The recent news surrounding downtown shopping centers has been negative, with a focus on low office attendance and an increase in crime. However, according to CBRE’s latest report “Reports of Street Retail’s Demise are Greatly Exaggerated,” there is another side to this story. The report reveals that many urban storefronts and shopping districts have actually recovered to a healthy state.
But what does “healthy” really mean? According to CBRE, foot traffic in 10 prime retail districts has already reached 81% of pre-pandemic levels from 2019. Even better news is that it is projected to fully recover by Q3 of 2024 and potentially surpass previous levels by the end of 2025.
Additionally, the report highlights some key points:
– Retailers located in densely populated areas with high-income residents are seeing an increase in business from out-of-town visitors and tourists.
– Anecdotal evidence suggests that negotiations between tenants and landlords are happening three or four years before lease expirations.
– Rents for prime retail space have increased by over 9% across the Americas as some retailers take advantage of lower rents during this time period for new flagship stores.
E-commerce also plays a significant role in driving revenue growth for successful storefront retailers. The report emphasizes the importance for retailers to have strong multichannel platforms in order remain competitive at scale. Limiting digital sales or failing capitalize on increased online traffic can be counterproductive.
On the other hand, digital retailers can also benefit from having brick-and-mortar locations as well. According Forrester research cited by CBRE, fulfilling digital orders through click-and-collect methods can boost per-square-foot sales by an average of11%.
Moving forward,the report acknowledges that interior build-out costs may be higher compared suburban markets along with operational expenses.However,it also notes how people still prefer spending their holiday shopping time,making social connections,and window-shopping in retail real estate. Successful retailers understand the importance of having a diverse store presence to attract consumers at any time, and with limited space available in historic street retail districts, competition will remain strong even as economic conditions fluctuate.
In conclusion, it is clear that street retail is here to stay despite recent challenges. CBRE’s report highlights the resilience and potential for growth within this sector and emphasizes the need for retailers to adapt and evolve in order to succeed.
