How E-Commerce is Affecting Retail Real Estate

  • December 25, 2017
  • Retail

The explosive growth of e-commerce over the past few years has raised many questions regarding the future of retail real estate.  Many investors are left wondering where they should put their focus moving forward.  Despite fears that the brick and mortar retail store is a dying breed, there is plenty of evidence to suggest the contrary.  Rather, fluctuations in this sector have only stood to create a new and different retail experience.

A Few Fun Facts

While it’s common to hear a great deal about the rapid increase of online sales affecting retail real estate, you may not be clear on the actual facts and figures.  Yes, it’s certainly true that e-commerce is on the rise, with online sales raising an average of 16.9% over the course of the past 15 years.  A lesser known fact, however, is that 94% of retail sales are still generated at brick and mortar buildings.  This figure alone proves that consumers are still being drawn in to the face-to-face interaction of the traditional retail transaction.

Retail Evolves

retail and bowlingIn an effort to keep consumers engaged, brick and mortar retail businesses have found creative new ways to evolve and keep up with the e-commerce transaction.  While previously slow to adapt and stay relevant, retail real estate has been forced to create more opportunities for interactive experiences for their consumers in an effort to keep them coming back.  Retail revolving around older concepts, such as movie theaters, health clubs, and bowling alleys, are generating new interest with the incorporation of more food choices that are inviting in a broader target audience.  Technology centered retail has opted to create a more interactive environment by devoting more space where clients can test-drive products.

Setting Up Shop

In an effort to keep driving traffic to retail real estate, more and more businesses are opting to open up near gyms and fitness centers, banks, and grocery stores.  With a growing focus on healthcare and the constant need for the latter, it makes a lot of sense.  Restaurants, previously a relatively overlooked contender in retail, are also gaining a lot of attention as more and more consumers are seeking experience and interaction.

Valuing Properties

With all of the changes happening in the retail real estate sector, there are new challenges coming up regarding valuing retail properties.  As needs shift, properties that may have once been considered high traffic may be losing some traction.  Vendors are also beginning to downsize square footage as they require less and less space for inventory displays, choosing instead to devote more area to interactive opportunities.  Banks are a great example of this.  Many banks are opening up micro-branches (as opposed to full-service banks) where tellers are helping customers with a limited menu of services through the use of tablet computers.  Landlords of older properties should get ready to step up their game, as the need for easy access to technological advances becomes a key factor in determining what a property is worth.

Effect on Lending

Despite the rise of e-commerce, lenders do not appear to be discouraged when it comes to retail real estate.  They have, however, become more meticulous when determining which ventures to support.  The strongest retail sector seems to be grocery centers, even with the influx of online food shopping options.  While the convenience of online food shopping may appeal to some consumers, the draw of fresh, never frozen food is sure to keep the local grocery store a strong contender in the retail real estate market for the foreseeable future.  Industrial real estate is also seeing a rise in lender requests, as more and more e-commerce companies seek property that can be used as distribution centers.

Looking for Retail Real Estate in the Baton Rouge Area?

If you’ve been waiting to invest in retail real estate out of anxiety over the growth of e-commerce, hopefully you’ve seen that there’s no reason to worry!  Now is the perfect time to find a retail real estate investment property, and SVN | Graham, Langlois, & Legendre is ready to help you do just that.  With over 99 years of combined experience helping our clients create successful real estate transactions, we are certain that we can show you the property that’s best for you.  We pride ourselves on excellence and look forward to giving you a superior experience.  Take a look at our properties today and call us to get your search started!