Home News Retail Real Estate Is Enjoying Its Biggest Revival in Years

Retail Real Estate Is Enjoying Its Biggest Revival in Years

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U.S. retail vacancy rates fell to 6.1% in the second quarter, the lowest level in at least 15 years, according to a real estate services firm, while U.S. shopping center rents in the same quarter were down five years ago. 16% higher than

cushman and wakefield.

For the first time since 1995, more stores opened than closed in the United States last year, according to an analysis by .

Morgan Stanley,

And some analysts expect the trend to continue this year, despite growing fears of a recession.

change from a year ago

US retail space

area

US retail space

area

US retail space

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US retail space square footage

US retail space square footage

The upturn in the retail real estate industry reflects decades of painful adjustments, including hundreds of retail bankruptcies, widespread vacant stores and plummeting demand for enclosed malls. Over the past few decades, construction of new retail stores has slowed significantly after years of overbuilding.

Instead, most developers choose to refurbish aging properties rather than build new ones. Companies embarking on new projects are more cautious and usually secure leases from tenants before construction starts. More and more companies started out as online-only retailers.

warby parker Ltd,

It also looks to real estate to attract customers and drive growth. The eyewear retailer opened nine new stores in the second quarter, bringing the total number of stores to his 178 at the time, according to financial documents.

And after being forced to buy more online in the early days of the pandemic, many people now prefer shopping in stores, from clothing to groceries.

Other real estate sectors still struggle with oversupply. Most notably, the office market is struggling. too much workspace It’s been exacerbated by the pandemic and the rise of remote work. Some real estate analysts say it will likely be years before supply shrinks to match levels of post-COVID-19 office demand.

After a painful reinvention of itself, retail real estate is benefiting from years of minimal construction as companies that survived the challenges of online shopping and the pandemic look to expand.

“For the first time in almost five years, there will be more new stores opening in the US than closures,” said Brian Kingston, Managing Partner.

brookfield

Asset Management said in a recent conference call with investors: “And those new 2,600 of his stores will require an estimated 23 million square feet of space.”

A real estate firm, one of the largest mall owners, said spending at its 132 malls in the US was 31% above pre-pandemic levels.

While many mid-range and low-end malls are still struggling, Brookfield, Simon Property Group,

Maseric Ltd.

— Occupancy rates have bounced back to more than 90% from the pandemic dip, according to businesses and Morgan Stanley.

High inflation, rapidly rising interest rates and the prospect of a recession are likely to reduce retail sales and increase vacancies in the coming months. But stronger retail performance during the pandemic shows the industry is more capable than it has been in years as it weathered the coming storm, executives and analysts said.

Chad Cress, chief creative officer at California-based DJM, a real estate investment, development and management firm. .

The problems in the retail industry started long ago

Amazon.co.jp.

Until the 2008 financial crisis, retail construction was growing four to six times faster than the U.S. population since the 1970s, according to Ronald Camdem, head of U.S. REIT and commercial real estate research at Morgan Stanley. was growing up in

Last year, for the first time since 1995, more stores opened than closed in the United States.

There are currently about 22 square feet of retail real estate per person in the United States, according to data provider MSCI Real Assets. The figure of 23 is higher than any other country, more than twice as many as France and the UK, and nearly eight times as many as China, according to Morgan Stanley calculations.

As Americans moved to the suburbs after World War II, downtown shopping districts dominated by small businesses and family-owned department stores were replaced by local malls and retail chains, says retail advisory firm Siteworks. Founder and President Nick Egeranian said. The developers then rushed to build a sprawling open-air shopping center with a large number of stores.

Brandon Svek, National Director of U.S. Retail Analytics at The Data Company, said:

Co-star.

When the recession hit in 2008, e-commerce was just beginning to gain popularity among middle-class shoppers. According to Morgan Stanley, in 2008 and 2009 he had more than 850 retailers gone bankrupt.

Both the Consumer Sentiment Index and the Consumer Confidence Index are trying to do the same thing: consumer sentiment. The WSJ explains why the Federal Reserve is eyeing his 2022 Consumer Confidence Sentiment. Illustrated by Adele Morgan

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Retail has also fallen. CoStar says the developer has provided less than 150 million square feet of new retail space each year since 2010, half of both 2008 and 2009 levels.

Retailers had been grappling with the growing popularity of online shopping for years before the pandemic hit and forced people to turn to the internet for everything from groceries to working out. According to the U.S. Census Bureau, in the first quarter of 2008 he was 3.6% of total retail sales, but by the first quarter of 2020 he had risen to nearly 12%.

However, the percentage of online retail sales has declined after peaking at 16.4% of total sales in the second quarter of 2020, according to the Census Bureau. In the first quarter of this year, 14.3% of retail sales occurred online, higher than before the pandemic, but the growth rate was slower, underscoring that people still want to shop in person. I’m here.

“Brick-and-mortar retail sales growth is actually growing faster than e-commerce this year,” said Kingston of Brookfield.

Analysts and retail executives say the pandemic has forced companies to accelerate the integration of online and in-person services. More and more businesses are allowing customers to pick up or return online purchases in stores. Shopping center owners have designated additional parking spaces for curbside pickup.

Some retailers have gone online as the cost of online advertising has risen looking for real estate acquire customers.

Menswear designer Todd Snyder’s flagship store opened in Manhattan in 2016.


Photo:

Julie Florio

Menswear designer Todd Snyder, who launched his label in 2011, saw online sales triple in the New York metropolitan area in the first year after opening his first physical store in Manhattan in 2016. It is said that it became

“It’s a great way to build brand awareness. It’s also a great way to get consumer feedback,” says Snyder, who has since opened five more stores.

Rather than building new stores, many property owners are redeveloping older retail outlets to appeal to modern shoppers.A real estate investment trust located in Mamaroneck, a suburb of New York

Brixmor property group Ltd.

Most recently, it completed a $13 million renovation of a 46-year-old shopping center it acquired in 2005.

One recent afternoon, a visitor was pushing a shopping cart out of North Shore Farms, a regional grocery store located in a shopping center. Former grocery chain A&Pwhich closed after bankruptcy in 2015.

Brixmor Property Group recently completed a $13 million renovation of a 46-year-old shopping center it acquired in 2005.

Jennifer Mercer, 52, said she goes to the store to stock up on fresh fruit and vegetables, as well as specialties, especially Greek feta cheese and olives.

“I like to pick my produce. I like to browse,” said Ms. Mercer. “When I enter a store like this, ideas come to my mind. “

Retail real estate still faces challenges.Several major tenants including

Bed Bath & Beyond Ltd,

facing significant financial pressure, announced a major closureRegional retailers that rely on offices continue to struggle as remote work curbs customer traffic.

And the US is still in a state of over-retail. Morgan Stanley’s Camdem said about a third of the existing 1,100 shopping malls and more than 10% of the 115,000 shopping centers are likely to fail in the next few years and should be demolished. .

Still, the industry is better positioned to face the economic turmoil than it has been in decades, he added. Retail bankruptcies increased during the pandemic, but not as much as during the 2008 financial crisis.

“It’s definitely going to be a headwind, but I don’t think we’ll have the same level of loss,” Camdem said.

Retailers are expanding more strategically while better integrating online and in-store shopping.

Fix and Amplify
Brookfield Asset Management is a real estate company. Earlier versions of this article were erroneously referred to as Brookfield Property Group. (Corrected on October 4)

write destination Kate King [email protected]

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