It’s no news that retail real estate is in a downward spiral. It started slowly 10 to 15 years ago as timed constrained shoppers were getting tired of getting stuck in traffic and reduced their mall trips. E-commerce accelerated the trend. Efforts at trying to make mall shopping more experiential have fallen flat.

And stuffing brand stores into high-street urban locations has run its course too—rents are dropping along the most coveted shopping strips in the country. We’re at the top of the economic cycle and the retail real estate tailspin is savaging NCREIF performance—the core index delivered only a 1% return in the second quarter. So what happens in a recession when chain stores inevitably retrench further? The number of closings could be unprecedented.

All the ongoing disintermediation raises a crucial question. Can institutions still consider bricks-and-mortar retail investments core real estate? Or have shopping centers turned into a much too volatile, high-credit risk component unable to reliably support income-producing strategies with tenants vulnerable to going belly up or reducing their footprints at any time in the economic cycle. Even the once-seemingly impregnable fortress malls catch a whiff of the unimaginable—losing brand names, cutting rents, shrinking store formats, looking for non-traditional tenants. In the 1960s, who thought Woolworths Five and Dime would ever disappear? Now anchor department stores—whose ranks have been shrinking for several decades–really look like dinosaurs and even once seemingly insulated luxury purveyors, the province of the one percent, go bankrupt. At strip centers local and regional grocers have been eviscerated by Wal-Mart, Target and Trader Joes, among other national behemoths. And in cities, do we really need any more corner drug stores or Starbucks?

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Jonathan D. Miller

A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.