The retail sector continues to have to the most unique path on the road to recovery. In a REIS Q3 2015 Preliminary Retail Trends report, Ryan Severino said, “The shift towards experiential shopping continues to spur the development of other retail subtypes at the expense of neighborhood and community centers.” And so, the national vacancy rate for neighborhood and community shopping centers was unchanged during Q3 at 10.1%. Vacancy rate for malls was also unchanged at 7.9%.
Severino attributes the lack of decline in vacancy for both subsectors to a mixed bag:
Space in the best centers leased up quickly at the beginning of the recovery and is largely gone.
Frank Meyrath, VP Capital Markets Group at Bull Realty, said, “Consumers are looking for a mixture of convenience and a retail experience. Simply stated, areas that don’t offer either continue to struggle.”
eCommerce, while certainly not totally to blame, (as is often portrayed), simply “isn’t helping” and is in fact “slowly taking market share away from bricks-and-mortar each quarter.”
In a recent article on the top omnichannel retailers, Retailing Today reports that 95% percent of retailers have mobile-optimized sites, 84% save a cart between platforms, 26% offer in-store WiFi and 12% offer an email receipt for in-store purchases.
- “The rise of different retail subtypes such as town centers, lifestyle centers and power centers has given consumers options that they didn’t previously have.”
Seemingly, the latter factor is the most notable. “Although retail sales and demand for goods and services continues to increase, it is now spread through many more distribution channels than in the past,” said Severino.
And in a changing landscape what can you really expect? Recovery isn’t going to be predictable.
Of Atlanta specifically, Meyrath said “The old fundamentals of ‘location, location, location’ continue to rule. This truism has recently been concentrated on the in-town markets, Avalon in North Fulton, and in the Cobb County (new Braves stadium) area.”
Avalon is a great example of what Severino says “consumers have become enamored with” nationally—“the idea of shopping at a center that also includes outdoor promenades, fountains, green space, benches and outdoor dining.”
Driven by technology and changing consumer desires, recovery for the retail sector isn’t stagnant, it just isn’t traditional. For instance, this quarter, asking and effective rents grew by a seemingly insignificant 0.5%. However, year-over-year, asking and effective rents grew by 2.0% and 2.2% respectively, which is the “best performance for year-over-year rent growth since 2007, since before the recession,” said Severino. REIS predicts that it will be a “number of quarters before we see more meaningful acceleration in rent growth.”
So again, this quarter we must adhere to the adage, “slowly but surely.” “The outlook for spending during the balance of the year remains bright with tight labor market conditions, increased savings due to low oil prices, and low inflation. However, the direct benefit to many traditional retail properties will likely remain muted for the foreseeable future,” predicts Severino.
Bull Realty, Inc., Research