It’s no secret that the third and fourth quarter outlook for retail in the California and other west coast markets remain modest, but that retailers are faring far better now than the last two years. As I’ve been finalizing my schedule for the upcoming 2012 ICSC Western Division Conference in San Diego, I’m keeping an eye on a handful of trends we are seeing from a national and regional perspective.
1) Retailers will modestly increase their open to buys and expansion plans as the economy continues to stabilize: While new store opening are expected to grow by 5%, there may also be a greater number of store closings this year. Restaurants are expected to expand aggressively this year. Since they act as destination tenants, this will serve to draw larger numbers of shoppers to centers.
2)E-commence growth: Continued growth in e-commence is applying even more pressure on established big-box retailers like Best Buy, Target and Barnes & Noble. Combined with an increase in buying via mobile devices, retailers are having to find new ways of reaching and retaining their customers. Both nationally and more locally, retailers have to be creative about holding on to market share through “store within store concepts”, changing layouts to use space more effectively or catering to in-store pick up of on-line orders. The apparel and accessories category will lead this growth through 2016 with sales gains of 20% predicted for this year.
3)Big boxes have been under tremendous pressure: Big box tenants have taken advantage of lower rents and empty big boxes to grab prime space. Locally in the downtown Los Angeles market, Ralph’s, Target and Wal-Mart have opened and retail is “following new rooftops”. Tenants like Kmart, Sears, Best Buy, The Gap, and Office Max are all in the downsizing mode. Others boxes are expanding such as Kohl’s, Wal-Mart, hhgregg and Hobby Lobby. The combined closures and expansions in the box category should serve to balance each other out and result in flat movement in absorption.
4)Continued consolidation of national tenants, as they open new stores in strong centers, they continue to close underperforming stores: More retailers will close underperforming stores and focus on stronger markets. Where space can be shed easily or immediately, look for continued “store within store” build outs as big box retailers seek to efficiently use excess space and diversify their merchandise to attract more consumers. The watch word for supermarkets will be consolidation. As a result, we can expect to see more mergers and divesting of underperforming locations.
Stop by our booth #1337 to learn more about how these trends are affecting deals across the country. I look forward to seeing all of my colleagues and contacts in San Diego tomomrrow.
Jones Lang LaSalle
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