What does the future hold for retail shopping centers in Snohomish County?
Vacancy rates in grocery-anchored retail strip centers have reached 10 percent nation-wide. Somewhat immune from recessions because they sell necessities, this recession seems to be too big and too broad for them to dodge the bullet.
These centers are joining the rest of the retail sector, reaching vacancy rates in the lower to mid-teens as we step into the Fall of 2009.
Of new centers coming on line, about two-fifths are suffering with vacancy rates of at least 50 percent, reports The Kiplinger Letter, an economic forecasting publication. The double whammy of consumers pulling spending in tighter and nearly 10 percent unemployment in many areas is to blame.
The question is, will it last?
When recovery comes, will we go back to our old spending ways and see retail properties fill up again? And if so, will they fill up with the same kind of retail stores or will we shop differently?
Prevailing thinking in retail and shopping center circles is that the retail sector will be forever changed from this recession.
High unemployment, over-segmentation, and a new culture of saving more of what we earn will force a shift in how retail centers are built, where they are built, and how they are configured.
One emerging theory in the future of retail centers is that many — particularly in suburban middle or lower class income areas — will be the place solely of food staples and necessities.
Most of those centers today are located in neighborhoods or on busy streets. The businesses that occupy them rely on convenience to attract customers. Convenience will be even more of a premium attraction in the more frugal America that emerges from the impact of America’s current recession.
Another theory is that a boom in family-owned and operated businesses might likely emerge from this recession and the nature of what these businesses do will shape retail centers.
Big box stores that have been vacant for a long time become right-priced locations for churches, repair shops, thrift shops, and the like — businesses not already dominated by national franchises, local businesses that emerge out of necessity and demand when times are tough.
Other trends also will impact retail, of course.
Already, the marketing of DVD movies and video games has shifted from the racks and kiosks at local retail stores to stand-alone kiosks in retail centers to on-demand cable systems at home or Web-based online movie libraries.
These trends will continue to alter an industry sector that previously relied on well-located retail centers with ample parking in order to survive and grow.
Retail properties operate like no other sector. At their core, they survive on the spending patterns of consumers who can often be fickle and change their buying habits rapidly.
Building the right retail center for tomorrow’s consumers is a difficult guess right now. Fickle or not, it’s likely the current American consumer will be the key to building successful new shopping centers.
Yet, those in today’s 25 to 45-year-old demographic might not spend at nearly the pace they spent leading into the current recession ever again.
And what they spend their money on will be forever changed as the memory of the current recession lingers for them — like the Great Depression and World War II rationing did for the two generations prior.
Tom Hoban is co-owner of the Everett-based Coast group of commercial real estate companies, specializing in commercial real estate management, sales, leasing and investment. He can be reached at tomhoban@coastmgt.com, 425-339-3638 or www.coastsvn.com.
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