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National Association of REALTORS takes a look at ten retail trends to watch in the upcoming year.

1. The Internet’s True Impact on Retail Sales

Without question, ecommerce retail sales are growing. However, they still remain a small portion of total retail sales. In 3Q13, ecommerce sales totaled $67 billion,  which represents less than 6 percent of all retail sales, according to the U.S. Census retail trade report.
2. Online Media Sales
Books, music, video, and other items that can be digitized and downloaded comprise about 35 percent of Amazon’s sales. Applying this metric to the entirety of ecommerce means that Internet sale of items that cannot be digitized and downloaded is about 3.7 percent. If 3D printing of merchandise becomes possible, the world as we know it will change.
3. Retail’s Efficient Logistics Model
Efficiency in logistics has revolutionized retail. For example,  Walmart’s execution of efficiency and their cross-docking model has helped them to emerge as the largest retailer in the world. The “last mile in the chain of distribution” is actually outsourced to the customer.  A customer comes into the store, selects merchandise, carries the merchandise to the car, and then transports the merchandise the “last mile” from the store to home.
The cost of the final mile is not included in the retail price of the merchandise. On the contrary, delivering merchandise to the customer’s home is a costly and inefficient endeavor. One major Internet retailer spends more than double to deliver than the amount it collects for shipping. Hence, the practical application of the “last mile” principle means that ecommerce is likely to have 100 percent market share of items that can be digitized and may never even reach 10 percent market share of items that cannot be digitized.
4. The Internet’s Other Impact
Online sales are not only impacting the retail sector, but the Internet is creating more informed consumers. Well-educated shoppers are causing pressure on retail margins, which translates into pressure by tenants to lower rent.
5. More Sales, Less Space
The wide range of available technology offers retailers more efficient inventory control and space needs. Tey are applying the 80/20 rule – 20 percent of their SKUs generate most of their sales and gross margin. The result: Retailers can generate more sales per square foot in less space causing store formats to shrink.
6. Bigger Players Dominate
The supermarket sector is being consumed by dominant players with larger stores.
7. National Anchors
In large shopping centers, national credit-tenant anchors are winning out over same-category regional and local tenants.
8. Big-Box Woes
Large vacant boxes are becoming increasingly more difficult to re-tenant.
9. Exclusive Use
Second-generation retail space is being increasingly impacted by exclusive-use lease provisions.
10. Service Tenants Triumph
Landlords are making greater use of service tenants to maintain occupancy. A recent study revealed that service tenants comprised less than 15 percent of total occupancy 10 years ago versus more than 25 percent today.
By: Gary Ralston, CCIM, CPM, SIOR (National Association of REALTORS)
Click here to view source article.

The sharp rise in e-tailing and its game-changing impact has created a new normal in the retail real estate sector. Major national retailers are evolving their strategies in an effort to “survive and thrive” in this new market dynamic. Looking beyond  the e-tail era, what factors are shaping retail’s next phase?
“The good news is that even though Apple, Netflix,  Amazon, eBay, and other online giants killed record stores and video rental shops and are in the process of doing the same to electronics and bookstore big boxes, e-commerce will never replace the brick-and-mortar shopping experience,” says Sean Glickman, CCIM, managing director of Glickman Retail Group in Maitland, Fla.
Research shows and many retail industry experts agree that consumers are settling into a preference for a “blended” shopping experience. In a recent Forrester Research survey, shoppers said visiting a store served as the most important source of product research before purchasing in every major consumer category except travel.
“This research speaks to the need for retailers to focus their technology efforts inside the store,” said Dan Seliger, digital strategist for 3GTV Networks, in a recent Brick Meets Click blog post. “We have to stop thinking of the Internet as something tethered to a home computer or a shopper’s smartphone. The goal should be a borderless communication continuum where every channel is connected. … Smart retailers can use this approach to help overcome the inherent limitations of brick and mortar while offering shoppers a blended in-store experience built around their needs.”
The impact of retailers’ exploration of the online environment is creating new and oftentimes challenging realities for their real estate footprints. From big boxes to inline neighborhood centers, retail real estate – and those who advise retailers and tenants on their space decisions – must evolve to ensure spaces meet both retailers’ and consumers’ rapidly changing needs.
A variety of retail experts weighed in on key questions facing the industry in the current market. These CCIM designees include Glickman; Shawn Massey, CCIM, partner, The Shopping Center Group in Memphis, Tenn.; Francis Rentz, CCIM, managing director/senior adviser, Southland Commercial Advisors in Tallahassee, Fla.; and Jeff Yetter, CCIM, LEED AP, director of real estate, Express Oil Change & Service Center in Greensboro, N.C., and a member of the North Carolina CCIM Chapter board of directors.

Aside from e-tailing’s ripple effects, what are some of the biggest challenges facing the retail real estate sector right now?

Glickman: The unpredictable economy, consumer confidence, and increased taxes that are cutting into consumers’ disposable income are some of the biggest issues.
Yetter: The continually changing, idealistic development regulations imposed by the local municipalities are our biggest issues. Express Oil’s business is typically driven by an initial impulse buy, and the local municipalities’ trend of limiting access and visibility directly affects our ability to conduct business.
Rentz: Investors with B and C class shopping centers or a weak anchor on the decline must find reuse ten-ants to fill vacant spaces. This typically means non-retail, nontraditional retail, or service tenants, which often translates into lower rent or greater capital in-vestment to reshape the property.
Massey: The lack of good quality retail space availability is the biggest challenge. With the lack of new development since 2008, we find our clients in search of space that is simply not built today.

What factors are influencing retailers’ site selection and acquisitions decisions in this environment?

Yetter: We have seen a major increase in competition from a pad-site buyer standpoint. This has produced a scarcity of viable sites and driven up pricing in our larger markets. This is due in large part to the resurgence of quick-service restaurants, bank branches, and similar out-parcel retailers. This is also a result of the lack of new developments being delivered as compared to the pre-economic downturn conditions.
Massey: Most retailers are very risk adverse right now — entering areas where they can avoid unfavorable zoning or adverse site conditions is critical. Retailers are becoming ever-more data driven as well. They are performing extensive research to get a clear picture of the factors shaping an area’s retail environment, including demographic, socioeconomic, and psycho-graphic profiles, the workplace population, and consumer spending patterns.
Rentz: My clients are looking for quality real estate  with no weaknesses. It is more important than ever that the site has all the fundamentals that make for a successful retail site: visibility, accessibility, parking, and favorable demographics. A solid anchor tenant may get a project built, but a great location and greater design will be even more important going forward to sustain a project. As Yaromir Steiner said in a recent Shopping Centers Today article, “The place is the an-chor.”

What’s next on the horizon for the retail real estate sector?

Rentz: Retailers will continue to reduce their square footage into smaller, more efficient footprints. Traditional retailers will continue to perfect and grow their online presence, while the e-tailers will attempt to fine tune their brick-and-mortar locations to perfect a one-day delivery strategy. The survivors and thrivers  will have a great geographic footprint of stores as well as offer a great online experience.
Yetter: Customer first service is the key. The auto services industry has traditionally focused on upselling customers, thus creating a lack of trust among consumers. We are focused on combating that perception by delivering the highest level of service and focusing on the individual customer’s car needs. As in most industries, the level of service and the customer experience continue to become more important as customers evaluate their growing purchase options.
Massey: It is all about the customer experience. Many retailers and restaurants fail to recognize that the customer’s needs and wants come first. The retail customer today wants it all from omni-channel retailing to being wowed with their in-store experience. This might be classified as the “Apple effect” that many retailers are trying to replicate. Those who do not adopt these two pillars in the future will disappear from the retail landscape.
Glickman: Most retailers are shifting focus and heavily investing in their omni-channel platforms, information technology, logistics, and same- or next-day de-livery. By doing so, retailers like Target, Macy’s, Nordstrom, Walgreens, The Gap, Office Max/Office Depot,  Walmart, and many others are positioning themselves to compete in the digital world.
By: Jennifer Norbut, CCIM Institute (National Association of REALTORS)
Click here to view source article.

Thanks to all of the brokers, sponsors and guests who attended the March CCIM Deal Making Session.  Nearly 10 million dollars of commercial real estate properties available for sale were presented from all over New Mexico.