Business Trends

E-Commerce Changing Face of Retail and Industrial RE, by Cassidy Turley

File Type: Free Content, Article
Release Date: May 2013
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Retailing is in the midst of a seismic shift and if retail landlords do not understand the nature of the change taking place, they are in for a bumpy road ahead, according to Cassidy Turley Commercial Real Estate's The E-Commerce Imperative 2013 report. Similarly, owners of industrial properties need to grasp the nature of the change as well to fully capitalize on the current wave of mega-distribution centers. According to the report, “over the next few years, the overwhelming majority of new retail development will — in fact — be industrial. And the overwhelming majority of new industrial development will — in fact — be retail.”

E-commerce is obviously not a new trend, according to the report, but it has now reached “a tipping point.” The retail marketplace will change more over the next five years than it has over the past 20 years. These shifts are being driven by the accelerated encroachment of e-commerce.

Here are trends to watch:

  • Shopping center vacancies will continue to fall at a modest rate as retailers expand, however, there has been a massive shift in terms of who is expanding.
  • There are two forces currently impacting retail demand in the United States; the economy and the impact of e-commerce.
  • Continued weak recovery has meant strong growth from dollar stores, discounters and off-price retailers. Luxury shoppers are back and high-end chains are also in growth mode (though these numbers are always small and mostly limited to high street retail and trophy shopping center locations). With the middle class consumer still in frugality mode, mid-priced concepts are in an extremely conservative growth mode at best, or in contraction.
  • The rise of e-commerce has meant stiff competition for mid-priced hard goods retailers. Most are focusing their immediate efforts on building their e-commerce platforms and are streamlining their bricks and mortar presence.
  • Concepts that don't, or only minimally compete, with e-commerce are where there is some of the strongest bricks and mortar growth. Restaurants lead the way, grocery stores are hot (new smaller concepts are expanding though many traditional players are contracting) and service-related retailers are the strongest sectors.
  • Big box users are mostly shrinking their footprints, particularly in those sectors most impacted by e-commerce (consumer electronics, office supplies, etc.).
  • The tenant mixes for shopping center landlords are radically shifting away from hard goods. Experiential retail means creating a shopping environment that builds around dining and entertainment options.