Just How Much Retail Space Do We Need?
A new CBRE report, Five Forces Shaping the Future of Retail, declared that the U.S. faces a shortage of 200 million square feet of retail space. This represents about 5% of existing inventory. Put another way, 200 million square feet equates to 250 to 500 average regional malls. That’s based on ICSC’s classification of a regional mall as comprising 400,000 to 800,000 square feet of gross leasable area.
Annual retail construction completions for 2021 through 23 fell by more than 80% versus the mid-2000s, according to CBRE. Average availability of retail space dropped to 4.7% in the second quarter of 2024. That’s the lowest since CBRE began tracking availability in 2005.
CBRE measured how well retail inventory had kept pace with population growth and determined that Austin, Texas, faces the biggest shortage, followed by Orlando; Nashville, Tennessee; Seattle; and Charlotte, North Carolina.
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5 U.S. Markets Where Retail Real Estate Investment Is Poised to Outperform
Fashion Show Las Vegas
A new forecast from Altus Group pinpoints Las Vegas as the U.S. market best positioned to outpace typical retail real estate investment returns. Altus noted the Las Vegas area’s millions of shopping-minded visitors each year — visitors spent $51.5 billion there in 2023, according to the Las Vegas Convention and Visitors Authority — along with recent year-over-year increases in average retail rents, projected negative absorption of retail space through 2027, high per-square-foot values for retail properties and an influx of transplants from California.
Following Vegas on Altus’ ranking are Charleston, South Carolina; West Palm Beach, Florida; Phoenix; and Camden, New Jersey.
Altus’ scoring system accounted for asset values and net operating income, in addition to 20 quarters of index returns for privately owned investment properties published by the National Council of Real Estate Investment Fiduciaries. The Altus outlook encompassed an array of retail assets, including malls, big-box stores, specialty stores, grocery stores, restaurants, spas and convenience stores.
“Retail real estate has demonstrated remarkable resilience, fueled in part by limited construction following the Great Financial Crisis,” said Altus associate director of research Cole Perry. “The rightsizing of spaces and the shift to experiential retail have not only counteracted some of the impact of e-commerce but have also made it complementary, offering unique in-person experiences that online shopping cannot replicate.”
Tokyo, Bangkok and Seoul Top Asia-Pacific’s Innovative Retail Markets
The Nakamise Street shopping corridor near Tokyo’s Sensoji Temple
Tokyo, Bangkok and Seoul, South Korea, rank among the most vibrant cities in the Asia-Pacific region, so it makes sense that these three metropolises would lead CBRE’s first-ever Asia Pacific Retail Innovation Index. The trio “are at the forefront of retail innovation, driven by their dynamic domestic retail ecosystems, diverse tourism markets and vibrant cultural and entertainment offerings,” according to CBRE. The index rated cities based on market size, consumer demographics, retailers’ growth strategies and retail spaces “that tell a story.”
CBRE added that emerging markets like Bengaluru, India; Shenzhen, China; Brisbane, Australia; and Ho Chi Minh City, Vietnam, “show significant potential for retail growth. These cities, supported by robust population growth and consumer expenditure, present promising opportunities for new retail concepts and strategies.” CBRE head of Asia-Pacific retail Vivek Kaul said: “With brick-and-mortar retail continuing to play a pivotal role in our shopping journey, innovation is the key to success. Vibrant retail hubs, characterized by diverse leasing demands, serve as catalysts for fostering innovation and collaboration.”
Simon Reported a 5.9% Spike in Black Friday Foot Traffic
If Black Friday results for one of the country’s largest retail landlords are an accurate barometer, one of the busiest shopping days of the holiday season made a lot of U.S. retailers jollier. Simon reported Tuesday that foot traffic grew 5.9% year over year on Black Friday, 6.3% on Saturday and 8.2% on Sunday.
“On Black Friday and throughout the weekend, we saw even more evidence of what we already knew: Malls are thriving,” said Simon president and CEO David Simon. “Popular brands throughout our portfolio reported double-digit sales increases over the weekend compared to last year. Coast to coast, we saw lines prior to opening and throughout the day at many of our centers across the country.”
$160 Billion of Holiday Sales Will Be Returned
The folks handling returns at brick-and-mortar retailers may be busier post-holiday than Santa’s elves have been leading up to Christmas Eve. A new report from CBRE and returns-technology provider Optoro forecast 16%, or $160 billion, of holiday sales will be returned this holiday shopping season. In-person returns are expected to make up a big chunk of this activity.
“Physical stores are no longer just sales hubs; they are becoming essential for efficient returns management,” said CBRE vice president of global industrial and retail research James Breeze. “Leveraging in-store returns will be a game changer for retailers looking to lower shipping and warehousing costs, enhance customer satisfaction and drive foot traffic for additional sales opportunities.” In fact, the report indicated that many retailers are equipping stores with dedicated return sections that lure gift-returning customers into the merchandise-laden middle or back of a store.
Costco, Walmart and Amazon Alone Gobbled Up 46% of Retail Growth in Q3
Two brick-and-mortar retailers and one e-commerce giant are dominating growth in U.S. retail sales. WWD reported on the latest Retail Funnel market share report from Morgan Stanley, noting eye-opening findings by stock analysts Simeon Gutman and Brian Nowak. The analysts discovered that in the third quarter, Costco, Walmart and Amazon accounted for about 46% of all incremental retail sales, which are sales attributed to marketing campaigns or sales promotions. “That means that 46 cents of every dollar of retail growth in the U.S. went to one of those three companies,” WWD reported.
Amazon represented 24% of incremental sales growth in the third quarter, followed by Walmart at 12.2% and Costco at 9.8%, according to WWD’s reporting on the study. Walmart’s growth has been so robust, in fact, that the retailer recently lifted its projection for fiscal year 2025 net sales from a range of 3.75% to 4.75% to a range of 4.8% to 5.1%. Walmart’s 2025 fiscal year ends Jan. 31, 2025.
Colliers Engineering & Design Will Acquire Architecture Firm MG2
From left to right are MG2 president Russ Hazzard, Colliers Engineering & Design president and CEO Kevin Haney and MG2 CEO Mitch Smith.
Engineering, architecture, design and consulting firm Colliers Engineering & Design — based in Holmdel, New Jersey — will expand its West Coast presence, having just agreed to acquire MG2. The commercial architecture, interior design and branding firm launched in 1971 and has 400 employees across seven offices: its Seattle headquarters; Portland, Oregon; Irvine, California; Minneapolis; Washington, D.C.; New York City; and Shanghai.
Colliers Engineering & Design was born when the larger commercial real estate services firm Colliers acquired a controlling interest in Maser Consulting and its 34 offices in 2020 to diversify its revenue base. Colliers Engineering & Design now has more than 75 offices in the U.S. It will provide MG2 expertise in building systems, structural engineering, site development, civil engineering and construction management.
MG2 CEO Mitch Smith and president Russ Hazzard will hold executive positions within Colliers Engineering & Design, and MG2 will rebrand as Colliers Engineering & Design in 2025.
New Execs at CBRE Investment Management and The Inland Real Estate Group
Adam Gallistel and Andy Glanzman will become co-CEOs of CBRE Investment Management, focusing on investment strategy and investor engagement. Gallistel also will serve as chief investment officer, and Glanzman also will continue as president. They’ll co-chair CBRE Investment Management’s executive committee. Gallistel will join CBRE on April 1 from Singapore sovereign wealth fund GIC, where he heads Americas real estate and global real estate credit. Glanzman joined CBRE Investment Management in 2010 and became president in January 2022.
The Inland Real Estate Group LLC promoted Joseph Binder to chief investment officer to manage investment strategy, capital markets and “related strategic transactions.” He will continue as executive vice president of Inland Private Capital Corp. and chief capital officer of IPC Alternative Real Estate Income Trust, and his 10-person team also will elevate to The Inland Real Estate Group level. Binder has worked for Inland for more than 16 years and has been a senior member of the IPC management team since 2012.
The Inland Real Estate Group LLC promoted Joseph Binder to the newly created role of chief investment officer.
—Additional reporting by Commerce + Communities Today editor-in-chief Amanda Metcalf
By John Egan
Contributor, Commerce + Communities Today