‘Retail Apocalypse’ Is Not At Hand
While there will be some softness and “over reaction” by some as the retail sector continues its transition, Bell notes, “We are not going to see a situation where there is a ‘retail apocalypse.’”
MIAMI—Despite the numerous big box retail closings and the negative market prognostications those closures have prompted, brokerage firm Transwestern believes a “retail apocalypse” is definitely not on the horizon.
Transwestern managing director with Florida’s Capital Markets Group John F. Bell tells Globest.com that while big box retailers are struggling mightily, the demand for retail space from both conventional and non-conventional users will soften the blow from the closures from the likes of Toys R Us, Sears, Sam’s Club, Bon Ton, Macy’s, K-Mart, Best Buy and JC Penney.
While there will be some softness and “over reaction” by some as the retail sector continues its transition, Bell notes, “We are not going to see a situation where there is a ‘retail apocalypse.’” He says that although the influence of e-commerce has taken its toll among conventional commodity-driven retailers, “there is not a void of interest in demand for those spaces, it is just different type of users that are not influenced by the Internet and they tend to be Internet-neutral or just not influenced by it at all.”
Bell relates that demand will be strong for the 735 Toys R Us stores nationwide that will be closing. He said there are a number of factors that will drive demand to the Toys R Us space both here in Florida and elsewhere.
He notes that the typical Toys R Us store totals approximately 40,000 square feet, which fits the size type of new users seeking to expand. The store space could also be subdivided into smaller sizes of 20,000 square feet to lease to smaller tenants.
Bell points out that many of the Toys R Us stores are on leases at below market rents that with recapture will allow for the potential for increased rents. He adds that the smaller Target prototype concept totals approximately 40,000 square feet and will therefore be another potential user for the Toys R Us or other similar type big box space that comes available.
“Many of the stores are prime real estate that Toys R Us has taken the unprecedented step of offering payment packages (in bankruptcy) to allow for more time to decide which stores they want to dispose of to maximize pricing from their highly coveted real estate,” Bell says.
Bell says that while the tumult in the retail sector and particularly in the big box sector will create some softness for a certain period, “Florida is a primary and active market that will have retailers suited for the new economy competing for available big boxes,” he says.
Transwestern believes that vacant retail space will be leased from a variety of conventional and non-conventional users. Bell says that vacant big box or empty space in shopping centers or malls will be leased by the emerging sector that offers an “experiential component or superior boutique-level customer service.”
“The challenge in retail is not online vs. brick and mortar, but the transitioning hybrid approach to retail that provides an experiential shopping experience combined with technology incorporated into retail concepts,” he says. “The two are not mutually exclusive, but instead symbiotic.”
Other high-growth sectors that will fuel leasing activity will include specialty grocers, such as Sprouts, Trader Joe’s and ALDI, as well as medical and urgent care facilities and entertainment-oriented uses such as escape rooms, laser tag and trampoline centers. Bell also believes that charter schools are another potential user for former retail space and cited a recent approximately 48,000 square-foot lease deal in Tampa of retail space by a charter school as one example.
Another trend in retail will be the adaptive reuse of retail properties to residential as well as the redevelopment of town center properties into smaller store sizes with a heavy reliance on restaurants, entertainment uses and experiential retail, he notes.