The changing face of retail real estate: A promising new landscape

[tm_pb_section admin_label=”section”][tm_pb_row admin_label=”Row”][tm_pb_column type=”4_4″][tm_pb_text admin_label=”Text” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”] Recent news is awash with headlines of retail store closures, an easily forseen story with a certain local e-commerce giant taking the unspoken blame, or so one may believe. It’s no secret that malls may begin looking more sparse after 2018; 25 national retailers are on track to file for bankruptcy in 2018 already (there were 50 US retailers that filed for bankruptcy in 2017, according to Business Insider). Select major chains that have announced store closures between 2017-2018 are represented in figure 1. Year to date for this year, store closings approximately double store openings across the nation, according to Coresight Research, with 3,258 stores vs. 1,699. There were 7,066 announced store closures in 2017. Former Starbucks CEO Howard Schultz sees this as a benefit in disguise: “Over the last few weeks, I have been in a number of U.S. cities and observed firsthand the abundance of empty storefronts across the country, in prime A1 locations,” Schultz said in a memo that was recently released by Starbucks. “We are at a major inflection point as landlords across the country will be forced to permanently lower rent rates to adjust to the ‘new norm.’” Positive attitudes surrounding retail real estate don’t only have to do with lower rents. “Total in-store sales continued to grow [in 2017-2018], yielding an uplift in sales densities across US retail,” says Deborah Weinswig, the managing director of FGRT, or Fung Global Retail Tech. “Moreover, occupancy rates in open-air shopping centers and superregional malls [more than 800,00 SF in size] proved resilient.” Michael Diamond, the NPD Group’s director of industry analysis for commercial real estate, also reflected this sentiment in a recent interview, commenting that brick-and-mortar retailers are in fierce competition to provide a more complete experience to increase foot traffic—by offering other amenities such as restaurants and entertainment. “The stakes are much higher for brick-and-mortar retailers—large and small—today, and if you can adjust the purchase decision beyond price to a more positive emotional experience, you have much better odds of attracting people to your shop.” Also according to the FGRT, the top five retail real estate owners in the United States (Simon Property Group, General Growth Properties, Kimco Realty, Brixmor Property Group, DDR) have been able to maintain 95 percent or higher occupancy rates. The digital age doesn’t show signs of slowing down and neither does the trend towards e-commerce. Could grocers be next to see a decline in physical locations? The outcome of this controversial debate remains to be seen. What does bode well for the Seattle retail market, however, is the continuing growth in the residential market. Chief Executive Officer of Lawrence Group, Steve Smith, commented promisingly to CNBC, “Retail follows rooftops.” [/tm_pb_text][/tm_pb_column][/tm_pb_row][/tm_pb_section]