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Street Retail Isn’t Going Anywhere
The news regarding downtown shopping centers has been negative, with a focus on poor office attendance and increased crime. But there’s another side to the story. CBRE’s recently released information, “Reports of Street Retail’s Demise are Greatly Exaggerated,” indicated that many urban storefronts and shopping districts “have recovered to a healthy state.”
How “Healthy” is Healthy?
CBRE said that in 10 prime retail districts, foot traffic “had recovered to 81% of pre-pandemic 2019 levels.” The better news is that traffic is forecast to recover by Q3 2024 “and could potentially surpass previous levels by the end of 2025,” the CBRE report said.
The report also noted that:
- Retailers in densely populated, high-income areas are seeing more business from out-of-town visitors and tourists.
- Anecdotal evidence indicated that tenant-landlord negotiations occur three or four years before lease expirations in some areas.
- Rents for prime retail space increased by more than 9% in the Americas. Some retailers took advantage of lower rents in 2020 and 2021 by leasing space for new flagship stores.
Examining E-commerce
Some retailers are achieving synergies by establishing locations in multiple street districts within the same market.
The report said that successful storefront retailers also rely on digital sales to help drive revenue growth. “It is essential for retailers to operate robust multichannel platforms to be competitive at scale,” the report advised. “Limiting digital sales by closing stores or failing to capitalize on a rise in digital traffic at an existing store is counterproductive.”
The same applies to digital retailers, which can benefit from operating through brick-and-mortar storefronts. In analyzing information from Forrester, CBRE indicated that digital orders fulfilled through “click-and-collect” methods would increase a retailer’s per-square-foot sales by 11%, on average.
Where it Goes from Here The report acknowledged that interior build-out costs can be higher in urban markets than in the suburbs. Also more expensive are operational costs. On the other hand, retail real estate is where people like to spend their holiday shopping, meeting friends or simply window shopping. Successful retailers “require a diverse store presence to attract consumers at any time,” the CBRE report said. “What little store space remains available in historic street retail districts will be keenly sought after, even as the economic climate ebbs and flows.”
- ◦Lease
- ◦Economy
