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Howard Hughes - Why Now Is The Right Time To Invest In Retail Space

Why Now is the Right Time to Invest in Retail Space

The retail landscape continues to strengthen. In fact, a recent trends report by The Urban Land Institute (ULI) and PwC US indicated the United States closed 2023 with roughly 35 million square feet of new retail product across all shopping center types. This is good news, but in order to succeed as an investor, you need to understand current trends and future forecasts.

Changes in the retail sector over the past few years have been primarily driven by technological advances and consumer preferences. In ULI and PwC US’ report, Anita Kramer, senior VP of ULI’s Center for Real Estate Economics and Capital Markets, says that the real estate industry is shifting towards a new era of “thinking, building and operating.”

Today’s talent wants to live in communities where they can work, afford a great house, send their kids to good schools and limit their commutes. Howard Hughes has those communities—and relocating or expanding your company to one of them can be much easier and faster than you think. As the developer with Entitlements/Site Development Plans in place, Howard Hughes can accelerate your relocation process trimming years from timelines. From lease signing to occupancy in 12-24 months versus 5-8 years.

Key Factors for Investors

With the current economic climate the real estate sector in general is facing a range of challenges. In retail, these include economic headwinds and possible credit constraints. Among these challenges, however, there are chances for investors to thrive. Investors can work to meet the needs of their retail tenants by reviewing how their property can adapt to the changing market conditions. By offering new amenities, services and retail locations that resonate with the right tenants and investors, real estate professionals can capitalize on those market demands and emerging trends to mitigate the impacts of credit constraints and economic headwinds.

Another consideration is the need to adapt growth strategies as a result of higher interest rates. Borrowing costs are still elevated, which could point investors to shift towards financial structures that are more conservative, with a larger emphasis on operational efficiency as well as cost management. Investors could also focus on properties that produce a higher income and offer a better cash flow in the end.

Read on for some additional points and trends to keep in mind while investing in retail real estate.

Retail Resilience with E-Commerce

Despite e-commerce being on the rise, retail tenant demand has grown. While online shopping is still popular, customer demand has proven that it’s not the only way to shop. Brick and mortar stores are still an essential part of the ecosystem. Retail spaces that compliment online channels can benefit customers.

Experiential Retail

We’ve seen the retail sector change with a rise of experiential retail as retailers focus on creating engaging and immersive shopping experiences to attract customers. It’s a trend that leads to a bigger demand for retail spaces that can accommodate unique concepts, such as pop-up stores and themed displays and interactive environments.

Retail Technology

Retail investors are really leaning into augmented reality, AI and virtual reality. This not just enhances the operational efficiency of retail spaces, but the shopping experiences of the customer. This has led to a huge demand for retail spaces that are properly equipped with the right infrastructure to support new innovations.

Adapting Climates

Billion-dollar climate events seem to be on the rise and the Sun Belt is not adverse to these events, which can lead to growing government regulations. This is compelling property owners to prioritize environmental, social and governance (ESG). ESG includes exploration of design in the retail space to minimize the impact on the environment. Commercial retail investors can adapt to those climates with reinforced properties.

Omnichannel Retail

There is a big shift toward omnichannel retail, which is when companies reach customers through multiple touchpoints, including digital and physical channels. This is reshaping the requirements for retail spaces across the board. Consumers want a seamless shopping experience and it’s not just online stores that can do this. Physical stores and fulfillment centers for ecommerce can help to reimagine retail spaces, and these can accommodate those needs with a focus on adaptability and flexibility.

Mixed-Use Retail

Another trend is the convergence of retail across other sectors, such as entertainment and hospitality. As retail spaces evolve into destinations that are multifunctional, mixed-use retail spaces are rising. Creating vibrant hubs of development and activity attract foot traffic and push sales, which can impact the future of retail investment in a positive way.

Personalized Retail Experiences

Evolving retail spaces are another forecasted option, and this is in response to the change of consumer behavior. Consumers desire personalized experiences and smaller, more niche stores will be the result.

Synopsis

The best mixed-use developments are people magnets and something for investors to consider when looking into commercial real estate for retail use. Having a strong understanding of the current trends in retail real estate positions investors to win. Howard Hughes Holdings communities offer unparalleled retail opportunities to connect with residents, workers and visitors and we are happy to help guide you to retail success.