Retail real estate has experienced significant changes in the last few years, as consumer shopping behaviors continue to set the standards and expectations for the industry. There have also been noticeable changes in spaces that are deemed most valuable and those which are obsolete, changing the dynamics between landlord, tenants, and property investors across the country. Here are some of the major changes being reported.
Increased Creation of Mixed-use Properties
Rather than a single-use facility or development project, there has been an increase in the number of projects being designed for mixed-use purposes. One large parcel of land could be divided into both commercial and residential projects, having a retail location on one side and private residences or apartment homes on the other. The idea is to create communities that create a live-work-play environment, where residents are able to avoid lengthy commutes to nearby cities in order to do their shopping, working, socializing, and living in a convenient location.
Increased Demand for Retail Space
In addition to creating combination properties, much of the demand for retail real estate comes from business operations that have formally been excluded from retail locations. Marijuana and CBD distributers are looking for storefront opportunities, as are medical clinics and massage studies. Many landlords have created leases that exclude the sale of drug paraphernalia and other illicit substances, but with the changes in states across the country with marijuana legislation, these business ventures need a place to set up shop.
Reconstructed Office Space
As many business models are moving to team-based operations, there is less of a demand for separate workstations in office complexes. Larger spaces where multiple employees work can be a more collaborative workspace, unifying the office and creating a new kind of work environment. In light of the 2020 COVID-19 pandemic, these spaces could be transformed to provide more social distancing, but for now, integration is big deal in office space.
Reinvented Lease Terms
Many landlords have been hesitant about accepting short term lease agreements for fear of high turnover, but this could change as more startup businesses and incubator companies search for functional workspace. Percentage rent has also fallen by the wayside as more stores are finding their sales declining in favor of online shopping. Landlords lose out on money, and eventually, the lease as the shop is forced to close.
Retail real estate is thriving, though not in the traditional ways of a decade ago. Property owners must face these changes if they want to continue earning a profit on their space.