As we finish out the year, here are a few of the most talked about topics shaping the retail investment industry.
1. Investors Bullish on Service Focused Retail
A buzzword in the industry is “e-commerce resistant” investments. Strip retail investments containing service related tenants and net lease investments (especially quick service restaurants) continue to perform well.
2. Retailers Seek to Differentiate with Convenience
Grocery/drug partnership — Kroger and Walgreens recently announced a new pilot program that combines retail grocery with pharmacy, health, and beauty. The format aims to be a one-stop shopping experience with customers ordering Kroger grocery items online and picking up their orders at a participating Walgreens. On the flip side, Walgreens stores will also carry a selection of Kroger private label products.
Pickup Locations — Retailers are offering more pickup options for consumers ordering online. Walmart is testing a pickup-only store format in Chicago. The company is also running a one-of-a-kind test where self-driving vehicles take shoppers to and from its Chandler, Arizona store to collect their online orders.
Delivery Expanding — To compete with Amazon, retailers realize they need to speed up the delivery of online orders — especially because web purchases are often the fastest-growing part of a chain’s business. This is true for Home Depot, which recently announced that it will offer home delivery of over 20,000 products starting at $8.99.
Medical/Retail Synergy — Healthcare providers can offer a captive audience and a chance to reinvigorate old store formats. As owners experience tenants seeking to shrink their store footprints, medical uses have proven to be an attractive replacement.
3. Failing Formats
Bankruptcies and store closings will continue. Internet sales continue to grow at 15% year over year as brick and mortar sales decline. Large footprint retailers and retailers with product lines that can be easily purchased online are at risk. Last year, a total of 50 major store chains, including icons like Toys R Us and Payless Shoes, filed for bankruptcy.
4. Interest Rates
After years of speculation and predictions of higher interest rates, 2018 has brought about a significant change in interest rates and lending standards. Last week the Fed raised its benchmark interest rate by a quarter percent to a range between two and 2.25 percent, marking the Fed’s third interest rate hike this year.