In the midst of what many see as a ‘Retail Apocalypse’ – all is not lost “There have been nine retail bankruptcies [so far] in 2017—as many as all of 2016. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. Sports Authority has liquidated, and Payless has filed for bankruptcy.” Large department and niche retail have seen a hit, due in large part to the rise of ecommerce, but “…it’s not all retail, and there are selected areas of retail that are not necessarily [struggling] within that category.”
Retail power houses like DDR, Kite Realty, Regency and Inland Real E
state Acquisitions are reporting REIT portfolios that are on average 95% leased. In this precarious retail real estate market – what is the key to their success?
“Most if not all of those with high occupancies also have very high percentage of grocery anchors. For example, our REIT is about $1.4 billion in size, and 80% of the annualized base rent comes from grocery-anchored properties. The other entities I mentioned can be anywhere from 67% to 88% grocery-anchored.”
Everybody has to eat – and with the rise of the health-conscious craze, even traditional grocery brands have adapted to include organic and ‘natural food’ sections. And in a world where Amazon is king and ‘there’s an app for that’ mobile shopping, these grocery-anchored shopping centers have survived because of that essential retail experience. “You can’t touch apples, you can’t smell cheese on Amazon, and you can’t enjoy walking down the aisles and see a new product and buy it. You can’t go to the cleaners or get your hair or nails done. And these are precisely the usual suspects, the usual tenants in the properties alongside grocery stores.” Although most grocery chains have joined the digital era and offer up the opportunity to order online, many people prefer to pick out their own food. These centers offer up accessibility and convenience, and provide neighborhoods and communities with the necessities – whether it’s eggs and milk, coffee, a drive-through ATM, or a salon – and have also proven to be sound investments for commercial real estate investors.
Excerpts taken from The Atlantic and Globestreet.com
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