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Retail Property For Sale

Retail Space For Lease


The Retail Market

Retail has been nothing if not exciting over the last five years as the industry has undergone significant transformation. What has often been lost in this process has been that the industry is in pretty good shape. National retail vacancy is around 4.7 percent (CoStar) or 6.1 percent (Cushman) depending on the source and has been relatively stable despite the well-publicized closings (and, obviously) the not so well publicized openings. Per the National Retail Federation, retail sales have grown an average of 4 percent per year since 2010. Locally, our survey bears out the same trends albeit at a slightly higher vacancy. The market ended the year with an 8.7 percent vacancy, an improvement from 9.8 percent a year ago as some of our big box vacancies have been filled and some new pre-leased space has been added to the market.  

This retail transformation and change will continue but there is some clarity on the direction of the market which should help both retailers and retail real estate. We might as well start with internet sales which now account for around 10 percent of all sales; growth is still double digits but the rate of growth has slowed. The more exciting news is the dynamics between digital sales and physical stores. Retailers continue to figure out the right mix of internet sales, store size, distribution, etc. Nine of the top ten internet retailers now have physical stores which they’ve learned help their sales. This optimization will continue to be refined.

Our favorite trend in retail right now is a return to best practices – focusing on customer service, store layout and in-store marketing; supply-chain and inventory management.   One of the positives of the disruption of the past few years has been the swing of power back to the consumer. This is part of the experiential model you hear so much about, making the shopping experience meaningful to the consumer. Another industry focus has been discounters and value-oriented retailers.   Discounters have performed well over the last ten years and these retailers are driving much of the current sales growth. This has been fueled by both changing demographics and shopping patterns of younger shoppers in particular. Fitness, health and non-traditional uses are seeing an increased presence in retail as well. Health and healthcare is becoming more retail, driven by both a desire to be more healthy and rising healthcare costs. This includes a wide-variety of fitness and fitness classes as well as urgent care facilities, cosmetic procedures, and clinic and healthcare providers.   Healthcare accounts for around 25 percent of household expenses and it is only going up.

While overall industry occupancy remains strong, its never been more true that premium locations are in demand, especially for category leaders. Main & main centers, class A malls, top 20 percent locations are at a premium and it’s reflected in low occupancies and rent. Part of this has been due to the perceived safety in this time of change. The most exciting ideas in retail, both for the consumer and retailers, is coming in the form of technology. Examples abound, from Amazon’s high-tech, highly automated warehouses, to in-store robots that clean floors and scan shelves. Biometric cameras can track and identify shoppers in stores to tailor a shopping experience to the person, combined with the field of artificial intelligence and virtual reality applications. These will lead to some amazing innovations in retailing over the next several years.

All these trends are playing out in Oklahoma City retail as well; but, some local factors influence what we are seeing. Chief among them are the effects of the current energy downturn on the economy in general and disposable income in particular.   The fact that Oklahoma City lacks the density of many other markets changes the nature of our market for retailers (although we all know we’ll drive further than the average shopper). And, no breaking news here, Oklahoma’s incomes are lower than much of the rest of the country. Therefore, we see even more emphasis on value-oriented retailers. It is harder to convince high-end retailers to locate here.  It is more difficult to get big projects off the ground; Oak, the next phase of Chisholm Creek, the Cotton Mill site – all are working on preleasing and these local factors add a degree of difficulty.  

The current environment makes it more challenging at the other end of the spectrum as well - for local mom and pop retailers to identify locations and weather economic swings. Despite these headwinds, as noted, market vacancy has improved, owing much of the improvement to discounters like Ollie’s & At Home, as well as fitness users like Vasa & Urban Air. The explosion of marijuana dispensaries has clearly also played a role in maintaining and improving retail occupancies. Economic concerns, particularly related to energy, are the main concern for 2020 and the reason that our outlook is for a stable but unremarkable retail performance in the upcoming year. 

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