— By Sunny Sajnani
In today’s world of Uber and Amazon Prime, it’s obvious that people are focused on convenience in their consumption. Yesterday, I came home to a stack of packages at our front door (Christmas gifts the wife ordered online), and thought for sure that traditional retail stores must be suffering as holiday shoppers have shifted to an online experience. To my surprise, I discovered physical “Brick & Mortar” stores are thriving this season because of their online presence. I can definitely vouch for this after review of my wife’s credit card—both heavily populated with online and in-store purchases!
Physical stores served as a hub for Americans’ shopping sprees this Thanksgiving Day and Black Friday, according to an ICSC survey of more than 1,000 consumers. Half of the respondents who shopped on those days this year said they spent more than they had at the same time last year (also confirmed by my wife’s credit card).
Of those who said they shopped on Thanksgiving and/or Black Friday, 80% made a purchase at a physical store. On Black Friday specifically, 32% of the shoppers made a “click and collect” purchase: buying items from online retailers that also have physical stores and then picking up those items in-store. Nearly 60% of the respondents made additional purchases when picking up items in-store that they had bought online on Black Friday.
Other positive signs that physical retail remains robust, demand for U.S. retail space is high and will remain high even as more space comes online in the coming year, according to JLL’s Development Outlook. “Demand for quality retail space continues to outpace new construction, resulting in consistent vacancy compression and rising rents across most major markets,” wrote James Cook, director of retail research for JLL, in the report. “In the last two years vacancy rates have fallen 120 basis points, and even with new supply we anticipate that vacancies should remain low through 2016.”
By the end of this current year, approximately 82mm SF of retail space will have opened across the U.S. for 2015, yet the national vacancy rate stands at just 5.8%. An additional 83mm SF is still under construction. Stand-alone retail buildings, small neighborhood centers, and grocery-anchored and power centers make up 76% of new construction. The top five markets, which account for 40% of the new construction, are northern New Jersey, south Florida, Houston, Dallas–Fort Worth and Boston. I can also vouch for the demand in DFW as my wife and I live in Dallas.
Metropolitan Capital Advisors has always been heavily focused in retail acquisition, development and value add. We believe that in the coming year, investors will focus on redevelopments of existing retail centers, expansion of centers when possible and much repositioning of properties to better serve their markets. Please reach out to any of our Senior Directors at MCA to discuss how to efficiently capitalize your shopping center deal versus your wife’s credit card.
The author, Sunny Sajnani, is a Senior Director and Principal in the Dallas office of MCA. Sunny can be contacted at firstname.lastname@example.org .