Thanks in part to Amazon and online shopping experiences, both consumers and landlords may see more and more empty stores. Industry experts estimate between 7,000 and 10,000 retail stores may shutter their doors in 2017. Unless property owners act quickly, this change in retail real estate may do more harm to local economies before the former storefronts find tenants.
Retail Real Estate Market
A few specific things happen to the real estate market when there are empty stores. When supply for vacant storefronts rises but demand doesn't follow suit, prices go down, forcing landlords to lower prices per square foot of the retail space. However, that's not the entire picture.
Empty stores affect surrounding properties as well. Eyesores with unkempt doors, lawns not mowed and weeds growing in parking lots turn off customers to adjacent properties that still have retail activity. The entire neighborhood's economic clout lowers because of stores that are no longer in operation.
Property owners have several solutions for empty stores. First, developers and owners must realize the trends moving forward. If they already know there is a gap coming between supply and demand, property owners should lower prices sooner rather than later. Second, the owners must remain flexible and open to nontraditional ideas that pay the bills. Some tenants, even for a short time, are better than none at all.
Pop-up stores represent a good way to generate economic activity. These are seasonal stores, such as retailers that sell items during winter holidays or at Halloween, that only need short-term rentals. Rather than demanding a long-term lease for a building, property owners can seek one- or two-month leases. Pop-up stores are a way for retailers to test store concepts and new products to try to lure consumers back to the storefront.
Pop-ups do a few things. They create income for owners, hire employees and generate buzz for the surrounding properties. Retailers have a way to test the market without a long-term solution. Empty stores have something new in them, and it could rejuvenate economic activity in certain areas. However, pop-ups are just a short-term fix.
Over the long term, property owners must change consumer experiences at retail stores. Mega malls with more than 500,000 square feet must learn to cater to the shopping habits of a younger generation. Rather than anchor stores, malls can draw in customers on certain themes or draw more locally based stores to feature goods that local owners sell. This encourages more "mom and pop" stores and keeps economic activity to the surrounding area.
Another way to alleviate vacancies is to create theme-based malls, such as malls focused on food or entertainment. Food-based malls may contain nothing but stores that sell food-based items or restaurants. Another theme could be lower-priced retail or outdoor items.
One way to cope with vacancies is to completely tear down the space and create something different. Multi-use properties are popular, and this happens when owners create lofts or apartment living on upper floors with retail spaces on the bottom.
There are several solutions to empty stores when retailers go out of business or move. The keys to solving this problem lie in the flexibility and adaptability of property owners.
Photo courtesy of OakleyOriginals at Flickr.com