Amy Regal, Director
GRS | Title
(216) 571-7013
[email protected]
Retail real estate hasn’t garnered the most positive attention compared to other commercial real estate sectors, but many of its fundamentals are in good shape despite the negative attention.
Trepp recently released a report pointing to many positive metric trends happening in retail. The research firm found that NOI at retail real estate properties has been on the upswing, despite news of mass store closures by the likes of department-store chain Bon-Ton and Toys “R” Us. Though NOI growth is slow, it’s still positive, rising 1.15 percent in both 2016 and 2017.
Meanwhile, occupancy rates are near pre-recession levels. CMBS retail properties clocked in with a 94.3-percent rate, and they have risen steadily over the last few years despite store closures, up from 92 percent in 2008. All commercial real estate properties combined that are tracked by Trepp, by contrast, had an occupancy rate of 90.3 percent last year.
By region, the Pacific had the highest NOI growth rate last year, at 2.48 percent, due to the strength of the technology and tourism industries. Second place was the Central Southwest, which includes Arkansas, Louisiana, Ohio, and Texas, at 1.84 percent, followed by the Middle Atlantic, which fell 0.31 percent. By MSA, the top five in growth year over year, in order, were Miami, Boston, Phoenix, San Diego, and Riverside County, Calif.
Trepp sees more retail growth on the horizon. It says that the retailers who make the most innovations in technology will be able to succeed in both the e-commerce and brick-and-mortar spaces. The firm is also hopeful that new concepts will fill the spaces left by vacancies, and retailers are “right-sizing” their spaces, so they aren’t too large, as well as tempering over expansion.
On a lighter note, earlier this summer the Robin Report had an entertaining feature on some of the biggest retail chains and how they are performing, comparing them to the looks of famous actors.
The winner, compared to Brad Pitt, was Amazon. It does warn that the tech giant’s foray into physical stores won’t be as easy of a transition as its online success. Second was Starbucks, compared to the love child of Pitt and George Clooney, which the report says, “has the best omnichannel experience in the industry right now,” due in part to its successful mobile app.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.