ANNUAL RETAIL REVIEW
The retail real estate sector has faced a considerable number of challenges since the recession and the rise of online purchasing. While certain areas of the sector have not survived in their traditional form (think malls and big-box stores),
instead of completely disappearing they have been forced to reinvent themselves in order
to provide customers with what they need and crave: services, dining options, entertainment and experiences.
Some areas of retail real estate have become especially healthy and desirable to investors. According to Marcus & Millichap’s 2017 Retail Investment Forecast, despite headlines highlighting the demise of several high-profile retailers, local retail centers and
net-leased properties continue to post gains. National retail vacancy rates will hit their
lowest level in 16 years, bolstering rent growth and investor interest. Elevated uncertainty surrounding proposed tax reform, interest rates and other headwinds will persist,
but eventual policy clarity should reduce uncertainty and spur increased transactions.
Adding to the level of uncertainty has been consolidation. In February, Cushman &
Wakefield reported that Burger King’s parent, Restaurant Brands International, is buying Popeye’s for $1.8 billion; the much-anticipated Walgreens/Rite-Aid merger still
hangs in the balance at press time; and a variety of other mergers and acquisitions, such
as Samsonite acquiring eBags, are being announced daily.
One thing on which the experts agree: retail is not standing still. But some see the
glass as half full and others as half empty. “I characterize today’s real estate market as
quite fragmentized,” says Lindsay Parton, president of retail development firm DJM
Capital Partners. “It’s certainly a tenant’s market, not a landlord’s market like five years
ago. Everyone seems to be downsizing, and the larger-format big boxes are either clos-
ing up shop or trying to find ways to get rid of space. In general, it’s a varied market with
everyone still trying to find their footing.”
Nate Cadieux, president of real estate for Moniker Group Inc., developer of San
Diego-based multipurpose retail store Moniker General as well as other properties under
the Moniker brand, characterizes the retail sector as evolving. “The Internet is causing
retail to change, but retail is not at war with e-commerce. Rather, e-commerce is forcing
developers and retailers to focus on the irreplaceable strength of brick-and-mortar real
estate: human connection. Retail developers are now fostering environments that create
SECTOR IS GOING
THOSE IN THE
For the Point in El Segundo, CA, a 115,000-square-foot lifestyle shopping center, Lifescapes International designed a large programmable
open-lawn area that hosts concerts, fitness classes and other community events.
Annual Retail Review