By Troy Applegate
Head of Commercial Mortgage Lending, Commercial Banking
By Troy Applegate
2 min read
Retail is evolving. And not just because of e-commerce. Hybrid work is driving the evolution of brick-and-mortar retail—especially urban retail properties and neighborhood shopping centers. While many retailers in central business districts are adjusting to hybrid work schedules, consumers are still making purchases seven days a week. They’re just shopping in different places—mainly, closer to home.
“Year over year, national level effective rent for neighborhood and community shopping centers is the highest it has been since before the onset of the pandemic in early 2020,” said Tom LaSalvia, Head of Commercial Real Estate Economics at Moody's Analytics CRE. “The vacancy rate has fallen to 10.2% from its 10.6% high in early 2020.
"Sales numbers are up, too. According to the Census Advanced Monthly Retail Trade Survey, total sales for August 2023 through October 2023 were up 3.1% from the same period a year ago.
If you want to invest in a successful neighborhood shopping center, here are a few things to keep in mind.
In recent years, service-oriented and necessity-based suburban and urban retailers in densely populated neighborhoods consistently performed well regardless of market conditions.
“The acceleration of hybrid work arrangements has spurred retail’s current evolution,” LaSalvia said. “Retail needs people, and the self-reinforcing cycle of retail and population growth will continue, but not with the types of stores and shops many of us grew up with.”
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