Consolidation in the retail industry was as pronounced as ever over the last 12 months.
The latest mega deal that we’re absorbing is the proposed sale of 865 Rite Aid pharmacies by Walgreens Boots Alliance to Fred’s Inc. for $950 million. This is part of a larger acquisition by Walgreens of Rite Aid that is set to close in 2017. This follows CVS’ purchase of 1,600 pharmacies within Target stores.
Meanwhile, grocery retail has been in the acquisition mode for several years now, and department stores were doing the same just after the turn of the decade.
This means there is still investor interest in the retail real estate market, concerning some key tenants, despite what was a shaky holiday season. It certainly wasn’t all bad news, though, Gap had a bounce back in sales that was sorely needed for its three major retail chains. Ulta, Best Buy and TJX Cos. all reportedly performed well, too.
On the other hand, some major chains are having serious problems. Macy’s is having some major store closings and cutbacks, and overall brick-and-mortar retail sales were said to decline by 10 percent.
Obviously, much of the holiday shopping season was taken up by the results of Amazon, which outperformed several of its peers with physical stores. (And this is not bad news for commercial real estate owners of warehouses and distribution centers.)
At the same time, Amazon is opening its own retail real estate locations. So, the supposed culprit of hurting brick-and-mortar retail might not be such a nightmare that several propose are destroying retail CRE.
Experiential retail is making its mark on the brick-and-mortar scene. Cabela’s and Bass Pro are great examples of that, despite what invested consumers into those brands might think of the two companies’ merger. Apple’s stores, as well as restaurants, and other types of establishments, are performing well, and that is helping many retail real estate locations.
Speaking of location, that’s what real estate is all about. Right?
Well-chosen store locations, which are tenanted by stores adored consumers will always be important. And there is very little doubt that people in several states will want to buy their own groceries or luxury items in person.
Though the world might change rapidly, there is little reason to think that brick-and-mortar retail will be demolished any time soon. The money that investors are putting out to buy and open new chains is decent evidence.