Commercial Real Estate

CRE Opinion: What’s Wrong with Those ‘Retail Armageddon’ Headlines

The biggest unknowns in our industry revolve around department stores and enclosed malls.

It’s time to clear the air. The headlines of “Retail Armageddon” are greatly exaggerated. To these writers’ credit, those headlines do get your attention and make you read. However, this style of journalism only encourages the next writer to make an even more dramatic point, such as “Retail is Dead.”

I’m here to say that retail is not dead, but before we get into that, I do want to acknowledge that our industry is experiencing great change. We are seeing changes in shopping habits, how and when people buy, and how goods are delivered. We are experiencing a significant “evolution” in the nature of goods and services and how we receive them. Much of this is a product of improved technology, which makes it easier to order and receive merchandise. However, there are many times that a customer would prefer to go into a store if they are not comfortable purchasing a product online, or they need a product or service quickly and conveniently.

I find that all of this “evolution” is creating change in our industry, and this is exciting. It is exciting because it is making our lives more convenient and efficient. As things continue to evolve, other things become extinct or endangered. This is more evident in retail that evolves around traditional malls. It is not only the department stores that are struggling; there are also other retail concepts often found in malls that are struggling as well. The biggest unknown in our industry revolves around these two categories.

In the world of non-mall properties, also known as open-air centers, change exists as well. However, this industry is adapting to change more quickly and there are many more concepts that go into open-air centers that are not being impacted significantly by the internet. The least impacted appears to be restaurants, entertainment and basic services. Many of the service businesses that occupy space in open-air centers are not affected by the internet. These concepts can be nail salons, hair salons, insurance offices and many of the ordinary conveniences you see in most properties.

While there is much evolution and competition in the grocery industry, these users and their customers rely heavily on brick-and-mortar locations. Eventually, home delivery will improve. Even then, the store itself will likely be located closer to the neighborhood it serves. Other larger users and open-air centers that continue to expand are discount stores like Ross, Marshall’s, and Bed Bath & Beyond.  These stores succeed by offering convenience and value. At retailers like Ross and Marshall’s, merchandise continues to fluctuate constantly, which makes it difficult to sell on the internet.

There is great change in our industry. However, the shopping center industry is seeing the highest occupancy levels in many areas of the country that it has ever seen, and most market rents continue to grow. This indicates that while many of our users are dealing with the effects of the internet and evolution, there are many businesses that still need a brick-and-mortar presence to conveniently serve the customer.

Mike Geisler is Founding Principal and Managing Partner at Venture Commercial Real Estate.