Having just returned from ICSC’s RECon, the world's largest retail real estate show in Las Vegas, I'm very excited about the improving market for retailers and the properties they occupy. In primary cities retail centers are becoming fully leased and creating pressure for new construction and rent increases. While that has not started in the secondary and tertiary markets, often this type of activity will follow at a 6-24 month lag time. There were over 32,000 attendees at the show and the mood was upbeat. Retailers, Developers and Landlords alike, felt things were on track to be the best year since the recession hit. Deals were getting done and leases were getting signed.
The retailers that are expanding the most are drug stores, discount stores, payday loan stores and personal service businesses such as haircuts and laundromats. The quick service restaurant businesses are also growing across the country, most with a new found desire for drive-through lanes. Even the chains that have traditionally not had a drive-thru are discovering they can increase their business by as much as 20% by adding a drive-thru lane and increasing sales, especially on rainy days. Currently, I am working to find spaces for a national restaurant chain, auto parts store and dollar store that were all at the ICSC show.
Another prevailing retail trend is that stores are decreasing their traditional footprint and opening in smaller formats. Businesses are saving on rent and putting more money into web sites that complement their retail store. The combination of a small bricks and mortar store with strong on-line sales possibilities seems to be the ultimate way to compete with the large on-line e-tailers such as Amazon. As such, strip centers in smaller markets are still having a hard time leasing space and continue to offer tenants discounts & incentives to get space leased.
While the overall news is good, the development that usually follows an uptick in activity, has not begun. There is still too much existing space available and rents have not started to rise. The plus side is that owners of well located strip malls and retail centers are seeing an increased demand from buyers who are looking for opportunities to put their money into the real estate market and finding their options are limited. Overall the news is good for Northern Michigan, as we see more opportunities in retail than we have seen in the preceding few years.
-Dan Stiebel, CCIM