E-Commerce Share of Retail Sales
16 %
More Than a Designation
12 %
8 %
4 %
0 %
2000 2001
2002 2003
2004 2005
2006
Source : FRED , St . Louis Federal Reserve * 1Q2021
2007 2008
2009 2010
2011 2012
2013 2014
2015 2016
2017 2018
2019 2020
2021 * or industries . This phenomenon is undoubtably happening now . Twentieth-century stalwarts of the retail landscape are now giving way to a new breed . Traditional department stores such as JCPenney , Sears , and Macy ’ s have closed many of their locations and are looking to renovate or alter their business model to remain relevant . But other retailers are expanding their footprints . Target continues to enter more urban areas , Dick ’ s Sporting Goods has found life in a new breed of outdoor enthusiasts , and even companies such as Nike have found value in created showroom and customization space in this new era of retail .
It was clear in the data that larger , well-kept properties in locations with quality transportation infrastructure were holding up very well against the barrage of e-commerce competition .
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Variation at the asset level has also been noted , in particular with indoor shopping malls . In a recent research paper , Moody ’ s found a strong correlation between space market performance and certain characteristics of the property like age and size , as well as characteristics of the tenant mix . It was clear in the data that larger , well-kept properties in locations with quality transportation infrastructure were holding up very well against the barrage of e-commerce competition . In contrast , older smaller-scale malls with limited tenant and experiential diversity have tended to struggle .
In summary , brick-and-mortar retail real estate is far from dead . We are noticing an evolution and an exposure of weak assets at least partially due to the pandemic , but the sector still has a solid mid- and long-term future . After a bumpy next year or two for retail , we expect the national vacancy rate for the sector to trend back down toward a sub-10 percent level and rents to grow at a reasonable average of about 2 percent per year .
Thomas P . LaSalvia , Ph . D . Senior economist at Moody ’ s Analytics Reis
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