Retail isn't just decades-old apparel brands and antiquated shopping malls.
The future for many industry names is bright and booming, despite dire headlines. And malls and shopping centers are taking on a new image of their own, bringing in experiential tenants and living spaces as department stores and other big-box anchors scale back.
"Store closures grabbed the headlines and drove the retail apocalypse narrative in 2017 and into 2018," said Deborah Weinswig, managing director of FGRT (formally Fung Global Retail & Technology).
However, "total in-store sales continued to grow, yielding an uplift in sales densities across US retail," she said. "Moreover, occupancy rates in open-air shopping centers and superregional malls [more than 800,000 square feet in size] proved resilient."
Open-air centers in particular, which could be anchored by names like Dick's Sporting Goods, Whole Foods Market, Kohl's, Dollar Tree or TJ Maxx, are considered one of the "most resilient retail real estate segments," according to FGRT. Retailers located there haven't been fleeing or breaking leases, as is the case at some regional malls, which tend to be about 400,000 to 800,000 square feet.
Meanwhile, the top retail real estate owners in the U.S. — Simon Property Group, General Growth Properties, Kimco Realty, Brixmor Property Group and DDR — have maintained occupancy rates at or above 95 percent. That means less than 5 percent of spaces throughout their properties (a mix of malls and strip centers) are vacant.
"GGP and others have been dialing down their exposure to apparel specialty stores, and a number of these companies have focused on grocery-anchored centers or sought to bring in more grocery tenants to their existing centers," Weinswig wrote.
For now, grocery stores look to be a safe haven for real estate developers hoping to diversify their assets. But there's also a growing concern this trend could reverse as more shoppers opt to order their groceries online.
Nonetheless, the majority of store closures in 2017 stemmed from so-called softline retailers, which includes apparel brands, FGRT found in its report. In turn, regional malls have suffered the most from their peer group as names like Rue21, Ascena Retail Group and Gymboree shutter locations.