The 1950s saw the birth of the shopping mall across the nation, yet the era of destination retail stores, especially clothing stores, has been on a downward slide for some time. This trend away from the malls began with the introduction of the internet, bringing convenience and in many cases, lower prices to the consumer. A big wave of store closings that began in 2016 is expected to continue in 2017. However, the common thread is these stores are mostly inline or in shopping malls. What's interesting is that only a small percent of these stores affect free standing single-tenant net lease properties. As buyers need narrow, STNL offers the easy in-and-out that a traditional mall can no longer provide.
Many of the big retailers acting as mall anchors have been struggling to stay profitable or maintain growth from previous years. The biggest shock was the closing of 100 Macy's stores across the country. Other retailers such as JC Penney, Sears and Kmart followed suit. As seen in the chart below, it isn't just department stores, other fashion retailers are closing stores as well. The trend here is that most of these are store closings are clothing retailers who are generally inside shopping malls. The existence of physical clothing retailers is coming to an end due to e-commerce with Amazon being the leading competitor.
We expect to see more store closures from these clothing retailers, and those that survive, will shrink their footprint. As a result, many shopping malls will be forced to close if they are unable to transform into non-retail space like apartments or condominiums.
In contrast, new development of mixed-use projects with retail components and new free standing retail are both seeing significant growth. The takeaway here is that retail isn't dying. The traditional mall might be. The retail environment is changing and if you are an investor in STNL, you're in the right place.
The 1950s saw the birth of the shopping mall across the nation, yet the era of destination retail stores, especially clothing stores, has been on a downward slide for some time. This trend away from the malls began with the introduction of the internet, bringing convenience and in many cases, lower prices to the consumer. A big wave of store closings that began in 2016 is expected to continue in 2017. However, the common thread is these stores are mostly inline or in shopping malls. What's interesting is that only a small percent of these stores affect free standing single-tenant net lease properties. As buyers need narrow, STNL offers the easy in-and-out that a traditional mall can no longer provide.
Many of the big retailers acting as mall anchors have been struggling to stay profitable or maintain growth from previous years. The biggest shock was the closing of 100 Macy's stores across the country. Other retailers such as JC Penney, Sears and Kmart followed suit. As seen in the chart below, it isn't just department stores, other fashion retailers are closing stores as well. The trend here is that most of these are store closings are clothing retailers who are generally inside shopping malls. The existence of physical clothing retailers is coming to an end due to e-commerce with Amazon being the leading competitor.
We expect to see more store closures from these clothing retailers, and those that survive, will shrink their footprint. As a result, many shopping malls will be forced to close if they are unable to transform into non-retail space like apartments or condominiums.
In contrast, new development of mixed-use projects with retail components and new free standing retail are both seeing significant growth. The takeaway here is that retail isn't dying. The traditional mall might be. The retail environment is changing and if you are an investor in STNL, you're in the right place.
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Jonathan Hipp
Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.
