Pop-ups are a bellwether of retail property market's health: Savills

Pop-up retail is here to stay in Australia.

They are also a bellwether of the retail property market’s health, according to Savills director for Retail Services, Leighton Hunziker.

While casual leasing focuses more on common area leasing, a pop-up business occupies what is traditionally a leased tenancy.

Landlords are embracing the concept in the absence of being able to secure long-term covenants. Pop-up retail can exist for a variety of reasons, including:

Because there is a vacancy in the shopping centre and there’s no long term tenant wanting the space

If the shop is earmarked for development and the landlord wants some activation prior to the start of demolition 

More rarely, if the landlord has devoted some space to allow entrepreneurial activity and would like to try out a new business.

Pop-ups started in Los Angeles in the late 1990s and were originally designed as a cheaper way to promote little known brands or products. 

However, their success attracted the attention of major manufacturers and in recent years, no label was too old or too high-end to open a pop-up under the right circumstances. 

In Australia, the current retail landscape is going through a period of reinvention as many traditional brands fail to differentiate themselves from the competition, and landlords are desperate to “keep the lights on” to receive at least some income rather than a vacant shop, writes Hunziker. 

Pop-ups rose in popularity as they benefit both retailers and landlords. 

They provide retailers a low-cost, low-risk platform to try something new. They also provide a low-rent and flexible duration to promote products.

For landlords, pop ups provide an income stream instead of a vacancy, while also providing a conversion opportunity to a long-term tenancy if the business succeeds.

“It’s important to remember that these pop-ups don’t operate just as a standalone alternative, and more often than not, they work in combination with traditional shopfronts as well as online retailing to help elevate brand recognition and target new audiences,” said Hunziker.

With consumers, pop-ups are popular because they offers something different, are more creative and available only for a limited time. 

The fear of missing out also plays a huge role, with 61% of shoppers listing seasonal products as the main reason to shop at a pop-up store, according to a PopUp Republic poll.

Pop-ups have been embraced by top brands. 

French designer Louis Vuitton showcased their winter men’s line in their first flash store in Milan, while Hermès sampled the market in a historically significant space in Kyoto, and then took their brand of luxury to customers in Causeway Bay with its mobile pop-up Silk Bar. 

The concept has been popular in Australia as well. Doughnut Time is a case in point.

Doughnut Time launched to the Sydney market via a 15 sqm pop up at Central Park (above) and, having successfully tested the market and delivered very strong sales, has now been converted to a high value 400 sqm permanent tenancy.

In Melbourne’s Richmond, pop-ups have become a regular feature on the Bridge Road discount fashion retail strip.

Other examples include Hello Kitty, Rue La La and Shoes.com which created pop-ups that provide sales and experiences not typically offered in traditional retail stores, whether through a shipping container that turns into a café, a two-day shopping event with a disc jockey, or a revolving door of different brands of footwear.

“In the future, it’s unlikely that the “online only” or traditional big box “brick and mortar” standalone approaches will be the most efficient,” says Hunziker.

Instead, pop-up shops are growing in popularity in combination with traditional and online retailing as a hybrid model to build more intimate relationships while creating unique, memorable 3D experiences that are aligned with the brand's values, he adds.

“In an environment where retail property is under stress, we expect that pop-ups will become increasingly popular. Landlords may continue to market pop-ups as new and exciting opportunities, however an abundance of this type of store may also reflect a certain amount of oversupply of retail space in Australia,” concludes Hunziker.