The Evolving State of the Retail Sector
It’s an exciting time to be in retail! Great article that talks about the demise of anchored retail strips as well as the resurgence of retail by focusing on experience and location. Millennials love retail strips that provide multiple services in one concentrated spot. These "neighborhood strips" are precisely the kind of asset that Prudent Growth loves to acquire and own.
From the article:
Big box closures grab headlines and generally serve as the public’s barometer for the health of retailing. However, the closures reported by large, established stores such as Sears are not nearly as consequential in context of the broader retail market. Without a doubt, the introduction of large blocks of dark space to the market is problematic, particularly for malls that rely on these anchors to draw traffic that eventually supports the inline stores. This trend is evident when looking at store closures this year. Payless, Charlotte Russe, Gap and Things Remembered are closing hundreds of stores, largely due to the mall sector that historically relies on anchors. Sears and Macy’s are closing dozens of additional stores this year, offering evidence of future struggles, and transitions, for malls.
Outside of the dated mall format, retail is thriving. Nationwide, vacancy is near all-time lows and rents continue to set new peaks. This resurgence is due to the creative reinvention of the sector from retailers with an understanding of consumer wants and needs. Two major trends are driving the market forward: experience-based retailing and irreplaceable physical locations. Retailers are blurring the lines between wanting to go shopping and needing to go shopping.
The other path retailers have chosen is making shopping convenient, or necessarily physical in concept. Rising household income, low unemployment and a strong economy is supporting consumer spending at restaurants, which remains a healthy segment of the retail market. Gyms are flourishing. The high cost of healthcare is a component of this trend as companies are subsidizing memberships for their employees. Social media and technology are also likely contributors to the increased demand in fitness and the retail space it occupies. Wearables, such as Fitbit and the Apple Watch, are making more people aware of their daily exercise. Smartphone apps make consumers more conscious of their diets, which is driving health food purchases.