Raub Report: This New Trend is Changing Retail

November 27, 2019

The Happy Holiday Season is upon us and it is time for Black Friday retail shopping and the rush to get all of the great and popular gifts for Christmas.  So let’s look at retail commercial real estate, because when you read the press, you would think that Black Friday’s meaning is really the death of the shopping center.  But wait! San Antonio retail sales are actually up about 5% in 2019.

Retail center leasing is doing exceptionally well, actually, with 94.7% of the available space occupied, and a year ago occupancy reached 96%, which are very high rates!  For example, out of the buildings IRC has in our management portfolio, 7 buildings are 100% occupied at this time.  Accordingly, rent rates are at an all-time high, too.  Then, there is 1.6-million sq. ft. of newly built space being delivered to the market so far this year, and 76.4% of that is pre-leased, according to NAI Partners.  So leasing is strong and new construction is not over-built.

Here’s a new acronym for you – BOPUS. That means, “Buy on line, pickup in store.”  This is the newest trend in retail, allowing shoppers the freedom and convenience of browsing the dozens of choices they have on their phones or laptops, when looking for a particular item, and purchasing it for the best price.  Then, you get in your car and zoom over to the store to pick it up and not have to spend time in the store shopping. And if you don’t like it, you can return it in the store, without the hassle of shipping returns.  It saves time, cuts down on shipping costs and materials and since they got you to their store, you might just find something else to buy!  Win-Win!

Well, as you may have gathered the retail apocalypse is more hype than reality.  In fact, International Council of Shopping Centers calculates that for every store that closes, five new ones open! Over 8,500 stores have opened in the past year alone.   Of course, the closures of high profile brands catch your attention, like Payless Shoes, Mattress Firm, The Gap, Sears and Toys R Us.  But one store’s demise is another’s opportunity.  Economists call this Creative Destruction, where the fittest survive and the least competitive fail, but only to be replaced by new, innovative brands from bright, hardworking entrepreneurs, seeking to succeed by satisfying (sometimes fickle) market demands.  Go Capitalism Go!

Sears closes its old Central Park Mall location and it is replaced by several stores; Toys R Us closes on Blanco at Loop 410 and becomes LA Fitness.  Windsor Park Mall becomes the HQ for high tech maven, Rackspace.  HEB buys and converts McCreless Mall and Westlakes Mall to Super Groceries. Good locations remain good, and then are put to better use when one retail brand fails and another succeeds. AND, the consumer, you and me, win, because we get better quality, better service, better prices and more convenience.  It’s a great country!  And don’t forget at this time for giving thanks – God Blessed Texas!

We have 4.7% GDP in Texas, while the rest of the U.S. is at 2% and declining, and the rest of the world is at 1% down to negative growth.   Fun Fact: If Texas was a separate country we would be the fourth largest oil and gas producer behind the rest of the U.S.A., Saudi Arabia, and Russia. The Republic of Texas?