Experts Round-Up: Top Retail Trends to Expect in 2019

Dec 17
Experts Round-Up: Top Retail Trends to Expect in 2019

Trends in the retail industry are perpetually changing, and inevitably affected / influenced by technological advancements, evolving market conditions and ever-changing consumer behavior. Due to these factors, both retailers and commercial real estate operators have to improvise and adapt constantly to consistent changes in order to stay competitive in their respective markets.

We reached out to a variety of industry experts in the retail sector nationwide to provide their perspective on what they are excited about and where retail trends are heading in 2019.

Here is what real estate experts say on Retail Trends for 2019:

Relative to retail trends in 2019, I’d say I’m most excited to watch the continued expansion of online startup retailers to brick and mortar retail locations of varying sorts as they continue to scale their business and realize the growth and profitability of expanding their physical real estate presence, i.e. Indochino, Untuckit, etc…  Along the same lines, it will be interesting to see how existing retailers continue to advance their omni-channel business models to improve their distribution efficiencies and bridge the super costly last mile. ”

Danny Finkle HFF HeadshotDanny Finkle, Senior Managing Director, HFF

 

I am most excited about all of the new developments coming out of the ground in 2019.

Just in a few blocks in Plantation, my Starbucks project, along with Falcone’s Plantation Walk, Seritage’s Sears redevelopment and Jon Samuels new Aldi, will add a bunch of new retail in a starving corridor for food and entertainment – and since it’s close to my home as a consumer I’m also very excited!
West Broward will finally have a variety of evening offerings.”

Beth AzorBeth Azor, President, Azor Advisory Services

 

1 – I’m looking forward to 2019 starting off with a bang, with retailers coming off a very successful holiday season. I sense a cautious optimism that’ll propel growth, but also inhibit the kind of boom that would ultimately lead to a bust at this stage in the cycle.

2 – I’m looking forward to a new wave of higher quality locally owned and chef driven restaurants, as 2nd generation restaurant spaces are easier to find and higher caliber restauranteurs already in the market mature into multi-unit regional players.

3 – Looking forward to further expansion of an omni-channel retail model that increasingly includes new retail space for traditionally online-only retailers.  Hopefully the most iconic among which, Amazon, will finally test their bookstore in our market in 2019.

4 – I’m looking forward to the projects proposed in Opportunity Zones this year. These areas will benefit greatly from developer attention—but I hope everyone’s intention isn’t to transform the communities that host them, since there’s only so many times you can displace middle income homes to make way for luxury.”

Rafael Romero HeadshotRafael Romero, Senior Vice President, JLL

 

First and foremost: online retailers doing brick and mortar stores. The realization in the end is that “customers still want to shop for sport! They want to go out and see and touch and feel and smell and try on!” The largest online retailer in the world, Amazon both acquired Whole Foods and is opening Amazon Go stores. Apparently they believe in brick and mortar! Let’s not forget the retailer with the highest volume per square foot-Apple, started out as an online only retailer. Casper Mattresses who started online plans on opening 200 stores. Following suit are Wayfair, Warby Parker and Boll & Branch. For the successful retailer today, Stores support online sales (and act as mini distribution centers) and online sales support stores by way of online and social advertising.

Second:  Restaurants, restaurants, restaurants… How nice to see some new and exciting and healthy concepts. I mean really, was the fried mozzarella stick at TGI Fridays any different than the one at Bennigan’s, Houlihan’s, Chili’s, or Ruby Tuesday? It was all the same crap just in a different setting, and the settings weren’t that different either!

Finally, chef drive restaurants. People today don’t mind spending a lot for a good meal, but they want something new and innovative, something they couldn’t have thought of or made at home, something creative. I heard someone say recently “How have I lived over 50 years and never tasted this phenomenal combination before? How is that even possible!?!” That’s what every restaurateur wants to hear, and now that they’ve tasted it, they have to create something else that’s new!”

Russel Bornstein ColliersRussell Bornstein, Senior VP, Colliers International South Florida LLC

 

In terms of trends for 2019, we expect to see the role of technology continue to increase and evolve for both retailers and restaurants. Online retailers are opening brick & mortar storefronts as showrooms in major trade areas. Traditional brick & mortar retailers are becoming more customer friendly with delivery services in order to compete with online retailers.  For restaurants and fast casuals, we are seeing a significant increase in sales coming from mobile ordering via an app, website, or delivery service. Restaurants and fast casuals are often requesting to have short term parking near their storefront in order to accommodate a larger portion of their sales coming from mobile orders.”

Ray Schupp HeadshotRay Schupp, Principal, H&R Retail

 

We expect a continued flight to quality in 2019 as private investors become increasingly risk adverse in the face of rising interest rates and ongoing retail reinvention. “Amazon proof” concepts such as quick serve restaurants, building supplies, fitness and day care are all sectors to watch. Location has always been a key factor in valuing real estate investments however, due to some retailers pruning their portfolios, investors are now more cautious when considering tertiary markets. As such the pricing spread between primary and tertiary markets has widened. Professional investors seeking yield are exploring less core markets however the private clients looking for stability are becoming increasingly sensitive to market demographics.

In 2019 we also expect the transaction velocity for net leased properties specifically to remain very strong. Investment grade tenants and deals with strong franchisee guarantees lead the pack in terms of demand. However, as inventory levels increases, buyers are less tolerant of overpriced assets. Sellers with pricing expectations from 2015/2016 will see their assets overlooked in favor of more competitively priced deals.”

Karly IaconoKarly Iacono, Associate Director, Iacono Retail Group

 

The trend that I am most excited about moving into 2019 is the fact that more and more retailers have concluded that an omni-channel strategy is most beneficial, where strong online and in-store presence fuel one another and increase overall sales. An increasing number of online merchants are opening stores across the country, and it’s not just Amazon – other examples include UNTUCKit, and Warby Parker. The reality is that consumers want to get out, experience things and interact with others. The most successful retailers moving forward will combine a blend of art, music and similar cultural elements to offer the best possible experience.

In the investment sales arena, increasingly lower yields and higher competition on multifamily assets is slowly pushing more capital into retail, with many viewing it as an opportunistic, contrarian play. While grocery anchored shopping centers are still king, more and more private and a growing amount of institutional investors are seeking well-located, service-oriented, unanchored strip centers. Contrary to the overall business media narrative, retail operating fundamentals across Florida remain very strong, as most of our clients are reporting at or near-record highs in terms of occupancy rates across their portfolios. While there is a lot of uncertainty in the market due to interest rates and the effects of online shopping, there are many more reasons to be bullish on the future of retail real estate.

Kirk OlsonKirk Olson, First Vice President Investments, Marcus & Millichap

 

It is exciting looking forward to 2019 how different “Big Box” retail centers will continue to be creatively repositioned. We continue to see these centers retrofit their existing footprints into Lifestyle centric uses. The concept of creating amenities to drive the public to these shopping centers will help adaptively reuse the retail centers and buoy foot traffic. Innovative and exciting concepts such as Fitness Centers, Automotive dealerships such as Tesla, restaurants, breweries and like kind uses are being developed and help reposition traditional retail.”

Nordlund AssociatesNordlund Associates

 

While cap rates for core plus grocery anchored centers have held fairly steady, there has been a notable upward movement in non-core plus grocery anchored shopping centers over the last year. The increase in larger, non-grocery anchored centers has been far greater. I anticipate the spread between core plus and other assets to continue to widen coming into 2019.

It is reasonable to assume that the opportunity zone craze to persist, especially in light of the administrations recent move to push more federal resources into the Opportunity Zone program. I would anticipate seeing private investors to continue searching for opportunities and yield in secondary and tertiary markets through the first half of the year, and would anticipate beginning to see an uptick in opportunities to purchase distressed/maturing loans from community banks as interest rates and cap rates continue to rise.”

Gabriel Navarro MMGGabriel Navarro, Principal, MMG Equity Partners


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