Commercial Investment Real Estate July/August 2018 | Page 29

Retail Faces
Challenges and
Opportunities
Small Business Outlook Optimism Index
Based on 10 Survey Indicators (Seasonally Adjusted)
115
Retail disruption is driving wide-
110
spread change throughout retail
105
properties, but it is important to
100
note that the transformation within
95
the sector is not a retail apocalypse.
90
A recent research study conducted
by the National Retail Federation
85
and the IHL Group looked at the
80
2013
2014
2015
2016
2017
2018
top 1,000 brands and found that for
every group that was closing stores,
Source: National Federation of Independent Business, Small Business Economic Trends
another 2.7 were opening stores.
Those retailers that are opening
new stores span a variety of categories that are more expe- they are potentially just as vulnerable as department stores
riential in nature than goods selling. That is an important and big-box retailers as more grocery sales shift online.
statistic to realize; despite the challenges in the market, Today, it is estimated that more than half of what we pur-
there are still opportunities for growth and expansion.
chase at a grocery store can be purchased on-line and deliv-
The PGA Tour Superstore is one example of a retailer ered to our home without a delivery charge at prices equal
that is dialed in on the recipe for success in today’s market. to or less than a grocery store.
The formula that works is one part merchandise and selling
stuff to nine parts experience and service. When custom- Tech Slows Demand for Office
ers go into a PGA store, they can check with a golf pro for Densification has been the big trend to watch in office,
advice, get clubs repaired, customize golf balls, or use the as companies pack more people into the same amount
indoor driving range. The retailers that are going to expand of space. The resulting downsizing and consolidation
and be successful are those that can blend experience and slowed the office recovery, because companies needed
service with selling merchandise. Another retail recipe that less space to accommodate growth. The new trend going
works is retail integrated with mixed-use development.
forward is a new term I refer to as “AI-cation” — the
Specific to trends in the grocery sector, Amazon is poised application of artificial intelligence to every industry and
to be a big disruptor, with changes ahead that could happen property type. The rise of AI — artificial intelligence
relatively quickly. It is important for those who invest or and machine learning — means that companies are not
lend in retail to understand that shift. People used to look just getting rid of filing cabinets as they shift to digital
at grocery-anchored centers as the safe haven for retail, but storage and more telecommuting; they are eliminating
positions altogether.
The banking and financial
Multifamily Holds Steady
Effective Rent Growth
services industry, for example,
Vacancy
is slashing staffing and closing
10%
branch locations as more bank-
8%
ing transactions take place online.
Some forecasts predict that up to
6%
50 percent of all bank branch loca-
tions could close within the next
4%
five years. Other industries, such as
2%
financial services, accounting, and
engineering, also are adopting new
0%
technologies that bring increased
automation to jobs that had been
-2%
done manually in the past.
-4%
The result is a bearish outlook
on office, because AI-cation is
-6%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
going to result in lost white-collar
jobs and less demand for office
Source: JLL Research, Axiometrics
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