Buying a shopping center? Be Mindful Of Consumer Shopping From Home On The Internet
The rise of Internet shopping’s multi-billion-dollar revenue stream is spawning the creation of Internet-based businesses that are reshaping the role and function of shopping centers. This has resulted in a higher mix of service-oriented offerings with key product-selling anchors. Investors need to be mindful of the evolution of the retail market when conducting the due diligence. Without this perspective, they may find themselves owning an empty property in a matter of months.
The shift of retail dollars to online destinations has been substantial, with sales reaching a record $46.9 billion for the month of June, according to Marcus & Millichap research. The online category now accounts for nearly 13 percent of core retail sales, up from 8.4 percent a decade ago. Over the 12 months ending in June, receipts at non-store retailers jumped 14.2 percent, a robust pace that eclipses other retail categories.
As e-commerce makes deeper inroads, the composition of shopping center tenancy has been altered dramatically. Tenant mixes have begun to shift toward service-related businesses. Restaurants and bars are an extremely strong presence while grocery stores remain stalwarts, experiencing steady growth in sales over the past several years.
Several areas of retail are performing well, particularly the healthcare and home improvement sectors. Due to the impracticality of purchasing building materials online, retailers in the category registered a 7.7 percent jump in receipts over the past year, according to the Marcus & Millichap mid year report. Although online pharmacies are gaining business, the multitude of local drugstores, combined with a larger selection of offerings that includes convenient food and beverage options, contributed to an 8.4 percent surge in healthcare sales volume over the past year. The aging baby boomer population and the rise of urgent care facilities in shopping centers have also bolstered this trend.