Los Angeles
The current disruption in the retail market aside, restaurant and entertainment tenants have become the pillars of the retail sector—in many cases replacing traditional anchor tenants. This is no short-term trend, but rather a fundamental shift in the retail market and the way that consumers use brick-and-mortar retail today.
"Restaurant and entertainment companies will continue to be active because people want to eat and people want to be entertained," Chris Wilson, head of national retail agency leasing and EVP at JLL, tells GlobeSt.com. "These aspects have always been part of the mix, but are increasing in importance as the experience economy continues to gain momentum. I also think that we will see other sectors like health and wellness and fitness concepts continue to take market share as landlords look to provide shoppers with the amenities they are looking for."
Tenant mix is just as important as securing these types of retailers. In addition, landlords should commit to improvements the will create an welcoming environment for consumers. "Retail owners should be looking at dining and entertainment companies of all sizes to help activate their centers," says Wilson. "In the end, retail owners need to be willing to invest capital to improve their center."
These tenants have helped to drive leasing activity across the country, particularly in the class-A market. However, the growth is widespread. "With class-A centers, rents are stable and growing, but there is likely to be some continued softness in lower-tier assets," says Wilson. Of the 72.6 million square feet of retail currently under construction, 96.5% is either class-A or -B space."
The COVID-19 outbreak will certainly disrupt the market, but in terms of fundamentals, the retail market and demand is healthy. Restaurants and entertainment will continue to play a significant role. "I expect this trend to continue for the foreseeable future," says Wilson. "The good news is that there is solid projects in the pipeline, as proposed retail development is five times the volume of current construction, so leasing fundamentals should remain positive."
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Kelsi Maree Borland
