Retail space is commercial real estate property where goods and services are sold directly to buyers in person, who are purchasing for their own use. These brick-and-mortar storefronts including strip malls, shopping centers, community retail centers, power centers, shopping malls and out parcels. Properties may be operated with a single tenant or multiple tenants who typically lease space from the property’s owner.
These small retail properties include a mix of tenants in different retail businesses such as gift shops, salons and dry cleaners, which may or may not include an anchor tenant.
Normally 150,000 to 350,000 square feet, community retail centers often feature multiple anchor tenants such as grocery stores, drug stores and restaurants.
These larger retail centers typically have several smaller, inline retail store tenants with a few major box retailers. Each big box retailer occupies 30,000 to 50,000 square feet. Power centers often include several out parcels as well.
Traditional regional malls offer 400,000 to 2 million square feet of space with multiple anchor tenants such as department stories and major retailers.
Large retail centers often include multiple out parcels, which are retail properties allotted for individual tenants such as restaurants or banks.
Much like office space, retail space can also be classified in three tiers:
Class A properties offer high-end construction, quality interior detailing, sought-after design, sustainability measures and top of the line mechanical and sprinkler systems. They often have existing high-end tenants and may offer desirable amenities, such as valet parking and on-site services.
Class B properties are one step down and may be slightly older or in a less attractive location, yet they are still well-maintained, have quality tenants and good access. These properties are often a good investment and can increase in value with upgrades and repairs to become Class A.
Class C properties are in less desirable locations, have few amenities and a more dated appearance. With upgrades and maintenance, these properties can sometimes move up to Class B.
To compete in the retail space, investors need a nuanced understanding of consumer demand and how that
impacts the needs of tenants. Coldwell Banker Commercial® affiliated
professionals who specialize in retail can help owners maximize the value of their property prior sale
through recommended upgrades, rehabilitation, market repositioning and helping secure anchor tenants. Our
skilled CBC affiliated professional can assist buyers with aligning their business strategies.
Whether you are looking for retail space to purchase, lease or sell, our knowledgeable professionals can help find you the right retail space for your needs.
Look to the Coldwell Banker Commercial network to assist with all your retail real estate needs. Our services include:
Acquisitions – CBC affiliated professionals can assist you with research, due diligence, lease and purchase.
Demographic Overviews – Our experienced CBC affiliated professionals can help you understand where your customer lives, their preferences and lifestyle characteristics, what paths customers take to the store and where they visit before and after the retail site.
Market Analysis – We can identify underperforming markets, analyze market potential, and find and rank potential locations for your retail real estate investment.
Void Analysis – Your CBC affiliated professional may identify gaps in specific businesses and services in one area compared to a similar area.
Competitive analysis – Our CBC affiliated professionals may map potential store locations, evaluate the competitive environment of each site, determine the site’s market share, and identify if new trade areas overlap with existing locations.
Landlord representation - We can help property owners and investors attract and retain ideal tenants while boosting investment value through our access to the leading online database of currently expanding retailers.
Stay informed with the latest commercial real estate market reports,
trends and industry news from Coldwell Banker Commercial.
Retailers in the United States are defying historic lows in retail space availability by planning to launch 1,000 new stores this year, underscoring the sector's resilience amid commercial real estate challenges. Despite factors like inflation, elevated interest rates, and the closure of businesses such as Bed Bath & Beyond and Christmas Tree Shops, landlords are reporting unwavering demand for retail spaces, highlighted by The Wall Street Journal. This resilience can be attributed to the reduced retail construction since the 2008-09 financial crisis, allowing the oversaturated sector to absorb its existing real estate. Moreover, retailers are using online sales data and analytics to pinpoint ideal locations for successful stores. Contrary to predictions of online retail dominance, digital-native companies are now establishing physical storefronts after reaching their online customer acquisition limits. Shoppers are returning to stores and restaurants as pandemic restrictions ease, alleviating earlier concerns. Additionally, Commerce Department data from earlier this summer reveals that retail sales increased by a seasonally adjusted 0.7% in July compared to the prior month. American spending has risen for four consecutive months and seems to be outpacing inflation.This retail revival stands in stark contrast to the office market, which is grappling with a 30-year high in office vacancy rates of 18.2%, primarily due to the rise of hybrid work schedules. A whitepaper by Placer.ai highlights the success of Walmart, Target, and Costco amid economic challenges such as inflation and high gas prices. Despite the evolving retail landscape, these retailers serve as prime examples of how challenges can transform into opportunities. Placer.ai's Q2 2023 data suggests that shifting consumer trends are favoring superstores.In fact, both Costco and Target outperformed the broader retail sector in year-over-year (YoY) performance, with visit growth rates of 1.2% and 3.1% in the first half of 2023, compared to the overall retail sector's 0.3% decline. Conversely, Walmart seemed to be more affected by inflation, possibly due to its visitors having a lower median household income compared to Costco and Target shoppers, experiencing a 0.9% decrease in foot traffic compared to H1 2022. However, recent weekly visit data indicates a potential Walmart rebound. Between June 19th and July 24th, the chain recorded year-over-year weekly visit growth, suggesting a positive trajectory and hinting at year-over-year growth in the second half of the year.For commercial real estate investors, staying attuned to retail trends is of paramount importance. The ability to anticipate and respond to these trends can make the difference between a successful investment and a poor decision. Understanding which retailers are thriving and why, as well as grasping the nuances of changing consumer behavior, can inform strategic decisions regarding property acquisitions, leases, and developments. Incorporating these insights into investment strategies can help commercial real estate investors identify prime locations, optimize property portfolios, and ultimately maximize returns on their investments.
The Real Estate Round Table recently released its 2023 Q1 Sentiment Survey, a comprehensive measure of industry experts’ confidence and expectations regarding the commercial real estate environment. As we’ve observed throughout the first quarter of 2023, the real estate market has been uncertain and incredibly volatile due to the historic increases in short-term interest rates and soaring inflation.
While the past few years have seen brick-and-mortar retailers embrace big-box stores with large footprints, a recent study from placer.ai found that smaller stores come with their own set of benefits. A growing number of tenants are experimenting with reduced footprints in a variety of ways.
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