What is the Future of Retail? Does Anyone Know?
COVID will likely affect how consumers do their holiday shopping this year – with more people than ever shopping online.
This, combined with the overall trend towards online shopping in general, could lead to less demand for retail spaces.
Commercial property owners, therefore, will have to adapt to the changing times and look for opportunities to repurpose unneeded retail spaces.
I hope everyone had a great Thanksgiving. It was a little muted this year – but hopefully you had fun and lots of turkey. Or tofurky, if you so desire.
One thing that Thanksgiving always brings – besides a post-turkey nap and a Detroit Lions’ loss – is Black Friday. Obviously this year presented a challenge to stores and shoppers alike. How do you wait in line overnight and practice social distancing? I was not one of the lucky ones who made it out there this year, so I’m not totally sure how that worked. But that is besides the point for this article where my focus is on the future of commercial retail real estate. And the place to start with that is the holiday shopping season that is upon us.
There seemed to be some serious trepidation among retailers about how Black Friday – and the entire holiday season – are going to go. Traditionally Black Friday is the busiest shopping day of the year. But many retailers seemed to think that the holiday shopping season could be different in 2020. The most obvious reason is because of COVID. The pandemic is likely to keep some people away from stores. And even when people come out, there are many local and store regulations about how many people can be in the stores. As a result, the 2020 holiday shopping season could look a lot different.
And, of course, the shift away from brick and mortar shopping did not start with COVID. Its just an another big step in that direction. As traditional retailers have had to compete with online giants like Amazon, they have shifted much of their business away from physical stores to online shops.
Future of Brick and Mortar
So what does all of this mean for commercial property owners that own retail space? Well first, brick and mortar shops are probably never going to go away entirely. If nothing else, they can often serve as loss leaders for the retail online business.
But retail spaces are changing. And commercial property owners have to change with it.
The most stark example may be the indoor shopping malls that we all used to congregate in when we were teenagers. Or was that just me? #LakesideMall
Anyway, around the country those malls are being repurposed into mixed use with office, retail, and residential. Or some (like my aforementioned hometown mall) are being torn down and replaced with a new mixed use product.
I think that is likely to be the future of much retail. It will be repurposed or rebuilt with fewer retail outlets and more hospitality or residential.
But, of course, COVID has thrown the future of many types of commercial real estate into question. We just do not know yet what the demand for office or hospitality will be when things shake themselves out.
The future for retail, however, was already on a path to fewer physical stores. And there is no reason to think that will change with COVID. Indeed, it will likely be accelerated.
That can present great opportunities for current and future owners of commercial real estate. They may have the possibility to purchase a current retail asset to repurpose or do the same with one they own. They will just have to continue to adapt with the changing times. It is, therefore, an exciting time to be in the retail space.
To further discuss this or any other commercial real estate issue, give us a call at 512-614-0335.