Commercial Investment Real Estate May/June 2017 | Page 28

Growth in Retail Sales vs. Retail Rent Increase
Real-estate-using Retail Sales
adjusted for inflation
Retail Sales
adjusted for inflation
Retail Rent
25%
20
Retail Occupancy
Real-estate-using
Retail Sales
Retail Sales
particular is overblown,” Levy says. Categories such
as restaurants, health and beauty, and off-price
retailers also have continued to add new stores.
15
Fighting for Market Share
10
5
0
-5
-10
-15
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Sources: Reis, U.S. Census Bureau, and Bureau of Economic Analysis
predicting that store closures will increase by 25 percent
this year to reach about 5,000 store closures.
It also is important to note that the outlook for retail is
not all doom and gloom. “We have seen a lot of negative
chatter in the market about retail,” says Spencer Levy, head
of Research in the Americas at CBRE. “The negative chat-
ter is caused by real softness in the B and C mall and B and
C power center space. But if you exclude those areas, retail
overall is strong. Institutional-quality retail properties,
grocery-anchored centers, and neighborhood centers are
doing very, very well, and we expect a good year in 2017.”
One factor giving retail a boost is the lack of new devel-
opment, which has helped fuel absorption and rent growth
in many metros. “I think the negative chatter on retail in
FOOD STEPS INTO
ANCHOR SPOT
by Beth Mattson-Teig
The explosive growth occurring in the restaurant industry in
recent years has helped to consume the vacant retail space
hanging on the market.
Restaurants have eagerly stepped in to fill the gap as
demand from traditional retail tenants declined. In addition
to occupying empty space, restaurants have become a
welcome solution to help drive traffic and are more immune
to the competitive pressures from Amazon and other
online retailers. Restaurant expansion is being fueled by
26
May | June 2017
The battle between e-commerce and traditional
retailers is heating up, and brick-and-mortar retailers
are feeling the competitive pressure. However, there
may not be one clear winner, as both sides are seeing
the lines blur between online and offline sales.
Retailers such as Walmart, Home Depot, and
Macy’s are seeing their online sales rising faster
than physical store sales. Meanwhile, e-commerce
companies such as Fabletics and Warby Parker have
stepped into the traditional retail arena and opened
new stores.
The retail “revolution” is increasingly an evolution that
is producing a hybrid model of retailers that can success-
fully manage both online and brick-and-mortar sales in their
omni-channel platforms. “The most successful retailers are
combining bricks and mortar and online to provide the con-
sumer a complete model and choice,” says Howard Meier,
CCIM, a principal at Realciprocity Advisors in Toronto.
Brick-and-mortar retailers are building out e-commerce
platforms to offer customers the convenience of online shop-
ping, while offering in-store pick-up of those purchases to
continue to drive traffic to the physical stores. Some shoppers
prefer to visit a store first to check out a product and then go
online to make the purchase.
consumers who are spending more of their food dollar
on dining out, as well as consumers who have a bigger
appetite for new tastes and concepts
“The consumer has gotten a lot more palate-educated
even in secondary and tertiary markets,” says Steven K.
Graul, CCIM, president and principal broker at Innovative
Concept Associates, a restaurant real estate advisory firm
based in Reston, Va. “They want to eat better. They want to
eat healthier. Everyone wants culinary-driven food.”
So, even within the restaurant industry there is dynamic
change, he adds. Mall owners, in particular, are jumping
on the rising “foodie” trend and are revamping stodgy
food courts and adding more restaurant tenants that run
the gamut from casual fare to full-service chef-operated
concepts.
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