A new decade is here with the calendar turning to 2020, and with it the inevitable, constant evolution of the retail industry market. As one of the most competitive markets in the world, change and adaptation are truly the only constants. The rise in use of technology coupled with metadata metrics for analyzing consumer habits have inspired retailers to adapt and not only stay on top of trends, but ahead of them. Due to these elements, both retailers and commercial real estate operators have to be consistently responsive to the changes in order to maintain the competitive edge in their respective retail real estate markets.
We reached out to a variety of industry experts in the retail real estate sector nationwide to provide their perspective on what they are excited about and what to expect heading in 2020.
Here is what real estate experts say on Retail Trends for 2020:
Health/Wellness and Medical. These are exciting tenants that have really been ramping up. They bring repeat customers to the center and are… for the most part… internet proof. We are an aging population and health and wellness are becoming more and more important. I represent Pure Life Fitness and they tell me that the trend is to have several memberships: maybe a traditional gym membership with yoga and Soul Cycle memberships, for example.I also continue to like restaurants for the same reason. Internet resistant, heavy traffic builders and they have a nice social element.”
Russell Bornstein, Senior Director- Retail Services, Colliers International
The next decade will be fascinating for retail. Self-driving cars and the future of voice will literally upend retail as we know it today.
Parking lots and garages will be diminished and development will occur as opportunities present itself.
Voice will be the new “online” competition to traditional retail. When I can order toothpaste while I am brushing my
Teeth in my bathroom, without having to go to a store or go “online” to place an order- this will be the biggest thing ever and we all thought “online” was industry changing.
Mom and pop retailers and national retailers will be able to survive but they will have to offer an experience and make sure it is friction less, as people’s time become even a bigger commodity than it is today.
Branding for agents will continue to be a necessity as the new “Zillow” like product creates a platform where retailers can get property info, without calling a broker or landlord for the info.It’s going to be very exciting to watch and participate in, as my last decade in the business!”
Beth Azor, President, Azor Advisory Services
Holiday sales in 2019 have broken all past records. This is great news and very much related to the strong economy we have been enjoying. However, a high percentage of sales are being done through mobile phones.
I believe 2020 will further define the successful retailers that are converging online with offline buying and providing greater brand engagement that reaches all generations across all channels.”
Paco Diaz, Senior Vice President, CBRE
I’m excited to watch the “retail Darwinism” continue to evolve in a new decade. There is an increasing necessity placed on owners, operators, tenants, etc… to be strategic, creative, and proactive in how they approach their respective business and expand market share.
Traditionally, the strong are defined by capital resources, but there are increasingly instances where innovators / first movers are leading the way. It will be beyond fascinating to see who thrives in 2020!”
Danny Finkle, Senior Managing Director, JLL
I expect 2020 to be a strong year for retail investments. In today’s market, retail opportunities offer great risk-adjusted cash yield compared with other property types or alternative investments.
The returns are magnified when historically low interest rates are layered into the equation. Private capital has largely exploited this opportunity in the market to date but I expect that to change in 2020. The general consensus at the NY ICSC is that there is an abundance of capital waiting to be deployed next year and we’re starting to see institutions and REITs begin to play offense after mostly being on the sideline over the last couple of years.
The mood is still a bit cautious/conservative and not all retail is created equal for sure but the market is starved for yield and has a lot of dry powder to invest which will make for an active 2020.”
Luis Castillo, Managing Director – Capital Markets, JLL
We continue to see an increase in health and wellness related tenants like Urgent Care Centers and dental groups moving away from inline retail and office space into high exposure retail pads and paying aggressive rents. There is also continued expansion of older concepts like chiropractors and acupuncture practices, but rolling out in franchised branded concepts like The Joint Chiropractic, and Modern Acupuncture.
We also continue to see this explosion in the fitness industry with the segmentation of the full service gyms into smaller personalized fitness concepts like Club Pilates, Soul Cycle (spinning), and Orange Theory Fitness (personal training). And then with the large format gyms (25,000 – 45,000 sf) there is continued growth amongst discount gyms like Planet Fitness and Crunch Fitness , expansion by regional mid-range gyms (In Shape Fitness) to compete with 24 Hour Fitness and LA fitness, and Specialty large format gyms like UFC Gym that is expanding throughout our market.
In the area of food, there has been a slowdown in the quick service food segment, but an increased interest in more local and regional food concepts that are new and different. In our market (Santa Barbara, CA) we have a very cool and retro fish taco concept called Spencer McKenzie’s that has two units, and there continues to be new craft beer operators opening both tasting rooms as well as craft beer and food concepts that are all local and regional operators.
The “A” shopping centers anchored by Target, Whole Foods, Sprouts, Trader Joe’s, TJ Maxx, Hobby Lobby (you get the picture) are getting the majority of the action from the strong and growing brands like Chick-Fil-A, Raising Caine’s, Starbucks, etc. Where the B shopping centers are seeing more nontraditional retail tenants like Charters Schools, trade schools, and cross fit gyms seek space in their centers. And in many cases these tenants are relocating from industrial and office space because they can get the access, visibility and parking benefits of retail at affordable rents.”
Rob Devericks, Vice President, Radius Group
Delivery efficiency is a hot topic for 2020 with same day delivery becoming more expected, drone technology in test phase, and ghost kitchens becoming a reality.Direct to consumer concepts and subscription models are rolling out with overwhelming frequency. Mobile check out and cashier less stores are further changing how people shop.On the real estate side tenants are demanding more TI while at the same time writing shorter leases and taking less sq footage overall. Retail is alive and becoming more exciting than ever but how we use space is certainly changing.“
Karly Iacono, Vice President, Marcus & Millichap
After a drop in transaction velocity and pricing in the 4th quarter of 2018, and a subsequent run up in both velocity and pricing throughout all of 2019, both due to the fed’s increase and subsequent decrease in interest rates, I expect 2020 to be a very stable year in the commercial real estate market due to a now relaxed fed policy.
As for the retail market, I anticipate retailer bankruptcies will not be as pronounced as they have been over the past couple years, with a stronger balance between new store openings vs closures. Brick and mortar retailers are continuously reinvesting into their online platforms, delivery services, and other technologies, which is a requirement to compete in this new age.”
Marcos Puente, Principal, MMG Equity Partners