It's going to be really interesting to see how traditional retail and malls in particular come out of this covid 19 pandemic. If they aren't able to rebound and consumers continue to gravitate towards online shopping I'm curious about people's views here on the impact to greater economy. Loss of jobs, oversupply of commercial real estate.
I wonder how many retailers are already on the brink because of the downward price pressure and online consumer trend over last 10 years.
Future of retail and economic implications
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vnatale
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Re: Future of retail and economic implications
doodle wrote: ↑Tue Mar 09, 2021 12:04 pm
It's going to be really interesting to see how traditional retail and malls in particular come out of this covid 19 pandemic. If they aren't able to rebound and consumers continue to gravitate towards online shopping I'm curious about people's views here on the impact to greater economy. Loss of jobs, oversupply of commercial real estate.
I wonder how many retailers are already on the brink because of the downward price pressure and online consumer trend over last 10 years.
If you go to my Rickards's book excepts Topic...he voices his strong opinion on your question. Or, maybe he addressed the reduced need for office space with so many now working at home. It's been a few months since I read the book.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Re: Future of retail and economic implications
I've got more than a passing interest in this question, since my family collectively owns a small strip mall located on a busy highway. And I'm currently the business/property manager.
I suspect that high density, go-to locations like these will continue to do ok. Malls located in the middle of nowhere are going to have much worse problems. And, not all retailers will be affected by the online purchasing boom equally. Some things you can't order online.
We have 3 stores currently and are in the lease negotiation phase with a fourth. Three of them (including the new tenant) are online-proof. One, for example, sells heavy containers of chemicals that are prohibitive to ship individually. Another provides construction materials along with contracting (installation), and they're a local go-to. Both are doing a very good business currently. Two of the stores I would also consider "recession-proof", meaning their business will actually increase during an economic downturn. This happened during COVID, which was a real lifesaver.
One of them is definitely vulnerable, not only because of the online purchasing but also because the company is poorly run. As in, their corporate office runs like the Keystone Kops. The one saving grace is that our store happens to be their best money-maker, out of all their stores nationwide, so we won't lose them unless the entire company goes under. Which could indeed happen.
We did a facade renovation during COVID that put us in a good position to get new tenants if needed - in fact, we got two very good offers simultaneously for the vacant store. Unfortunately, "very good" these days means a rental rate that's lower than it was 10 years ago, which is most discouraging. There is definitely an oversupply even in high-desirability locations like ours, although mostly it's old, non-updated buildings. The return compared to what the property would sell for is still good though, on the order of 6-7%. But then, your money is tied up in the property, and we have no debt.
I suspect that high density, go-to locations like these will continue to do ok. Malls located in the middle of nowhere are going to have much worse problems. And, not all retailers will be affected by the online purchasing boom equally. Some things you can't order online.
We have 3 stores currently and are in the lease negotiation phase with a fourth. Three of them (including the new tenant) are online-proof. One, for example, sells heavy containers of chemicals that are prohibitive to ship individually. Another provides construction materials along with contracting (installation), and they're a local go-to. Both are doing a very good business currently. Two of the stores I would also consider "recession-proof", meaning their business will actually increase during an economic downturn. This happened during COVID, which was a real lifesaver.
One of them is definitely vulnerable, not only because of the online purchasing but also because the company is poorly run. As in, their corporate office runs like the Keystone Kops. The one saving grace is that our store happens to be their best money-maker, out of all their stores nationwide, so we won't lose them unless the entire company goes under. Which could indeed happen.
We did a facade renovation during COVID that put us in a good position to get new tenants if needed - in fact, we got two very good offers simultaneously for the vacant store. Unfortunately, "very good" these days means a rental rate that's lower than it was 10 years ago, which is most discouraging. There is definitely an oversupply even in high-desirability locations like ours, although mostly it's old, non-updated buildings. The return compared to what the property would sell for is still good though, on the order of 6-7%. But then, your money is tied up in the property, and we have no debt.
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Cortopassi
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Re: Future of retail and economic implications
Cool. Good luck with mall going forward.
I had a facade/general question -- Mid-size strip malls, in general, around our area have a lot of vacancies. One smaller strip mall used to be active in the 70s and 80s pretty good, until the larger malls came around. It has had a variety of tenants and multiple facade changes over the years.
I always try to get in the heads of new tenants that come in and open up, for example, the 4th off name pizza shop in the same location in the mall where the three previous ones have failed to succeed over the past 10 years.
What do you think makes a person think they'll be the one to make it succeed this time around? I suppose it could be the pizza, maybe they are just really good and they'll get word of mouth. But the problem with this mall is it is locationally challenged. Cars either zip by on a faster street or have no visibility to most of the places in the mall on the cross street.
I know if I were considering a place, i would sit outside the mall for at least some number of days to see what traffic is like.
Wondering if you have any insight.
Re: Future of retail and economic implications
Well I'm hardly an authority on this...but offhand I'd say that a business has to be matched to what people driving by might be looking for.
If they're not looking for a pizza place, and there isn't a lot of signage so they won't see it until it's too late to slow down and turn into it, then yeah that sounds like a problem.
If that road is used mainly to get from point A to point B, rather than holding a lot of shopping options, that's also a problem unless it's ideal for a travel pit stop. In which case there should be a gas station co-located with it.
Signage is key. Traffic is key. The surrounding stores are key. Setting is key.
If they're not looking for a pizza place, and there isn't a lot of signage so they won't see it until it's too late to slow down and turn into it, then yeah that sounds like a problem.
If that road is used mainly to get from point A to point B, rather than holding a lot of shopping options, that's also a problem unless it's ideal for a travel pit stop. In which case there should be a gas station co-located with it.
Signage is key. Traffic is key. The surrounding stores are key. Setting is key.