The beauty industry embraces dominant retail role

Beauty retailers – from traditional spas to highly specialized niches – are taking on a more dominant role in our retail landscape as landlords look for tenants that offer experiential retail and insulation from e-commerce. And these “beauty” retailers are responding and blossoming under this new demand.

“You can’t go get your hair done, your nails done or get a great workout on Amazon.com, and that’s why these types of tenants are helping stabilize projects that are otherwise hurting because national retail has declined so significantly,” said Laura Hansen, a vice president at Legend Partners.

The beauty industry’s growth is manifesting itself in several significant ways – emphasizing specialization and unique atmospheres as patrons seek opportunities to socialize and congregate in these settings, and expanding real estate needs as practitioners opt for more independence in their locations, availability and work schedule.

While some forms of beauty retail have always been a staple of shopping centers – think nail salons – many are adapting. For example, the nail salon of choice used to be driven by location and price: Where can I get this service done most efficiently for a reasonable price? Today, many consumers are in search of a salon that offers the service in a cool environment in addition to a convenient location and price, said John Livaditis, president of Axio Commercial Real Estate.

In response to this shifting consumer need, Colorado is witnessing different beauty retailers specializing, individualizing or diversifying. For example, specialized services, such as blowout bars, waxing salons and men’s haircutting salons, are gaining popularity in shopping centers and malls in urban settings. As the number of specialized retailers increase, the demand ideal locations increases as well. Most of these retailers seek smaller floor plans, between 1,000 and 2,000 square feet.

Meanwhile, the uniqueness and creativity of a salon’s environment is important in attracting and retaining clients. The Parlour Hair Salon and Matthew Morris Salon and Skincare are two local, independent companies that are great examples, Hansen said.

Ella Bliss is another good example, said Livaditis. “They’ve become an approachable space,” he said. “They put more services under one roof and have created an experiential atmosphere with an overall good feeling. It feels like a spa, but it’s more approachable, which makes it more of an everyday kind of thing and opens the door for people to do it more often.”

The most pronounced impact on the real estate market is in the 5,000-plus-sf spaces. These spaces are becoming increasingly popular for salon suites. Salon suites offer stylists the opportunity to rent their own suite, while avoiding many of the pressures that come from owning and operating a physical salon.

Sola Salon Studios, founded in Boulder, is a great example. The company targets retail spaces that are about 5,000 to 7,000 square feet, mainly inline, but occasionally standalone, and demises the space into 30 private suites, said Jay Landt, a senior vice president with Colliers International. Instead of renting a chair a la the traditional salon model, stylists and other salon practitioners can rent a private suite. In about eight years, the company has gone from 15 locations to more than 300 across the country, said Landt.

“The competition has certainly been growing and I’m seeing more and more of these concepts pop up every year,” Landt said. “The model has been accepted, it’s successful and other people are trying to replicate it.”

Some salon suites offer in-house services, such as a front desk receptionist and general atmosphere, but Sola Salon simply rents the space and lets each practitioner manage her business as she sees fit.

As the healthy economy gives consumers more discretionary money, health, beauty and wellness retailers have become more acceptable spending outlets. “People are more apt to spend money taking care of themselves than in the past,” said Livaditis. “It’s just become more acceptable.”

Living in a state that repeatedly earns high marks for health and wellness helps drive cultural acceptance as well.

“It’s becoming a very dominant sector in this market, and I cannot say if it’s this dominant in every market,” said Hansen. “Colorado is continually noted as one of the most healthy states. I feel it’s a real plus for our market that we’re getting these opportunities.”

For landlords, the biggest appeal to any of these projects is that they are internet resistant and they come off as fairly sexy – it’s fun to offer a unique concept in a center. Yet that can be both a good thing and a bad thing. Staying trendy, at times, can be a losing game as fads fade.

Other leasing challenges with the highly specialized concepts are that these younger, less-established businesses often can’t pay the rent a typical fast-casual restaurant can afford. They also often have less credit developed and can be hesitant to committing to a five-year lease.

“Landlords are looking to make sure they get the most stable and secure tenants of these categories,” said Hansen. “And although we seem to have an influx of them right now, not all of them are that stable.”

The location matters for these types of services as well. Not only do they need easy access to their core demographics – typically in higher-income areas – but also they need small spaces, which not all shopping centers can accommodate, said Hansen.

For the holistic salons, including unique spas and salon suites, the biggest leasing challenge can be that leasing to one can severely limit the opportunities for the landlord to sign specialized, smaller leases within the center, because they’d be in direct competition with all the services offered at the salon. However, that doesn’t seem to be hindering too many such deals.

“I do think that the salon suites have more of an across-the-board impact on the beauty side of things,” said Livaditis. “We’re seeing a lot of them and they seem to make a lot of sense.”

Whether in the suburbs, downtown or anywhere else, there’s growth in this product type, he said. For the smaller, specialized retailers, the growth is clustered in the high-end malls and higher-income areas. Typically, landlords are not signing beauty retailers that are too specialized in the traditional neighborhood shopping center, unless that shopping center’s demographics appear to be able to support it.

When talking to a landlord about a new Sola Salon location, Landt makes sure to remind them that the overall beauty industry is flourishing and will continue to do so because it’s services based.

“I also love to tell them it’s great for their merchandizing mix,” he said. “Although we’re not trying to be an anchor, it’s common for a typical Sola to draw 700 or 800 shoppers to that shopping center every week – if you think about 30 stylists, five appointments a day. It is a big draw.”

Featured in CREJ’s January Retail Properties Quarterly.