Commercial Retail and Real Estate Trends
By: George Denman
2017 was one wild year for commercial retail and real estate. Indeed, tumultuous upheavals in so many sectors changed the way people do business—and expect to do it in the future. Real estate has been no exception and the upcoming trends indicate that things may only get wilder—but not necessarily in a bad way.
Trend #1 – Housing Shortage Opportunities
The current housing shortage may seem like bad news on the surface, but in some ways, it’s really just a reflection of these uncertain times. As baby boomers decrease in population while millennials continue their ascent, the problem is not so much a “shortage” as it is a challenge to better understand and capitalize on these changes.
Single-family homes at a mid-price could be the next source of untapped riches for anyone cunning enough to offer the best solution. The difficulty, though, lies in scalability, as this emerging market is notoriously tough to predict. Potential answers lie in a variety of affordable and creative workarounds, anything ranging from transit-oriented systems to finding the ideal location.
Trend #2 – Consumer Wealth and Confidence
How a consumer feels about their financial security plays a large role in how they spend. Today, the student loan debt crisis is just one layer of economic uncertainty plaguing the minds of younger generations. The old “big box” retailers have found themselves struggling to maintain profits and market shares. Meanwhile, lower-cost alternatives have seen positive increases and expansions. Simply put, many consumers are desperate for cheaper, cheaper, cheaper. Few examples better indicate this than the growing trend for second-hand purchases of used items—all in a bid to save a few bucks.
Trend #3 – A New Era for Leases and Retail
Say goodbye to the old 10-year-lease. That standard from another era is gone as mall owners witness drastic corrections in the market. As the move to digital and e-commerce continues to grow, the demand for physical land space in a shopping center or mall has diminished. Some in the industry have reported up to 30% reductions in retail rentals.
The overall plummet puts retailers in a tough spot: as their revenues decline, it could send costs of goods up, putting more pressure on retailers to downsize. This, in turn, could lead to fewer rentals or simply reductions in how much space is rented out.
Trend #4 – An Office Fit for Millennials
One of the biggest fads-turned-norm in the last few years is the cliché of Silicon Valley “worker-friendly” offices. You know, the deconstructing of traditional cubicles for open-access environments with more colors and dedicated “play-time” hours for employees.
These changes have directly changed how office space is built and utilized. In real estate, the signals are clear: build offices that are very flexible to fit the growing needs of a generation that emphasizes freedom and expression over rules and limitations.
Trend #5 – The Shift Towards Experiences
One of the most impacting changes in retail that are directly effecting real estate is the shift towards buying experiences rather than things. Instead of products, the trend is clearly moving to experiences such as going to theaters, eating out, amusement parks, etc. These will naturally alter the real estate landscape in the coming years, all reflective of a new generation full of optimism about living life. Ideally, mixed-use properties that can accommodate these evolving demands will do well.
Capitalize Now!
As the landscape changes, don’t get left behind. A new market means new rules, regulations, and potential headaches. But that’s what we’re here for.
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