlicht.
“Make it so that they want to see Diane who’s selling you your favorite pair of shoes. Or the guy that has the perfect sweater that came in and you were looking for.
“The movie industry shouldn’t exist,” added Sternlicht, saying that even though movies can be viewed from the comfort of home, the social experience of spending a night out at the multiplex still is a draw. He feels the same logic applies to the experience of visiting a physical mall.
Sternlicht feels that digital will likely always command a significant portion of market share, in both the retail world and in the hotel world thanks to Airbnb.
But if brick and mortar puts effort into improving the experience of visiting a physical location, properties will continue to generate revenues, he said.
