Retail Therapy

At the height of the COVID-19 pandemic, and even beforehand as e-commerce was exploding, there were many in the commercial real estate industry who wondered whether the retail segment would survive in the long-term. To almost everyone’s surprise, retail has become the asset class du jour, proving that consumers do crave experience, and that shopping online can’t always scratch that itch.

If it seems like the retail segment has been on fire lately, that’s because – for Foundry and others throughout the country – it has been. According to an August article from the Wall Street Journal, “Retailers are on track to open 1,000 net new stores in the U.S. this year as retail availability hits record lows, in fresh signs of the sector’s resilience despite turmoil in commercial real estate. In fact, landlords say demand for retail space has remained robust this year, defying inflation pressures, high interest rates, and liquidations.”

“There’s this notion of ‘revenge travel’ that is happening post-COVID, and brick-and-mortar retail is seeing a similar trend,” said James Mattox, Principal, Retail Services based in Foundry’s Raleigh office. “People were tired of being constrained within their four walls during lockdown. They wanted to get out and experience life again. And the retail segment was in a prime position to capitalize on that.”

James has worked within the asset class for more than 25 years, representing clients ranging from Dave’s Hot Chicken to Starbucks. He attributes other aspects of the pandemic – namely a halt to any retail construction at the time – to playing a critical role in record-low vacancy rates. As of this writing, the rates are hovering around 4.6 percent.

As noted in the aforementioned Wall Street Journal article, “Retail real-estate recovery stands in contrast to the office market, where the popularity of hybrid work schedules has helped push up the office-vacancy rate to a 30-year high of 18.2 percent.”

Rhett Batanides, who serves as a Master Broker for several retail clients ranging from Volli Pickleball to Rocket Fizz, echoes similar sentiments. “Retail numbers are through the roof. The sheer number of brands that want to expand… I’ve never seen it this way.”

As Vice President of Retail Brokerage based in Foundry’s Charlotte office, Rhett represents many clients who have introduced experiential retail, which has had an overwhelmingly positive impact on quick-service restaurants, entertainment concepts, and boutique-type shops. He recently began working with the famed Mall of America outside Minneapolis, sharing that not all malls are slowly fading into the sunset. “Various malls, such as the Mall of America, have figured out how to stay relevant by marketing their property as more of an experience, and also grouping together similar concepts so the consumer can more easily come and stay for the activities they are interested in,” he said.

He added that retailers who have pivoted and sell beyond the generic goods that consumers can purchase on Amazon have also seen success. In representing niche toy concept Kappa Toys, he has learned that this one retailer who has the exclusive rights to unique Japan-based toy sales has cornered the market in the U.S.

“The other element that e-commerce can’t compete with is what I like to call the ‘Instagram-ability’ of a retailer,” he added. “Younger consumers want places that serve up an aesthetic. They want to be able to take selfies; they seek out places with creative food presentation; they like lights and plants on the walls. They watch what influencers are doing and strive to experience life like they do.”

Perhaps no one has capitalized on these trends faster than Senior Vice President of Retail Services in Nashville, Carrie Bobb, who literally launched an entire social media marketing agency to help connect landlords to the new consumer. Despite having built her book of business over 20+ years in southern California, she and her family decided to move across the country last year to start again in Nashville. As the pandemic was underway and retailers were feeling the sharp declines in business, she cracked the code for engaging consumers and getting them to spend money. Build the relationships, know the market analytics inside and out, and get the landlords to understand they don’t have the secret sauce that we do. During her career, she has successfully designed and executed leasing strategies, representing landlords such as Hines, Kilroy Realty, Asana Partners, IQHQ, Heitman, Regency Centers, and many others. She has executed transactions with marquee brands like West Elm, Sephora, SoulCycle, lululemon, Blue Bottle Coffee, Cinepolis, Restoration Hardware, Shake Shack, drybar, Fox Restaurant Concepts, and several others.

Carrie is considered an expert in placemaking and understands how to create unique, memorable experiences that lead to consumer purchases – a resounding theme in this new age of retail. As fate would have it, another talented retail broker was looking to chase her passion for serving landlords of mixed-use developments, and an opportunity to work with experienced retail leasing executive Carrie Bobb opened at Foundry. Now, Molly Marcum works alongside Carrie as a Senior Associate Broker in Nashville.

“We are poised to help landlords curate meaningful merchandising strategies and execute on creating memorable experiences that evoke emotion through retail leasing,” Carrie said.

“Retailers are on track to open 1,000 net new stores in the U.S. this year,” said the Wall Street Journal.

And their joining Foundry could not have come at a better time. Nashville Market Leader Jason Holwerda sums up what many of us are already thinking, knowing that the retail industry is red-hot and ripe for opportunity. “Foundry has been steadily increasing our footprint in the Nashville region since we opened our office here in 2014, but the retail segment was one area that we had not yet expanded into,” he said. “With the addition of Carrie and Molly to the team, Foundry is immediately poised to capture market share, and we’re already seeing how Nashville landlords are jumping at the opportunity to tap into their expertise and unique approach.”

From every corner of the country, consumers craving experience are dictating the ways in which successful retail concepts are going, and many landlords and tenants are rising to the occasion. It’s impossible to predict how long this string of activity will continue, but for now, Foundry’s retail brokers and tangential business lines are happy to study the data and analytics, execute the strategy, and ride the wave.