The decision for apparel retailer Macy's to close 100 stores across the United States could be seen as the latest in a cascade of losses by brick and mortar retailer to e-commerce. Indeed, online commerce has grown over the past few years, but it may not be the only culprit that is affecting retailers. This post will highlight other factorsthat are having a negative impact on retailers.
Changes in spending patterns – As the economy started to improve after the great recession, consumers began saving more money instead of spending it on more consumer goods. Now consumers are spending more of their disposable income on travel and entertainment experiences, and the latest real estate investment projects are reflecting this trend.
Alternative properties are becoming popular – For decades, large malls where major retailers can have large spaces to attract customers were the only way to sell products. However, different shopping venues have changed the customer experience. As we noted in a prior post, consumers are gravitating towards multi-use venues that combine retail, office space and restaurants. Because of this, traditional retail centers (especially those in downtown areas), are seeing increased vacancies and downward pressure on retail rental rates.
“Right-sizing” is a growing trend – Retailers are looking for venues that can maximize the customer experience; and depending on the spending culture within the area, additions of smaller storefronts in conjunction with other consumer growth venues are being planned.
For real estate investors, understanding market trends is critical to the success of a project. However, to minimize risk, to guidance of an experienced real estate attorneyis key.