The Retail Apocalypse is the term associated with the widespread closing of brick-and-mortar retail stores. Many of these closures, particularly of large chains, began around 2010, and we’ve seen a steady stream of consolidations and bankruptcy filings over the past decade. 

Examples of casualties include Sears, Toys “R” Us, and American Eagle. Many point to the “Amazon-effect” as a catalyst for these closings now that the eCommerce giant has helped shift consumer shopping preferences. This trend in store closings has had a significant impact on the retail real estate sector. But, are things finally improving? 

Retail Real Estate Has Taken a Beating

In the Charleston area and nationwide, the retail real estate sector has been tough to watch. Companies, Pier 1 most recently filed for bankruptcy protection, which sets off a chain of events. Some will choose to restructure while others shutter their doors entirely. 

When it comes to leases, these retailers might walk away from a contract, look for someone to take over the lease, or attempt to renegotiate terms. In other cases, owners of these properties have been able to make some adjustments by bringing in more service and entertainment-oriented tenants to diversify revenue streams. 

Rate of Retail Closures Has Abated

There’s little argument that retail isn’t the most attractive real estate sector. In fact, National Real Estate Investor reports that it lags behind all others on the list in terms of preference, with the alternatives being hotels, office, industrial, and multifamily. In the preference survey, retail might have come in last place, but this was the first year that the score didn’t decline year-over-year. 

According to recent figures from CBRE, U.S. retail sales hit $1.57 trillion in Q3 2019, which was a 3.5% increase year-over-year. Even though investors may still be somewhat bearish when it comes to commercial real estate, the forecast for this sector is positive. 

Predictions for the Future of Retail Real Estate

Believe it or not, more retail stores are opening their doors than closing them. One of the factors that is helping retail is the growth of mixed-use developments in markets like Atlanta, Ft. Worth, Portland, and West Palm Beach. Another part of the drive to keep retail alive comes from the preferences of younger generations. 

Gen Z (born between 1997 and 2010) spends roughly $143 billion annually and influences another $460.6 billion. This cohort enjoys discovering new products in physical stores and will continue to influence the longevity and growth of the retail sector. Brands that find a way to combine their brick-and-mortar experience with their online presence will be most effective in the coming years. 

Charleston, SC Commercial Real Estate Services

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