For the past 10 years, CoStar Group, a commercial real estate services firm, has been tracking how much retail space closes each year. Retail properties are used to sell consumer goods and services, but there is a great deal of variety among this type of real estate. Retail real estate includes grocery stores, shopping centers, conventional malls, pop-up shops, “big box” stores like Home Depot and Wal-Mart, and clothing stores. According to CoStar, more than 90 million square feet of retail space will go empty by the end of April of this year: far more than last year’s record-breaking 105 million square feet.
Investor Insight: If you own retail space, be prepared for shifts in market trends. If you have a new strategy for leveraging this type of space profitably, 2018 could be your year.
Since the start of the year, Toys “R” Us, Sam’s Club, Sears, and Bon Ton have all closed down most, if not all, of their physical locations. According to forecasts from Cowen & Co., Macy’s, J.C. Penney, and Signet Jewelers are also “in danger.” Cowen analyst Oliver Chen predicted in the same report, “Stores and malls will be redefined as customer acquisition points, and off-mall locations will continue to be a platform for off-price and value retailers to expand their footprint.
Other analysts predict that while traditional mall venues will likely continue to falter in the coming years, the retail sector may reshape itself around “mixed-use components” that include a wider variety of commercial real estate. For example, a mixed-use venue might include office space, residential space, entertainment venues, medical services, and food services. For example, some venues are creating “food hall” experiences in old retail space, reported Think Realty commercial real estate investing coach Pamela J. Goodwin. “Each level has a different concept and experience, with the first level offering more than 30 unique food and beverage stalls, the second home to a craft brewing company, and the top level designated for entertainment, live performances, and private events.”
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