Ravid Law Group presents our annual survey of the top real estate brokers throughout the country following the ICSC convention in Las Vegas. According to our experts, there’s a mix of good news and bad news for retail: food, beauty/cosmetics, and athletic wear will thrive, but mid-priced and mature women’s apparel will continue to struggle. AAA Malls will stay strong, but B and C Malls will experience more pain. Perhaps the best news for shoppers, our experts predict a stronger focus on customer service. Here’s what else they had to say:
Jay Luchs, Vice Chairman, Newmark Grubb Knight Frank:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: In many ways it’s better because there’s a confidence level in certain retailers who are expanding and have a game plan. Last year, there was more confusion among retailers and things were in a spiral. This year, it feels like there are brands that are on their way that have set goals that are signing long term leases. There are newer brands evolving that are creative and different than what we’ve seen before that are aligning themselves with entertainment, technology, fashion and influencers.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: Much better for some much worse for others. There’s no right answer.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Retailers that have presence in both online and brick and mortar as a business will shine.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Brands that don’t know how to take advantage of the online world will not survive long term.
Q: Is there a particular region/market that will be strong in the next three years?
A: Big cities and suburbs will continue to be important and areas within business cities that are not obvious but close to the action will start to get better with brands that don’t want to pay high inner city rents. They will bring a cool factor to slightly off areas.
Q: Is there a particular region/market that will be weak in the next three years?
A: B and C malls.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Rents will be all over the place. In general they will decrease in many areas – though it won’t mean devastation; you might get cooler brands who can afford the lower rents so while rents may go down temporarily it will be net a positive because it will open the door for more brands that have something to offer. In prime and luxury areas, rent is stable and could continue to rise, depending on size and location.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: In the near term they will cause more vacancy, but because they’ve helped lower rents, there could be more start up types that will fill those spaces that can afford them and that will create more brands and more occupancy but it will cycle out.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: I think we learned a lot from the last one. If people can maintain confidence but not arrogance and not take things for granted because a few leases get signed, that we can maintain and stay away from a disaster. Disaster will happen when landlords get carried away when a few good leases get signed. We cannot have that happen anymore.
Q: How are retailers changing the way they do business to ensure their success?
A: They need to be not just be selling product; they need to be interactive; have an online presence; and offer products that are exclusive that you could not just get anywhere.
Robin Klein, President/Founder of Fashion Retail Group, Inc.:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: No.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: No, I think we will see a decrease in store closings in 2019 BUT I believe existing stores will continue to shrink their footprint.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Athletic wear/footwear; food and anything pet related.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Women’s apparel.
Q: Is there a particular region/market that will be strong in the next three years?
A: Strong tourism areas.
Q: Is there a particular region/market that will be weak in the next three years?
A: Small markets will continue to suffer as vacancies increase.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Tough to give an overall answer the better malls and locations could see a 4-6% increase as existing and new retailers flock to safe haven and the B/C malls and soft locations will decrease.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: There may not be enough online-only retailers expanding into bricks and mortar to make up for the vacant space left by existing tenants decreasing their footprint so I would say decrease.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: The downturn will not be as drastic but we will not experience the robust recovery period we had following the Great Recession.
Q: How are retailers changing the way they do business to ensure their success?
A: Customer care ~ retailers will get better at responding to client’s needs in service and pricing with a better overall experience regardless of the touch point.
John Auber, President of the Auber Group:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: Yes.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: If I could predict the future I would not be in Real Estate, however I expect 2019 to be better “overall” for retail.
Q: Is there a particular category that will succeed more than others in the next three years?
A: I still see strong support for Restaurant and Entertainment, as dining expenditures have exceeded grocery purchases.
Q: Is there a particular category that will struggle more than others in the next three years?
A: I feel there is likely more fall out of apparel.
Q: Is there a particular region/market that will be strong in the next three years?
A: Those areas with dense population will be the strongest, as densification leads to localization. Retailers will be most successful where they are closest to their guests.
Q: Is there a particular region/market that will be weak in the next three years?
A: The inverse of the above, those areas light on population will likely see further closings and repositioning of assets.
Q: Are today’s rents likely to increase or decrease three years from now?
A: “Overall” occupancy should see a decrease in the near term, then likely an increase.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Occupancy rates will likely have an initial decrease, due to closures and downsizing, however overall I would expect occupancy rates to increase, largely due to the repositioning of retail assets to another asset class (office, residential etc). Online retailers recognize the benefit of a physical stores, and they will evolve into an omni channel retailer. We have two points from which to start, physical retailing or online retailing, they both recognize that in order to be competitive and grow, they need to evolve into an omni channel retailer. Both require extensive investment.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: Who knows, I hope if any downturn, will be better than 2009.
Q: How are retailers changing the way they do business to ensure their success?
A: Those retailers that are investing in a comprehensive retail offering (omni channel) and engaging with their customer on all fronts will enjoy the greatest success.
Derrick Moore, Principal – Urban Retail Properties at Avison Young:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: No.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: No.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Fast-casual and quick service restaurants.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Mid-priced fashion brands.
Q: Is there a particular region/market that will be strong in the next three years?
A: Urban markets will continue their expansion and strength.
Q: Is there a particular region/market that will be weak in the next three years?
A: Malls.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Increase 4-6%.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Increase.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: Better.
Q: How are retailers changing the way they do business to ensure their success?
A: Cross-selling and blending of concepts. Also, more in-store experiences and specialty “pop-ups” to increase visitation.
Karen Bellantoni, Vice Chairman, RFK:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: Yes.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: No.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Footwear and accessories.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Fast fashion.
Q: Is there a particular region/market that will be strong in the next three years?
A: West Coast and Pacific Northwest.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Increase 3%.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Increase.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: About the same.
Q: How are retailers changing the way they do business to ensure their success?
A: Store experiences.
Laura Pomerantz, Cushman & Wakefield Vice Chairman, Head of Strategic Accounts:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: Yes.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: No.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Beauty/cosmetics.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Apparel – mid price.
Q: Is there a particular region/market that will be strong in the next three years?
A: Southern California and Florida.
Q: Is there a particular region/market that will be weak in the next three years?
A: Midwest.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Increase 1-3%.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Increase.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: About the same.
Q: How are retailers changing the way they do business to ensure their success?
A: Experiential retail.
Jeremy Ezra, Executive Vice President, RFK:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: Yes.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: No.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Technology, showrooming, fresh and convenient food.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Banks, mid-priced mature fashion.
Q: Is there a particular region/market that will be strong in the next three years?
A: Pacific Northwest, Boston, Nashville.
Q: Is there a particular region/market that will be weak in the next three years?
A: Midwest (other than Chicago).
Q: Are today’s rents likely to increase or decrease three years from now?
A: Totally depends on asset class. In AAA malls and high-profile streets increase 4-6%. Most everywhere else flat or decrease.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Increase. So many new clicks to bricks brands will bring more relevant products and experiences to the customer.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: Better – I don’t believe we will have a worse meltdown than 2009 in our careers.
Q: How are retailers changing the way they do business to ensure their success?
A: The smart/relevant ones are providing convenience and personalization.
Houman Mahboubi, Executive Vice President JLL:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: Yes.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: No.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Retail.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Malls.
Q: Is there a particular region/market that will be strong in the next three years?
A: NY and LA.
Q: Is there a particular region/market that will be weak in the next three years?
A: Don’t know.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Increase 4-6%.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Online isn’t the cause of retailers closing.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: Hard to say.
Q: How are retailers changing the way they do business to ensure their success?
A: Downsizing and using more technology.
Michael Townsend, President, Townsend & Associates:
Q: Is the overall state of retail in better shape in 2018 than it was in 2017?
A: No.
Q: Is the overall state of retail in better shape in 2018 than it will be in 2019?
A: Yes.
Q: Is there a particular category that will succeed more than others in the next three years?
A: Beauty/wellness.
Q: Is there a particular category that will struggle more than others in the next three years?
A: Fast fashion.
Q: Is there a particular region/market that will be strong in the next three years?
A: Atlanta.
Q: Are today’s rents likely to increase or decrease three years from now?
A: Rents will drop.
Q: Will online-only (or mainly) retailers cause an overall decrease (due to competition shutting down) or increase (online stores shifting to physical stores) in occupancy in the next three years?
A: Increase.
Q: As compared with the 2009 Great Recession, will the next retail downturn be worse, better, or about the same?
A: Better.
Q: How are retailers changing the way they do business to ensure their success?
A: Customer service.