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Retail Space Demand Stays Strong As Consumer Behaviors Change

Retail real estate isn’t caving anytime soon.

Even though store sales are sluggish, restaurants are experiencing slower foot traffic and high-end malls aren’t gaining new tenants, demand for retail space is still in full swing amid evolving consumer habits, National Real Estate Investor reported.

Apparel chains in particular are trying to stay afloat in today’s uncertain retail scene as brick-and-mortar continues to fall prey to e-commerce. As consumers increasingly favor digital over physical, it may be a challenge for mall landlords to rely on restaurants as second tenants.

This is quite the contrary, however, for retail space demand. According to RBC Capital, planned store openings remain strong as a long-term trend. Although tenant sales at class-A malls decreased by the end of first quarter 2016, class-B malls held a steady sales growth of 7 percent during the third quarter of 2015 and first quarter 2016.

Although consumers today are spending less on dining and in-store purchases, it is important to note why their shopping habits have changed.

As RBC notes, the rising cost of living may be to blame for missing consumers. Due to healthcare and rent expenses increasing each year, consumers are tightening up their budgets and cutting corners on “luxuries” like dining out and buying pricey clothing.

There is an exception to this consumer mindset.

If retailers are able to create a seamless, engaging experience with consumers, they’ll be more likely to keep sales up and bankruptcy at bay. In-store pick up or hosting events can also aid retailers in achieving in-store and online success.

Perhaps it will be up to retail real estate to understand this concept as it continues to have a good turnout in upcoming years.