Retail Rises Amidst Commercial Real Estate Slump

US retailers set to launch 1,000 new stores. Shifts post the 2008 crisis and evolving consumer behaviors buoy retail real estate against commercial headwinds.

Retail Rises Amidst Commercial Real Estate Slump
Image Source: Simon Property Group

Despite challenges in commercial real estate, the retail sector is showing resilience. This year, there's a projection of a net opening of 1,000 new stores in the U.S. Factors behind this resurgence include:

  • Historical Impact: A significant drop in retail construction post the 2008-09 financial crisis allowed an oversaturated market to adjust. This period of limited growth helped balance out supply and demand.
  • Data-Driven Decisions: Retailers now harness online sales data and advanced analytics to strategically determine successful store locations.

Key Data Points:

  • Retailers announced plans for almost 4,500 new stores, while nearly 3,500 are closing, as per Coresight Research.
  • Retail space availability dropped to a historic low of 4.8% in Q2, says CBRE.
  • In contrast, office space vacancy rates surged to an 18.2% high, due to rising popularity of hybrid working models.

Other Noteworthy Trends:

The narrative of e-commerce eclipsing physical outlets hasn't materialized as forecasted. Many digitally native brands now recognize the allure of brick-and-mortar establishments. There’s also a distinct migration from urban centers to suburbs, fueled partly by the pandemic-induced remote work trend.

On the Horizon: While retail boomed in 2022, some moderation is noted in 2023. Retail investment has seen a 48% drop in the first half of this year. Nonetheless, dollar stores remain dominant nationwide, with Dollar General planning to open around 1,000 new stores.

Yet, not all retail spaces thrive. While high-end malls report strong recoveries, their lower-end counterparts grapple with significant shifts in consumer preferences and geographical challenges.

Source: WSJ

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