The anchor tenant revolution: LFRA USA Study Tour insights

International study tours, such as the annual LFRA Overseas Study Tour, offer a valuable opportunity to observe and assess retail concepts that are still emerging in Australia but are more advanced in other countries.

One of the most significant shifts is the move from the traditional “anchor tenant” model to a more dynamic “anchor activity” approach, according to Julie Ryan, CEO of Ray White Commercial CSR, who participated in this year’s LFRA Study Tour (USA) to Denver and Phoenix.

As retail continues to evolve, the principles driving this shift are highly relevant to the Australian market.

Two key trends identified during the tour were the rapidly evolving “wellness revolution” and the “inside to outside” approach.

Ms Ryan said there is a clear shift in the way customers are visiting retail destinations, with wellness tenants increasingly becoming key drivers of repeat visitation.

This insight is supported by research from Vanessa Rader, Head of Research at Ray White Commercial, who said the economics of this transition are compelling.

“Traditional retail anchors might generate visits once or twice weekly. Wellness tenants deliver multiple visits per week, often multiple times per day,” Ms Rader said.

“A gym member arriving for a 6 am session, returning for lunch-hour recovery in the magnesium pool, then meeting friends for evening Pilates represents three separate centre visits before dinner. Each visit creates opportunity for incidental spending across the broader retail ecosystem.”

One outstanding example of a contemporary wellness anchor operating as an experience centre was Life Time Paradise Valley, Phoenix Arizona.

With around 8,500 sqm of space, the concept is defined as “connected living” and brings together a curated collection of lifestyle pursuits within a single destination.

Life Time Paradise Valley includes an outdoor rooftop area with pools, fireplaces, a bar, resort-style seating and cabanas. It also includes extensive gym equipment, exercise rooms, a Pilates studio, spa and beauty services, infrared saunas, ice baths, a magnesium pool, childcare facilities, pickleball courts, coworking space and a café.

Wellness centres such as Life Time are a very long way from the gyms of the past, which were often given limited visibility within a retail precinct and frequently seen as tenants that absorbed more than their fair share of parking.

This evolution is changing the design of retail destinations, with wellness centres creating the visitation that supports other tenants, many of which can afford to pay rent at a higher rate per square metre than traditional Large Format Retail centre tenants.

“For landlords, the implications extend beyond lease rates. Wellness anchors fundamentally alter centre-wide performance metrics. Dwell time increases dramatically when consumers combine workouts with recovery sessions and social connection. Adjacent categories benefit directly, athletic apparel, health food retailers, specialised wellness services all experience uplift from wellness anchor traffic,” Ms Rader said.

The other key insight from the visit was the trend of taking what was once inside a centre, and therefore behind blank walls, and bringing those tenants to the outside.

Within this trend, two different approaches were observed. The first involved adding tenants to the outside of existing centres. The second, more dramatic reinvention, involved demolishing older centres and developing new outdoor “village-style” precincts. Both approaches were effective.

The “opening to the outside” approach was seen in Phoenix at Scottsdale Fashion Square and in Denver at Cherry Creek Mall. Both centres were previously successful but had become somewhat dated in their look and appeal.

Both have now added a significant number of restaurants and other retailers that open to the outside of the mall.

An excellent example of this was the restaurant Elephante, owned and operated by Australians, which is positioned in the underground car park valet parking zone. The outside of the mall has been enhanced with lighting, landscaping and architectural features to create a glamorous feel. However, the fact remains that the restaurant is in a car park, which would once have been considered unacceptable for such a quality offering.

Outdoor shopping and mixed-use examples

Paradise Valley is a strong example of the complete redevelopment of a tired shopping mall. Built in 1978, the mostly indoor mall and Large Format Retail precinct closed permanently in 2020 and was demolished, with the exception of one building.

 

Replacing that mall is an outdoor retail experience, with retail, residential and office space blended together in a way that feels natural. The outdoor “village-style” precinct is pedestrian friendly and reflects a lifestyle that many in Phoenix find highly attractive.

Scottsdale Quarter is another walkable retail precinct where shopping, restaurants, residential and office uses are brought together.

The intentionally narrow streets are naturally self-shading, helping to protect visitors from the Arizona heat, while also ensuring the area is compact enough to be highly walkable.

The precinct has generous outdoor activity spaces, which support visitation across the day. It truly is a shift from anchor tenant to anchor activity!

“The care and professionalism shown by Phil Schoutrop of Buchan in selecting these sites, and by the Large Format Retail Association team in arranging the Study Tour and all the visit, was exceptional,” Ms Ryan said.

“Programs such as the LFRA Overseas Study Tour give our industry the opportunity to look beyond local market conditions and consider how global best practice can inform the next evolution of Large Format Retail in Australia. Each of us, and the sector more broadly, benefits when we remain open to new ideas, new models and new ways of creating value for customers, tenants and owners.”

To read the full report on the Anchor Tenant Revolution: How Wellness is Rewriting Retail Real Estate click here.

 

*Scottsdale Quarter photos courtesy of Phil Schoutrop, Principal and Precinct Sector Lead at Buchan

*Life Time Paradise Valley, Phoenix Arizona Credit: living-paradisevalley.lifetime.life

*Elephante image courtesy of Julie Ryan, CEO, Ray White Commercial CSR