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Commercial Trend Watch: Big-Box Retail Store Closures

February 15, 2019
Commercial Real Estate
By: Jason Holte

2018 set a record for retail closures. Here’s what brokers need to know.

The retail industry is undergoing a large-scale change. Shifting consumer behaviors and the continued growth of e-commerce have altered the retail landscape, and as stores close, they aren’t always replaced by other retailers.

Commercial trend watch: big-box retail store closures

According to a study cited by MoneyWise, a record 145 million square feet of retail space was shuttered in 2018. Many large retailers, such as Lowe’s, Kmart, and Sears, have already forecasted store closures for 2019. As these stores close and shopping centers look to replace anchor tenants, an intriguing trend has developed. Rather than seeking new retail tenants, spaces located near major metropolitan areas are increasingly being redeveloped into e-commerce fulfillment centers. A CBRE study referenced by Bisnow states that 8 million square feet of retail space have undergone industrial redevelopment for this purpose since 2016.

E-commerce isn’t going anywhere, so this is a trend that is worth monitoring in the months and years to come. Commercial brokers must have a plan for both pairing retail customers with ideal locations for new stores and identifying retail spaces that are ripe for industrial redevelopment. That is where a location intelligence platform becomes invaluable. Here are a few considerations that can be quickly researched with the help of a location intelligence platform.

What is the Property Best Suited For?

First and foremost, a location intelligence platform enables brokers to search for properties that meet their base requirements. This includes lot size, building square footage, land use, assessed value, and more. As indicated in Cushman & Wakefield’s 2018-19 North America Industrial Forecasting Report, the average last-mile distribution facility is only 10,000-40,000 square feet in size. This means that many locations that formerly housed big-box retail stores will meet those parameters. If a broker is representing a prospective retail tenant, on the other hand, the client likely has its own site selection criteria that must be met.

What Does the Area Around the Property Look Like?

Whether targeting a property for retail occupancy or industrial redevelopment, a working knowledge of the surrounding area is crucial to a successful project. A location intelligence platform illustrates neighborhood characteristics with the help of detailed demographic information, including age group and gender breakdowns, average household income, crime statistics, and more. Brokers can use location intelligence to highlight the competitive landscape by visualizing nearby retailers and other points of interest, and they can use traffic data to provide insights on how accessible a property is by car. Prospective retail tenants will want to know how the nearby retail mix will affect their business, and retailers and logistics tenants alike will need to understand how traffic flows around a particular location.

Is the Retail Property in an Opportunity Zone?

Searching for retail locations in opportunity zones using LandVision

Qualified tax opportunity zones are areas where capital gains from an investment in either property assets or stock can be reinvested for a tax deferment after their sale. Many of these IRS-designated zones are economically distressed communities where the IRS hopes to stimulate investment and growth. A location intelligence platform allows brokers to overlay opportunity zones and search for properties within these areas that meet their clients’ other base requirements. As noted by Commercial Observer, the “substantial improvement” provision associated with opportunity zones is a natural fit for redevelopment or new construction projects.

Learn More

Our map-based real estate application, LandVision™, is trusted by over 17,000 commercial real estate professionals to help them find off-market opportunities and win more deals. Brokers can use LandVision to research property details, understand ownership, conduct market analysis, search for properties within opportunity zones, and much more.

If you’re ready to discover how LandVision can help you make more confident decisions, request a trial today or contact us for more information!

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