“The Reports of My Death are Greatly Exaggerated…”

5/30/2018 | Articles & Alerts, Real Estate Transactional

                 Several quotes come to mind when summing up the current state of the retail business – “bend but don’t break”, “down but not out” and “The Reports of My Death are Greatly Exaggerated”.   Despite the widely held panic that Amazon and its online comrades have sounded the death knell for the traditional shopping center, the current reality is that retail is very much alive, albeit different and evolving.

               I have spoken to dozens of brokers and developers, and I personally represent many of the retail developers in our area, and everyone is busy.  From my perspective – and you can find countless viewpoints by simply doing a quick Google search – there are several reasons that retail is weathering the online storm.

               One big reason shopping centers have not folded the tent is that some products simply do not sell online.  Although Amazon recently purchased Whole Foods and other supermarkets sell all types of groceries online, it seems that the American consumer is not yet comfortable with buying food on the internet (at least not fresh food, such as meats and produce).  This could, of course, change as online retailers hone their skills, but for now grocers are still anchoring shopping centers, particularly as many shoppers seek healthier alternatives.   Also, although apparel is readily available online, the consumer still needs to try on clothes, so all types of clothing stores, particularly discounters, are filling empty shopping center space.

               Another explanation for the resiliency of the retail sector is that retailers are learning to adopt.  This does not come without some pain, as retailers are shrinking their footprint and getting more selective, but tenants are learning that shopping can be an experience, which attracts customers to the store.  In addition, some purely online retailers are opening brick and mortar locations to complement their online presence. 

               Shopping center owners and developers also play a part in propping up the industry.  Many tenants that were formerly taboo for shopping centers are now welcome participants.  Health clubs, entertainments uses, medical uses, car dealers, movie theaters, and a host of other users are now commonplace in shopping centers, whereas these uses were formerly last resorts. More traditional “retailers” have contributed to this turn around by agreeing to be flexible and waiving prohibited use restrictions that would otherwise block these uses.  In this regard, it is important for the lawyer to make sure that the lease gives the landlord as much leeway as possible to allow space in the shopping center to accommodate these new users.

               Lastly, municipal planning appears to be playing a part in keeping retail alive.  With the economy revving back up, the residential market is much improved.  Home buyers like convenience, and municipalities have an affinity for mixed use development.   Many of the new residential projects we see involve multi-family on top of retail, or houses and townhouses coupled with a retail/commercial component.  Municipalities seems to like increasing the tax base while not over-crowding the schools.

               Retail is certainly in a transition, but do not bury the shopping center quite yet.  The participants in the business are creative, smart and have a will to survive, so use whatever saying you want, but the conclusion should be that although video killed the radio star (sorry, couldn’t help myself), online has not yet squashed the shopping center.

If you would like additional information, please feel free to contact Jeffrey L. Silberman, Esquire (610) 941-2518 or jsilberman@kaplaw.com.For more information.

Related Practices: Real Estate Transactional