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How Competitive Communities Should Respond to 2020’s Retail and Restaurant Trends

Competitive communities understand that retail recruitment strategies should never be stagnant; instead, the strategies should evolve to reflect current market forces.

Each year, Buxton publishes an analysis of the top trends influencing retail and restaurant real estate decisions. This blog post summarizes some of the top trends and – more importantly – shares their implications for communities seeking retail development.

Trend #1: Real Estate Market Fundamentals Remain Strong

Nationally, retail real estate vacancy rates remained virtually unchanged throughout 2019 – despite store closures. Retail rents continued to climb as a reflection of demand and the market for good real estate remains tight.

Competitive Community Response

Although national market for retail real estate is good, it is important to understand the dynamics in your local market. What type of real estate is available and what is its class? The answer may dictate how long it will take to fill vacancies. Know what your market has available, its specifications, and asking rates so you can be prepared to help retailers find the right property quickly.

Trend #2: The Retail and Restaurant Industries Have Experienced Net Gains in Store Counts

Store closures make headlines, but they don’t tell the full story. A study from IHL Group revealed that retailers and restaurants saw a net gain of 8,575 combined stores – after factoring in store closures – from 2017-2019. That said, the rate of growth is beginning to slow. After opening more than 21,000 locations in 2018, the industry was projected to open around 11,000 locations in 2019.

Competitive Community Response

Don’t be fooled by headlines. There are still opportunities to recruit retailers and restaurants. Slowing growth rates mean that this process will become increasingly competitive, so it is critical to make your case for development using thoughtful, unbiased data.

Trend #3: Local Based Entertainment Joins Experiential Retailing Trend

Experiential retailing has been an important retail trend for several years now. Recently, a new retail category has emerged that is an important part of this trend: local based entertainment (LBE) venues.

From indoor surfing, to escape rooms, to axe throwing, LBEs offer consumers unique entertainment options in traditional retail centers. Buxton Senior Vice President Tim White observes that LBE venues are being developed on a nearly daily basis.

Competitive Community Response

Have an aging shopping center with stubbornly high vacancy rates, or trying to drive traffic to a new development? Consider expanding your tenant search to include an LBE venue. The traffic generated by these venues can help support neighboring retail and restaurant locations.

Trend #4: Health and Wellness Meets Retail

The days of separating healthcare and retail developments are over. From clinics to fitness studios, healthcare is playing a bigger role in many shopping centers. Retail center owners view healthcare providers as highly desirable tenants, and healthcare providers like the convenient access to patients that retail centers offer. Need further proof? The International Council of Shopping Centers now features healthcare at its industry conferences.

Competitive Community Response

Many communities are eager to fill gaps in healthcare services, so this trend should be welcome news. Recruiting a healthcare provider to a retail center requires the same thoughtful approach as recruiting a retailer. Be prepared to present data on the healthcare demand and existing supply of providers in your area. If you are planning a new development, consider the role that healthcare could play in the tenant mix. 

To learn more about the trends shaping the retail and restaurant industries in 2020, download Buxton’s complete 2020 Retail and Restaurant Real Estate Outlook

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