The Flux of Retail
The landscape of retail commercial real estate is constantly in flux, shaped by consumer behavior, technological advancements, economic fluctuations, and societal changes sparked by a post pandemic era. Understanding and adapting to these trends are crucial for stakeholders in the retail sector, from property owners to retailers looking to lease space in a retail center.
Retail certainly isn’t dead…it just looks different.
Overall demand for retail space rose by 15 million square feet in the third quarter of 2023. This marks the 11th consecutive quarter of growth after the sharp decline of COVID. There has not been much in the way of new retail space being delivered to the market either. These two factors together have created the lowest vacancy rate in retail since the great recession. Areas driving this include restaurants, fitness, beauty and even medical.
It is worth framing the different types of retail centers for reference in this article. Retail can span from small “strip centers” where there might be just a couple of small retail shops on up to what is referred to as a “power center” which is a major shopping hub/mall that you have traditionally found several major large national brands all in one giant development. In between that you have neighborhood centers which often might have a mix of small shops that are names you recognize maybe mixed with independent retailers. These are generally smaller spaces…not the 25,000 SF Target etc. Another type of retail choice all together is a “free standing” building. This can be anything from an old historic house converted to retail use to a business owner who built their own storefront many years ago and this has now housed different business uses. The difference is that this is a single occupant building that is not in a “shopping center”. You can probably guess what type of retail is seeing the growth…right?
Retailers are trending to smaller spaces. Retailers are looking for “efficient spaces closer to consumers”. Demand for the retail space in malls fell by more than 45 million square feet since 2017.
Remember- at the end of the day commercial real estate is just a box on dirt, the market will demand the change needed to the inside of that box!
