HP Thinks It Has Reinvented Retail
Toni Jarels
Muoio: We don't think the retailmarket has reinvented itself particularly well, and the culling ofthe herd continues. Some malls and retaillocations are attempting to pivot toward more experientialconcepts, which have proven to be more resilient and resistant tothe technological disruption, but it seems that the majority aretruly struggling. Even 5th Ave. in New York City,once a retail power corridor, has proven not to be immune. This isgoing to be a very long, ongoing process.
Muoio: It's very strong language, butit's hard to call it exaggerated; retail bankruptcies are atrecessionary levels, and a new headline of either a bankruptcy orstore closings seem to hit every day. Furthermore, the stock pricesof large department stores continue to plummet as more storeclosures are announced and same-store sales are failing tostabilize. Only the prime mall and other retail locations orproperties in markets with truly robust housing and demographicbackdrops are weathering the storm. The rest are seeingpersistently high vacancies and stagnant rents, despite the longeconomic expansion. Even as bricks-and-mortarretailers remake themselves to better compete withe-retail, that phenomenon is still bad for retail space demandsince these reinvented retail stores will shrink the footprints oftheir physical stores.
Muoio: Further downsizing of storesizes and number of locations. The country is justover-supplied from a retail perspective, especially ase-commerce sales growth continues toaccelerate. We have yet to see e-retail make a dent in thegrocery segment, and when it does, another major disruption is inthe offing. Chain-scale restaurants have beenstruggling, but for different reasons, as rising wages arecompressing margins. Some property owners, and even municipalities,might want to begin exploring if retail is the best use of some ofthese secondary/tertiary properties with high vacancies. In manycases, rezoning the land and converting it to a different, moremixed-use sort of development mayprovide greater value to owners and the broader community.
Muoio: The rise in e-commerce iscontinuing to accelerate, and retail fundamentals are going to facethis headwind for years to come. Retail fundamentals havestruggled mightily during this economic expansion, owing to thee-commerce disruption. A market downturn could really dentfundamentals.
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.