Where is Real Estate headed in the Retail Sector?
This month I had the opportunity to attend a real estate trade show focused on the retail industry. The Michigan Idea Exchange was held at Suburban Collection Showplace in Novi and put on by the International Council of Shopping Centers (ICSC). The focus was on national and regional trends in retail and there were many retailers present looking to expand into Michigan or open additional locations in our state. There was a vast array of speakers including Nick Egelanian, an expert in retail in the “Post Department-store Era”, Brad Oleshansky, the founder of the M1 concourse in Pontiac and our Governor, Rick Snyder, who presented the key-note speech. Overall I would say it was one of the best one-day real estate events I’ve attended in long time.
The event began with Rick Snyder talking about the state of Michigan, our economy and the labor force. He talked about how our unemployment has gone from over 11% in 2009 to 4.7% in 2016. He discussed how wage growth has transformed in Michigan from being one of the worst states in the nation to one of the top states. He also explained that 100,000 people have entered the job market this year, which is great news, but has kept our unemployment rate at 4.7% instead of dropping even lower. These are fantastic statistics for a state that struggled through the great recession and endured the bankruptcy of some of our largest employers, many in the automobile industry, and the exodus of many of our workers to other states. Governor Snyder said that the Pure Michigan campaign is going great and we have had a record number of visitors this past year and that he is working on increasing international tourism in order to continue to grow this number.
Governor Snyder discussed how the automotive industry will likely shift from the car industry to the mobility industry in the next 20 years. As autonomous cars are introduced to the market we will see a major shift in peoples shopping and driving habits. He stated that shopping centers will play a major role in the change. Imagine shopping wherever you like and being dropped off right in front by your car, and then have your car go and park itself. This will certainly lead to some changes in new development and the real estate industry as the need for onsite parking lessens.
The afternoon speaker was very aware of the importance of the automobile in Detroit’s history and Brad Oleshansky discussed the M1 Concourse that he is opening in Pontiac this year. He transformed a former General Motors manufacturing building that was sold in GM’s bankruptcy, into a premier automobile showroom and raceway on Woodward Avenue. It is a great example of repurposing an older industrial site and his success in selling condo car units shows the strength and enthusiasm of our economy and car collectors in our state. Brad described his vision of a place where collectors and enthusiasts could have not only a garage to store their vehicles, but a showplace and performance track that demonstrated the unique culture of car collectors. This “automotive utopia” will feature a retail village, restaurants and a place to relax and enjoy the community on an 87-acre site that is sure to be a destination for any car lover.
The luncheon speaker was Nick Egelanian from SiteWorks Retail outside of Washington DC. He discussed the ongoing shift from retail department stores to specialty discount stores and big box stores specializing in one specific area that previously had been a “department” in a department store. By specializing, the retailers have been able to offer a better selection at a lower price with easier accessibility to the consumer and that is why he sees this trend as continuing. He also discussed the effect that the internet has had on retail and presented some statistics on the world’s largest e-tailer, Amazon, and how its model of free shipping and low prices is probably not sustainable in the long term. The retailers with an on-line and in-store presence are making the highest profits and although Amazon might be the most convenient, the fact that they have yet to make a profit and the shipping companies are starting to charge more, is a sure sign that the on-line retailers will see some major shifts in the future.
The afternoon concluded with a host of retailers such as Art Van, Dollar Tree, Meijer, Kroger, Pet Value, Planet Fitness and a host of restaurants describe their plans for expansion and what type of areas and sites they will be looking for in 2016 & 2017. There was a cocktail reception with over 50 tables of retailers, developers, real estate brokers, lenders, suppliers and municipalities there to discuss their needs and real estate. I enjoyed speaking with many like-minded real estate professionals and getting to connect with agents from around the state that I often talk to and email, but seldom get to see in person. I was pleased to hear so many upbeat stories and the high level of enthusiasm in our real estate industry today.
Dan Stiebel, CCIM