The downtown shopping center news has been negative, citing low office attendance and increased crime. However, according to CBRE’s recent report “Reports of Street Retail’s Demise are Greatly Exaggerated,” many urban storefronts and shopping districts have actually recovered to a healthy state.
But what does “healthy” really mean?
CBRE reports that foot traffic in 10 prime retail districts has rebounded to 81% of pre-pandemic levels in 2019. Even better, it is projected to fully recover by Q3 of 2024 and potentially surpass previous levels by the end of 2025.
Additionally, retailers located in densely populated areas with high-income demographics are seeing an increase in business from out-of-town visitors and tourists. In some cases, tenant-landlord negotiations are happening three or four years before lease expirations.
Rents for prime retail space have also seen a significant increase (over 9%) across the Americas. Some retailers took advantage of lower rents during the pandemic by leasing space for new flagship stores.
E-commerce is another factor contributing to successful street storefronts as some retailers establish multiple locations within the same market for synergies. The report emphasizes that digital sales play a crucial role in driving revenue growth for these businesses: “It is essential for retailers to operate robust multichannel platforms at scale.” Limiting digital sales or failing capitalize on online traffic can be counterproductive.
Similarly, even digital-only retailers can benefit from brick-and-mortar storefronts as fulfilling orders through click-and-collect methods increases per-square-foot sales by an average of11%, according Forrester data analyzed by CBRE.
Looking ahead,the report acknowledges higher interior build-out costs compared suburban markets along with more expensive operational costs.However,it also notes that people still prefer spending their time holiday shopping,socializing,and window-shopping at physical retail spaces.Successfulretailers understand this needfor diverse store presence and will continue to seek out available space in historic street retail districts despite economic fluctuations.
In conclusion,street retail is here to stay.
