The Future of Retail Stores

May 18, 2017 | Steve Hable

An old-fashioned come in we're open sign.

We all buy goods from retailers, but do you shop more online or at physical retail stores? I bet the way you purchase goods and the types of goods you consume have changed through the years, too. In our ever-changing and growing economy it can be difficult to predict the future of retail stores and consumer behavior. One thing is still certain, American shoppers continue to purchase goods and acquire products and services.

As you travel around San Diego County, it is not unusual to see a “Store Closing” banner on a retail establishment. News outlets report about retail businesses that are having financial difficulties including the possible closing of popular brand name stores that have been around for generations. The culprit for the decline in retail stores is often reduced to Amazon and other online retailers. Before we declare the entire retail industry dead, let’s look at some data.

Reis, Inc., a public company that was established in 1980, provides data on commercial real estate throughout the country. In April, Reis issued a “white paper” study on the impact of chain store closures on the rents landlords could obtain for their retail space. Here are some of the facts within the Reis report:

  • San Diego was 8th in the country for retail store closings
  • Nationally, there were eight chain stores that accounted for over 28 million square feet of retail space. Most of these corporations left San Diego or reduced their number of stores. Familiar names that either disappeared or reduced their presence include:
    • Sports Authority
    • Macy’s
    • Kmart
    • Haggen’s
    • JC Penney
    • Sears
    • Golfsmith
  • The growth in retail rents in San Diego declined only by .3%

Another national data source, CoStar Group, states in their May 2017 report for San Diego that the vacancy rate for retail space is only 4.1% and the anticipated change in rents over the next 12-months is +2.00% because of increased demand for retail space, which leaves us asking, how can retail be dying?

There is no doubt that the internet is having an impact on some retailers. Many items can be easily ordered online and received the next day. Returning items to online retailers are usually not a problem either. However, the end of physical retail stores is not yet in sight. Retail “brick and mortar” sites will be around because:

  • Many businesses don’t work well with exclusive use of “online business:”
    • Restaurants
    • Hair salons
    • Auto parts stores
    • Hardware stores
  • Retailers adapt to shopping preferences:
    • Offer both retail sites and online buying
    • Offer pickup of online purchases
    • Offer self-checkout to speed up the process in stores
    • Upgrade their retail sites
    • Offer product demonstrations in-store
    • Be part of an entertainment/retail experience that includes theaters, night clubs and other retail outlets

Decades ago, people predicted the end of movie theaters because of the introduction of movies on tape, then DVD and cable/satellite dish. Theaters adapted with multiple screens, stadium seating and recently with delivery of food and beverages to your seat. The expansion of the internet was a primary argument why office buildings would become vacant because people would all work from home. New office buildings offer open interiors, workout facilities, cafeterias, coffee shops, hair salons and some even have day care facilities. Companies and property owners adapted to the changes demanded by the workforce. Most retailers will adapt to the changes and continue to thrive.

At Mission Fed, we have adapted to the changes as well. You can visit any of our 30 branches throughout San Diego County, but you can also manage your accounts, pay bills and more with Online Banking or download our Mobile Banking app to manage your accounts on your smart device. The future of shopping, banking and consumer needs is an exciting one, and Mission Federal Credit Union looks forward to providing you the tools, locations and products to help you succeed.

The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by Mission Federal Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by Mission Federal Credit Union.
Steve Hable

Steve Hable

Steve Hable is Mission Fed’s 1st VP Member Business Lending and has been in the real estate finance industry for over 30 years. His experience includes all facets of residential and commercial real estate finance, including loan origination, loan underwriting, servicing, secondary marketing (plus establishing private mortgage-backed securities on Wall Street), and property management of commercial properties.

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