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. COMMERCIAL INVESTMENT REAL ESTATE