LOS ANGELES — Fifth Wall, the largest venture capital firm focused on innovation for the global real estate industry, announced the close of its $100 million Retail Fund.
Backed by many of the largest retail real estate owners and service providers in the US and globally, including Acadia Realty Trust, Cushman & Wakefield, Macerich, and Nuveen Real Estate, the Retail Fund will seek to invest in emerging brands and retail concepts to accelerate their brick-and-mortar expansion through retail partnerships with Fifth Wall’s strategic consortium of more than 50 corporate strategic investors from 11 countries.
E-commerce has more than doubled from 4% to 11% of retail sales in the US over the last 10 years, and with that thousands of new, direct-to-consumer brands have been born online. While it is easier than ever to start a new brand digitally, it is counterintuitively more difficult than ever to scale and differentiate a brand, without also establishing a physical presence. Bonobos and Warby Parker pioneered this trend by opening dozens of stores and becoming an “omnichannel” brand. Following in their footsteps, thousands of digitally native brands recognize that, through e-commerce alone, it is difficult to develop brand awareness, deliver engaging customer experiences, and achieve profitable operations. As a result, the offline retail expansion of e-commerce companies has been dramatic: digitally native brands have opened over 1,800 stores around the US in the last decade, creating richer, more experiential customer connections, reaching new audiences, and driving sustainable growth.
“We started online, but always knew we would have a physical presence to better serve our customers,” said Aaron Sanandres, Co-Founder & Chief Executive Officer, UNTUCKit. “When Fifth Wall backed UNTUCKit, we had 15 stores and the goal of growing that by another 100 in 5 years. In part through the help of Fifth Wall’s real estate network in the US and abroad, we’re already well ahead of those ambitious plans.”
Although digitally native brands are rapidly expanding offline, Fifth Wall believes that most venture capital investors in e-commerce are not familiar with the challenges or complicated dynamics of brick-and-mortar retail growth. Similarly, many large retail real estate owners aren’t fully aware of new potential tenants for their space. As part of the Retail Fund’s investment mandate, Fifth Wall works to help new brands and retail concepts navigate the complexities of offline expansion through its deep real estate expertise and its network of more than 50 strategic real estate investors from around the world. At the same time, Fifth Wall’s Retail Fund aims to help its retail real estate owners build relationships with brands at a much earlier stage.
“New e-commerce brands know the importance of being wherever their customers want them to be at all times – they simply cannot reach their full potential if they remain solely online,” said Kevin Campos, Partner, Fifth Wall, who leads the Retail Fund’s investments in omnichannel brands. “However, digitally native brands often aren’t familiar with the challenges of retail real estate expansion and we’ve observed that many traditional VCs lack the experience to be able to meaningfully engage on issues like site selection, store design, merchandising, and staffing. Fifth Wall aims to support brands on these very issues. We’ve assembled a consortium that includes many of the largest retail real estate owners, and we believe they’ve invested in the Retail Fund because they want to see these new brands earlier and help them succeed with thriving stores.”
Additionally, Fifth Wall’s thesis is that some of the most innovative users of retail space will come from outside of “traditional” retail categories. For example, the firm identified flexible office as a uniquely complementary tenant within shopping centers, and a highly efficient replacement for large format vacancies. After Fifth Wall’s investment in Industrious, Macerich collaborated with the flex office provider to open a location at Scottsdale Fashion Square in a 40,000 square foot space formerly occupied by bankrupted department store Barneys New York.
“Our alignment with Fifth Wall is an example of how Macerich is leading the way in shaping the future of retail real estate,” said Tom O’Hern, Chief Executive Officer, Macerich. “Our top properties in top markets are natural platforms for a wide range of innovative concepts, such as Industrious, UNTUCKit and b8ta, benefiting from Fifth Wall’s expertise and investment. This new Retail Fund, which supports the ecosystem of emerging retailers, is an exciting step.”
“Our partnership with Fifth Wall helps us support some of the most promising, up-and-coming brands as they expand their focus from exclusively online retail to brick-and-mortar stores,” said Brett White, Executive Chairman & CEO, Cushman & Wakefield. “We look forward to continuing our collaboration, leveraging our global platform and expertise to help the next generation of retailers deliver an innovative customer experience.”
Fifth Wall has already made investments in emerging omnichannel brands and retail concepts, including Allbirds, Carbon38, Cotopaxi, Foxtrot, Heyday, Industrious, Interior Define, Madison Reed, Taft, and UNTUCKit.
Founded in 2016 and based in Los Angeles, California, Fifth Wall is the largest venture capital firm focused on technology-driven innovation for the global real estate industry. With approximately $1 billion in assets under management, Fifth Wall seeks to connect many of the world’s largest owners and operators of real estate with the entrepreneurs who are redefining the future of the physical environment. Fifth Wall is backed by a global mix of more than 50 corporate strategic partners in 11 countries, including Acadia Realty Trust, British Land, CBRE, Cushman & Wakefield, D.R. Horton, Equity Residential, Gaw Capital, Gecina, GLP, Hines, Host Hotels & Resorts, Hudson Pacific Properties, Kenedix, Lennar, Lowe’s Home Improvement, Macerich, Marriott International, MERLIN Properties, MetLife Investment Management, Mitsubishi Estate, News Corp, Nuveen Real Estate, Prologis, PulteGroup, Related Companies, SEGRO, Starwood Capital, Toll Brothers, Vanke, and others