- Netflix announced a new immersive entertainment experience it is building in Dallas.
- It is planning to repurpose old department stores to create the Netflix House.
- This could potentially be a promising new trend for commercial real estate owners worried about struggling movie theaters.
I have written and/or recorded videos a lot about the retail market lately. There’s a reason for that – it seems to be the one area of commercial real estate that is really cranking. Having said that, a couple of areas even in retail that are some concern – large department stores and movie theaters.
Well enter Netflix. While traditional movie theaters grapple with declining attendance, the streaming giant announced it is going to enter the brick-and-mortar world with its innovative “Netflix House” concept. Announced this week, the first Netflix House is slated to open in Dallas’s Galleria mall in Fall 2025, occupying a two-story space previously occupied by a department store. This project signifies a fascinating intersection of trends in the entertainment and real estate industries. So lets talk about it.
The Struggles of the Silver Screen
For decades, movie theaters have been a cornerstone of American entertainment. However, the rise of streaming services like Netflix has posed a significant challenge to theaters. The convenience of watching movies at home has led to a decline in movie theater attendance. According to the Numbers, theater ticket sales are far below what they were pre-pandemic. This has forced theater chains to adapt, with some exploring luxury recliner seating, premium dining experiences, and even in-theater gaming to lure audiences back. And, of course, this long-term trend was worrying for commercial real estate owners.
Rethinking Entertainment Spaces
The decline of movie theaters, of course, can potentially have a big effect on commercial real estate. As I wrote about a few weeks ago, movie theaters are often anchor tenants in retail centers.
In addition, the rise of e-commerce has led to the closure of numerous large department stores and shopping malls. This has created a surplus of large retail space, posing a significant challenge for real estate property owners. That’s one of the reasons Netflix’s new venture is so interesting.
On top of a movie theater, Netflix’s new venture will contain a wide array of retail shops, restaurants, and “experiential activities tied to the streamer’s major franchises like Bridgerton, Stranger Things, and Squid Game.” It is designed to be a destination experience, offering a variety of activities beyond just watching movies. This will hopefully broadens its appeal and caters to a wider audience.
Department stores, with their large floor plans and central locations, offer a perfect canvas for the creation of immersive entertainment experiences like this. Netflix House Dallas is just one example of this trend. Malls across the country are exploring similar options, transforming underutilized spaces into multi-purpose entertainment centers that house movie theaters, bowling alleys, arcades, and escape rooms. This not only revitalizes struggling retail properties but also allows movie theaters to offer a more diverse and engaging experience, potentially attracting new audiences.
Benefits for Retail Property Owners
The repurposing of retail space into entertainment centers offers several advantages for property owners. Here are some key benefits:
- Increased Tenant Demand: Repurposing vacant space for entertainment creates a more desirable property, attracting a wider range of potential tenants. This can lead to higher rental rates and increased occupancy levels.
- Enhanced Customer Experience: Entertainment centers create a more dynamic and engaging destination for shoppers, encouraging them to spend more time and money at the mall. This can benefit existing retail tenants by increasing foot traffic.
- Diversification of Revenue Streams: Leases with entertainment centers can offer a more stable and predictable revenue stream compared to traditional retail leases. This helps mitigate risk and provides a buffer against economic downturns.
The Future of Retail Entertainment
The announcement of Netflix House in Dallas is a significant development with the potential to reshape the retail and entertainment landscape. It signifies a future where streaming giants and physical spaces co-exist, offering consumers a more interactive and immersive entertainment experience. This trend presents exciting possibilities for both real estate property owners and entertainment companies. By embracing innovation and creating dynamic entertainment destinations, these entities can ensure their continued success in a rapidly evolving market.
While there’s still some time before Netflix House opens its doors, one thing is certain: the marriage of streaming and brick-and-mortar entertainment could be the key ushering in a new era for movie theaters.
