What Will Happen To Suburban Retail?

Eli Randel, director of business development at CREXi.

“Approximately 95% or more of the country remain stuck in recession like conditions. While the collective GDP numbers indicate otherwise, and according to a recent poll only 21% of economists predict a recession in 2016, the distribution of wealth and growth remains disproportionate to the top percentile of earners while the majority of Americans have endured stagnant income growth for the last fifteen years and watched major living costs significantly increase.” Those thoughts are according to Eli Randel , director of business development at CREXi , who recently chatted with GlobeSt.com about his thoughts on all things retail . As GlobeSt.com previously reported , Randel heads the new CREXi Miami office for the firm. “The result is dwindling disposable income, diluted buying power, and less money circulating as the top earners tend to spend approximately 5% of every marginal dollar while the rest spend about 90-110% of every marginal dollar. Low-end concepts like QSRs, discount retailers and drug stores will continue to prosper amidst stale economic conditions and impoverished tertiary markets,” he tells GlobSt.com. Demographic growth, he says, will continue to fuel earnings for grocers although “luxury grocers like Whole Foods, may see a little pull-back as they have successfully saturated markets and mid-tier grocers have begun to compete with their organic and health sections.” High-end brands will continue to do well, he continues, as “the American appetite for luxury has not diminished despite goods being harder to afford for most.” The concepts that might suffer, he says, are stores with large footprints selling other people’s brands and therefore susceptible to click-and-mortar trends. “Once anchor-worthy big boxes like Sears and Macy’s will continue to limp along amidst changing trends, levered capital stacks as a result of mergers and acquisitions, corporate re-structuring, and tired products and branding.” Mid-high-end retailers with good products carrying their brand at good locations with smaller footprints and lower employee costs will do fine, he adds. “Store size matters and smaller stores are typically easier to manage inventory (less a necessity since many purchases are online), require less employees, and act more as showrooms, return centers, and branding vehicles than inventory warehouses.” Another big trend Randel points to is the rental trend that is shifting towards cities. “Home rentership remains a popular and important trend as cost of home ownership increases, banks continue semi-disciplined underwriting for loans to new buyers, retirees look to right-size their housing needs, millennials continue to prefer the flexibility of renting vs. owning, and many still suffer from damaged credit or lack of funds for a down payment as a result of the previous housing collapse,” he says. But how does this affect retail? “Flexibility has led to fluidity among workers and real time migration to cities with job growth and areas which are job centers. In a study where thousands of home renters were surveyed, the No. 1 contributing factor to locational decisions was proximity to work,” he explains. “Most renters want to be within a 20-minute commute of their place of employment resulting in an inflow of renters and young professional shoppers to city centers.” Malls, which were once the kings of suburbia, are now outperformed by Urban Malls with eight of the 10 top sales per square foot malls being located within major cities, he tells GlobeSt.com. “Urban and high-street retail continues to thrive despite click-and-mortar trends as they remain destination venues for dining and entertainment among young residents and shoppers.” His prediction? “The trend during the next few years will continue to lean towards urbanization however the lack of available land (or pricing of the land) and rising construction costs will force developers to get creative and to either renovate older existing product or convert a previously different property use to retail.”