Washington, DC-based Zavazone is a startup retailer that has just opened its second location in a nearby suburb but that nascent track record
hasn’t stopped malls from around the country from contacting the company about setting up in their retail center.
“We have been contacted by malls in the Midwest, by
multiple malls in New York and New Jersey and as far south
as Texas,” says co-founder Joe Henry.
The outreach is a testament to Zavazone’s interesting
concept—it is an indoor adventure park open to anyone
that wants to walk across its catwalks or bounce on its trampolines—but it is also illustrative of how eager malls are to
attract retailers that provide an experience to shoppers.
Yes, there is activity in retail—even by malls. For all the
woes that the sector has experienced this year, when all is
said and done US retailers will have opened some 4,100
more stores than they will have closed in 2017, according
to a recent report by TH Real Estate. Many will be along
the lines of what Zavazone represents: a unique experience
that cannot be replicated online.
But Zavazone tells an even larger story for the commercial real estate industry: it’s not just the beleaguered retail
asset class that is ready for a rebirth next year —almost all
of the CRE asset classes had a dismal 2017 when judged
against one very important metric: investment sales.
It is still open for debate how much of an improvement
2018 will be. Or if there will be much of an improvement at
all, for that matter. For the optimistic among us, though,
there is reason to hope.
A BUMPY START
Indisputably, the year started out as a disappointment.
There was the shadow of a new presidential administration
and concern that the maturing cycle might end on a not-so-gentle note. First-quarter investment sales reflected these
worries: transactions dropped by 18% year over year, according to National Association of Realtors figures. The quarter
also saw the beginnings of a pricing disconnect between
buyers and sellers, which still continues. New worries also
arose as the year wore on, such as policy decisions over
healthcare and now, tax reform.
These trends combined to create a lackluster first half.
Statistics from the Mortgage Bankers Association show that
apartment sales as of the end of the second quarter were
down 17% Y-O-Y, while office and retail saw respective
declines of 2% and 16%. Only the industrial asset class
posted growth, of 10%.
These numbers change, of course, depending on the
location. Washington, DC—Zavazone’s home town—is
having a good year, relatively speaking. There, local office
investment sales are on track to equal or even slightly