By Garrick Brown, Vice President of Retail Research, Americas
Next Wednesday (December 21st) is technically the first day of winter… but you Game of Thrones fans know what I am really talking about.
While we predict that this year’s holiday shopping season will generally be better for retailers (including bricks-and-mortar) than last year, this still won’t be enough to slow the trend of store closures that we are going to see in Q1 2017. Disturbing news continues to slow drip across the retail landscape from a number of iconic brands and retailers; this week’s Top Ten articles are dominated by ominous articles about The Limited, J. Crew, Sears and others.
But here is the good news… the bloodletting that we anticipate early next year will still mostly be relegated to just a few key retail categories (the department store and apparel sectors leading the way).
But the bad news is that you can rest assured that this will help set the tone for retail in 2017. If you thought the negative news cycle that followed last year’s closure wave was bad, I suspect this will be much worse. The problem here, of course, is that once that negative news cycle hits it tends to color all of retail with the same broad brush and certainly doesn’t help the stock price or brand equity of those publicly traded concepts that are otherwise weathering a challenging atmosphere out there. And this only raises the risk of more retailers finding themselves in hot water.
Meanwhile, with the stock market continuing to set new records, we will also likely see M&A activity on the rise in 2017. We already expect further consolidation in the grocery industry as the big guys continue to gobble up the little ones… But we expect the trend to ramp up significantly for most retail sectors in the coming year. We will likely see healthier, cash-rich players gobbling up struggling (but name worthy) brands on the cheap in 2017. We will also likely see players in the same space merging for survival’s sake (a la the attempted merger of Staples and Office Depot last year). All of this means that there will be the higher risk of closures due to redundancies ahead.
This will be happening as many of the categories that have driven growth over the past seven years increasingly face the challenge of market saturation…
So the sky must be falling right? No… not really. We continue to see growth from new upstart concepts, fnon-retail concepts moving into retail spaces and pureplay eCommerce players going bricks-and-mortar… this is in addition to growth from many of the same old “usual suspects” that have kept the market in the black for most of the post-recession era. We also continue to see landlords and shopping center owners creatively adapt to a marketplace that is evolving as we speak…
2017 will be a year in which there will be some shakeouts and some pretty high profile bad news sucking up all the oxygen in the room. You need to be prepared for the fact that the headlines will seemingly suggest that the bricks-and-retail world is in dire crisis mode when it is, in fact, really in moderately challenged mode.
All of the early indicators and anecdotal information that I am hearing seems to suggest that the market will post pretty respectable numbers this holiday season and I still think our 3.7% growth forecast is going to come very close (if not nail it outright). Also, rising consumer confidence numbers and continued solid wage growth all are huge positives for 2017 and I expect these stories to continue heading deep into the New Year. Unfortunately, those are nebulous headlines (and fairly boring ones to most folks) that will largely be eclipsed by store closure announcements in 2017. And so, yes, get ready for more “Winter is Coming” dire pronouncements ahead. And they will all be somewhat true. The only problem is that few will spoil that dramatic, click-inducing headline by adding the rest of the truth: “Winter is Coming… but Retail Real Estate will Muddle Through…”
Before I leave you this week, here are some links you might find useful. A couple of weeks ago we released our new report, Food Halls of America, as well as our accompanying video for the report, Cool Streets: Food Halls of America Manhattan edition. If you would like to check out that report and video please just click here.
Also, our eCommerce guru, Ben Conwell, and I hosted a live webinar in Chicago a few weeks back where we discussed the outlook for both bricks-and-mortar retail and eCommerce this holiday shopping season. At least initially it looks like the eCommerce sector has outperformed initial estimates for growth on both Black Friday and Cyber Monday. It is too soon to tell how bricks-and-mortar fared, however, the anecdotal feedback I am getting seems to suggest that we likely saw stronger than expected activity on that front this past weekend as well (despite some headlines I have come across). So the good news is that the retail sector seems to be on track, so far at least, to outpace its performance last year. Our forecast is for 3.7% growth, as opposed to 3.0% growth last year. Our forecast was made about a month ago, but since that time the National Association of Business Economists has released their forecast and it is also for 3.7% growth.
You can watch our webinar Clicks vs. Bricks: Why Cyber Monday is taking over Black Friday by clicking here.
Additionally, late last month we released our annual Main Streets across the World Report. This report tracks high street retail around the world and breaks out the globe’s premier shopping districts by continent and average asking rent. It is an invaluable resource and you can access the Main Streets across the World 2016/2017 report by clicking here.
And for those of you still trying to figure out what the U.S. Presidential Election really means in terms of the potential impact, our Chief Economist Kevin Thorpe released a report recently on that very topic. If you would like to check out the report, Trump: Impact on the U.S. Economy and the Property Markets, just click here.
By the way, here are a few other links that you might also find useful as well: For the latest US shopping center statistics you can check out the National Shopping Center MarketBeat for Q3 2016 by clicking here.
You can access the recently released U.S. Macro Forecast Report here.
You can access the 2016 North American Retailer and Restaurant Expansion Guide by clicking here.
Also, you can check out the Cool Streets of North America Report and accompanying video series by clicking here.
This post is commentary from the latest weekly edition of our Cushman & Wakefield Retail Newsline, which you can subscribe to for free by e-mailing email@example.com.
Garrick serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.