Anyone reading commercial real estate retail headlines in 2023 can be forgiven for potential mixed-message confusion. On the one hand, there is continuous talk about retail bankruptcies following that of Bed, Bath & Beyond in April. Yet other reports classify retail investments as “the new darling of the CRE industry.” The reality is somewhere in between; like most other commercial real estate asset classes, retail CRE consists of a broad mix of many product types and fundamentals which prompt experts to tell two things: it isn’t necessarily the “new darling” for investors but it’s nowhere near any sort of state collapse either.
Grant Gary with The Woodmont Company commented: “Despite the pandemic and current economic situation, the retail industry – with exception to regional malls – remains fairly strong and doing much better than other product types.” However, this sector is also experiencing headwinds impacting all other CRE sectors and asset classes such as low unemployment rates combined with key elements having significant disposable income who still enjoy shopping at brick-and-mortar stores over online convenience due to experience factors.
The Providence Group’s Jay Hagerman noted that retailers aren’t reporting losses or sales decline but rather strength from consumers who have money to spend on restaurants or drive through QSRs (quick service restaurants). Scott Grossfeld from Cox Castle & Nicholson added core fundamentals continue supporting consumer spending while Northmarq’s Chad Byerly pointed out lack new construction leading retailers search existing built out locations especially free standing buildings featuring drive through components like those seen at Starbucks locations around town according Pam Goodwin from Goodwin Commercial .
Some are doing better than others within this sector including neighborhood/grocery anchored shopping centers selling staples always in demand plus luxury goods appealing higher income levels less impacted by higher interest rates or inflation per NewMark Merrill Companies’ Sandy Sigal noting growth among fitness venues , movie theaters , quick service restaurants plus treasure hunt value retailers Burlington Ross TJ Maxx Kohl ‘ s Five Below accelerating strategic growth plans across US . Regional malls particularly older stock non A level locales struggling along big boxers not adapting models ecommerce complementing brick mortar vice versa unable attract customers migrating toward mobile commerce omnichannel experiences .
Interest rate challenge matching sellers expectations investors what property sell further complicated cash inventory availability buyers wanting long term leases tenants yet ongoing work home trend crime rate increases traditional department stores people less time want easy place park competition specialty fast fashion brands lack differentiation outdated business models contributing struggles make difficult environment overall success right now however outlook remain positive despite challenges ahead .
