Trend Report For 2018: A Pivotal Time for Brick and Mortar Retail

Possibly not since the first enclosed mall opened in 1956 in Edina, Minnesota, has brick and mortar retail experienced such a pivotal point in its history. Most would attribute the changing retail environment to the effects of e-commerce and the Goliath that is Amazon; however, we believe there are more powerful factors at work.

In-store brick and mortar retail sales accounted for more than 89% of total retail sales in 2016, and early indications seem to point to 2017 being the best holiday shopping season in 4 years. So, if people are still shopping at brick and mortar stores, why do we hear the term “retail apocalypse” every time we turn on CNBC or pick up a Wall Street Journal?

The End Of The Department Store Era—Not Brick And Mortar

What we are seeing is not the demise of brick and mortar retail, but more the end of the department store era. Department-store-anchored malls that sold everything from apparel and electronics to furniture and home appliances dominated the 60’s, 70’s, and 80’s. But specialized big-box retailers have steadily eroded the department store model over the last three decades.

Eventually, we were left with malls anchored by department stores that focused on just a few categories centered on apparel. Does this mean that we will soon see the end of department stores and enclosed malls? Yes and no.

We will continue to see enclosed malls struggle to compete with convenience/grocery-anchored centers, experience-based shopping destinations, open-air lifestyle centers like Bridge Street Town Centre, and local specialty destinations such as The Garage at Clinton Row. Many malls will be able to adapt and survive with the addition of entertainment venues, hotels, and even office space. Others will simply disappear from the landscape to be replaced by a more modern retail and entertainment experience as we are seeing take place at the site of the old Madison Square Mall.

As far as the old department store is concerned, we are already seeing the same type of adaption into a more mixed offering of services and experiences. Many department stores are starting to reduce the size of the sales floor to make room for cafés, salons, pop-up shops, and even fitness concepts. Not all department stores will survive, but the ones that do will be more focused on the high-end specialty categories and customer experience. Instead of existing for exclusively for retail sales, they will provide a total experience and numerous services in one convenient location.

What Does The Future Look Like?

What can consumers expect the retail environment to look like in the future? Currently, the trend is what is called omni-channel retail. This is a combination of brick and mortar stores with online and mobile sales. As evidenced by Amazon’s acquisition of Whole Foods, e-commerce retailers are getting into the physical storefront game. It appears they understand the value of physical storefronts and their impact on the bottom-line. Sure, online shopping is convenient, but does it result in sales?

Research has shown that over 40% of items purchased online are returned. Furthermore, consumers make a purchase at a rate of 20% of the time when they walk into an actual store. That rate drops to 3% when visiting a website. The successful retailer of the future will be able to combine online, mobile/social media, and physical locations to create a positive experience for the customer.

One issue that is flying under the radar is the new tax reform bill and its impact on retailers. A reduction in the corporate tax rate could have a significant influence on the ability of brick and mortar retailers to compete with e-commerce retailers. With the reduction of the corporate tax rate, the savings experienced by the retailers can be used for an investment into omni-channel/mobile platforms, upgrading stores, or simply lowering prices to compete with e-commerce.

A Theme Of Adaptation

In conclusion, we continue to believe that the future is bright for both retailers and landlords. Once again, the theme continues to be adaptation. Traditional retailers are building their online presence and e-commerce retailers are getting into the bricks and mortar game. This environment creates opportunities for landlords that have the vision to meet the changing demands of consumers and the needs of the omni-channel retailer. It’s certainly an interesting time in retail, but one that can bring exciting changes to the benefit of everyone.

 Have questions about the changing retail market? Wondering how you can adapt in 2018? You can contact Zac at zac@crunkletonassociates.com or by calling 256-536-8809.

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Originally from Tennessee, Zac studied business management at Samford University. After moving to Huntsville in 2001, Zac started out his career in banking, wealth management, and financial planning. In 2010 he joined Crunkleton and has since become the VP of Leasing for the commercial real estate group where he focuses on retail leasing and development.

Zac Buckley
VP of Leasing
Crunkleton Commercial Real Estate Group
ZAC@CRUNKLETONASSOCIATES.COM

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The Trend Report: Emerging 2016 Insights

The Urban Land Institue recently released their annual report on the emerging trends in Real Estate for the year! Here are just a few highlights from their findings on the trends we can expect to see emerge nationally over the course of 2016!

Second Tier Cities Take Center Stage

Second tier cites such as Austin are booming, and according to the report, these cities are only getting started. In addition to their reputations for hipness, cities such as Nashville, San Antonio, Portland, Austin and Raleigh-Durham are also attracting attention for their lower costs of living, and their increasing ease of staying connected far from main hubs, more upside from affordable and available investment opportunities, and increasing sophistication from realtors and investors.

Will Millennial Parents Move to the ‘Burbs?

A generation traditionally known for their obsession with urban living, a growing number of Millenials are becoming parents and looking to find homes and good schools for their children. While this generation has put off having kids longer than previous generations, recent studies suggest that a larger number will soon become parents, and could quickly fuel a suburban boom. However, these won’t be the suburbs of yesteryear. Studies show that young millennial parents will be drawn to more mixed-use, walkable developments, offering a mix of urban and suburban benefits with quick easy access to the city’s core.

Investment in the Changing Office Landscape

The continued recovery of the US economy has led not only to job growth, but also a strengthening of the commercial sector. Open office plans still dominate the market and the average SF per worker, which was 253 in 2000, is predicted to shrink to 138 by the year 2020. Showing no signs of slowing down, investors can expect to see continued development and redevelopment of existing spaces, as well as a continued rise in coworking.

Pulling Up Parking Lots?

As many young Americans opt out of car ownership, and tech trends such as ride-sharing and autonomous cars begin to change transportation patterns, many urban planners, government officials, and real estate owners are questioning if parking lots are the best use of downtown real estate. Trends suggest that “existing parking represents a suboptimal use of land,” and as cities change zoning regulations to reflect these shifts, developers are asking how they can take advantage. Are surface lots and parking structures potential development opportunities?

Increasing Investment in Infrastructure

America’s crumbling infrastructure has been in the news for years, yet the need for new mass transit, better roads and highways, and improved aviation and rail facilities hasn’t been met: the American Society for Civil Engineers estimates that $3.6 trillion would be needed by 2020 to meet the backlog of much-needed repairs. This suggests there’s a great upside in new models for infrastructure funding, including public-private partnerships and real estate investment trusts (REITs).

Urban Agriculture Is On The Rise

While conceding that we’re not likely to see silos dot the skyline anytime soon, the ULI report suggests that an increasing number of viable urban farms and rooftop gardens, including Brooklyn Grange in New York, large urban farm operations in Detroit, and a forthcoming vertical farm in Newark, New Jersey.

CLICK HERE to read the full report and discover the rest of the exciting emerging trends for this year!

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KADIE PANGBURN
MARKETING COORDINATOR
CRUNKLETON & ASSOCIATES
KADIE@CRUNKLETONASSOCIATES.COM

The Trend Report: Emerging 2015 Insights

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According to an industry insight report released by Transwestern last week, there are some interesting commercial real estate trends emerging from the first quarter of this year:

Wage growth is flat, but disposable income is up.


Unemployment has improved since the Great Recession, but employees are not receiving wage increases typical of past recoveries. However, consumer credit is 30 percent higher than July 2010, and consumer confidence is spiking. This could be due to the decline in the price of gasoline: a one-cent-per-gallon reduction in price of gas is equivalent to approximately $1 billion in consumer savings – money that can be spent elsewhere.

The national economy has recovered.

The labor market surpassed pre-recession levels, and the gross domestic product growth exceeded expectations. This growth is expected to continue through 2015, barring a geopolitical jolt. Despite these positive signs, the stagnant wage growth is a cause for concern. With the improving economy, wage growth should be more meaningful in the period ahead.

Consumer behavior is changing.

Immediately following the Great Recession, consumers opted to pay off debt rather than spend money. More recently, consumers have begun taking on more debt – total consumer debt has risen 5.0 percent since bottoming out in second-quarter 2013. This indicates growing confidence in household budgets and job security, so consumers are willing to spend more. Student debt has risen 84 percent since 2008 and totals nearly $1.2 trillion. As these students enter the work force carrying so much debt, they put off homeownership to rent instead. They also put off owning a car, partially prompting the need for companies to seek out transit-served locations.

Tenant behavior is changing.


Densification among office tenants remains strong, with companies taking approximately 10 percent less space per worker, according to a survey conducted by Delta Associates. For some industries, this reduction would likely be substantially greater. Similarly, advancements in technology are prompting retail tenants to lease less space.

Real estate is now an experience, not just a location.


The average consumer is now younger and more informed, forcing developers to adapt. Mixed-use projects are becoming more prevalent as they bring walkability, vibrancy and community together into a unique environment that appeals to the modern urban consumer.

Real estate is a preferred investment vehicle.


Annual office sales volume has risen 528 percent since the market bottomed out in 2009. Commercial real estate in the U.S. continues to be a safe haven for investors seeking higher yields with relatively low risk.

To read the full report CLICK HERE.

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Make sure you’re staying on top of the latest trends, newest developments and hottest new stores in Huntsville by subscribing to our weekly blog updates!

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KADIE PANGBURN
MARKETING COORDINATOR
CRUNKLETON & ASSOCIATES
KADIE@CRUNKLETONASSOCIATES.COM

 

Could 3D printing be the future of construction in Huntsville?

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3D printing isn’t a new concept for Huntsville.  In fact, companies here in town even support NASA with 3D printers that astronauts use to create certain tools or parts they need on demand in space.  But a company based out of China has recently taken 3D printing up a few levels.  Five stories to be exact.

That’s right.  The world has just printed its first five-story building.

Welcome to the dawn of a new age where architects can design and print buildings on demand.

Architectural firms have been competing for the last several years with their designs for 3D-printed dwellings, but WinSun, a company based out of China, set out to get the job done starting last march when the company claimed to have printed 10 houses in 24 hours using proprietary 3D printing technology.

Now WinSun has set the bar for other 3D tech firms around the world and demonstrated their ability to print a 5-story apartment building and an 11,840 square foot villa complete with decorative elements inside and out.

The printer uses an extruder arm to lay down a mixture of ground construction and industrial waste, such as glass and tailings, around a base of quick drying cement mixed with a special hardening agent “much like a baker might ice a cake,” WinSun said.  The walls are printed hollow, with a zig-zagging pattern inside to provide reinforcement and to leave space for insulation.  With this technology, WinSun is able to print out large sections of a building, which are then assembled together, much like prefabricated concrete designs, to create the final building.

This process not only decreases production times by between 50 and 70 percent and drastically cuts labor costs, it also saves between 30 and 60 percent of construction waste.  In all, the printed villa cost around $161,000 to build.

Of course the million dollar question is, is it safe?

Well, according to the Chief engineer of China Construction No. 8 Engineering Bureau, Ma Rongquan, in recent press conference, “These two houses are in full compliance with the relevant national standards.  It is safe, reliable, and features a good integration of architecture and decoration.  But as there is no specific national standard for 3D printing architecture, we need to revise and improve such a standard for the future.”

But here’s the heads up for commercial real estate and developers,  the company hopes to take this same technology even further in the future setting up factories all around the world, including locations here in the United States, with the aim to print on a much larger scale.   Their planned projects include bridges and even skyscrapers.

So what could this new technology mean for commercial real estate?  Imagine the possibility of being able to create custom buildings at half the cost in half the time?

With our strong tech presence in the 3D printing community, could this be the future of construction in Huntsville?

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KADIE PANGBURN
MARKETING COORDINATOR
CRUNKLETON & ASSOCIATES
KADIE@CRUNKLETONASSOCIATES.COM