The first of a series of articles focused on retail’s 10-year transition, and featuring insight from industry leaders.
By Amy Wolfe Sorter | June 27, 2024 | As published by Connect CRE
The commercial real estate retail sector has had a wild ride over the past 15 years, undergoing everything from a massive economic downturn to technology disruptions to a “black swan” event. “The last decade of retail hasn’t been without excitement,” observed James Chung, founder and principal of the Econic Company.
Despite the common theme of the “retail apocalypse” following each event, none of the dire forecasts have come true. Retail bounced back and continues to be strong today. Connect CRE reached out to experts to better understand how past events influenced today’s retail space.
Back in Time
The experts agreed that three factors impacted retail within the past ten years.
#1: Recovery from Recession
Until around 2012, the retail situation wasn’t so rosy. “A decade ago, we were slowly digging out of the hole from the Great Recession,” said Dave Cheatham, president, X Team Retail Advisors and Velocity Real Estate Group. Mid-size box category consolidations meant that big-box space ended up a casualty of the period, meaning that “the development of big box retail sites virtually came to a standstill as Walmart, Target and Home Depot, worked to figure out how to build and operate omnichannel programs,” Cheatham said.
On the other hand, the Great Recession led to the rise of “treasure-hunting” consumers gravitating toward value. This drove the quick expansion of traditional discounters. “These discounters absorbed a high percentage of the vacant big box space,” said Coreland Companies’ Principal Matthew Hammond. Department stores also expanded off-price brands as “we saw stores like Bloomingdales Outlets, Nordstrom Rack and Saks Off 5th absorbing space,” Hammond said.
Hammond also explained that pop-up retail stores and food trucks gained momentum during the mid-2010s. “These were a less risky way to test products. With social media, it was easier to spread the word and create buzz about new concepts,” he said.
By the middle of the decade, things were more or less back to normal from the recession. By 2014, “we saw a lot of new construction,” said Darrell Palasciano, broker with The Providence Group. “We saw retailers growing. We saw new concepts being created.”
#2: The Rise of E-Commerce
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