Ten-X Commercial, an online and end-to-end transaction platform for commercial real estate, released its U.S. Retail Market Outlook, including the Top 5 ‘Buy’ and ‘Sell’ markets for retail real estate assets.
The report indicated that northern New Jersey ranked in the Top 5 market in which investors might consider selling retail property.
“In terms of brick-and-mortar stores and the real estate that supports it, the phrase ‘retail apocalypse’ is no hyperbole,” said Ten-X Chief Economist Peter Muoio. “Store footprints are continuing to shrink, and we are seeing droves of traditional retail assets being repurposed or simply demolished. Headlines of store closings and bankruptcies of household names like Toys R Us and RadioShack are some of the most visible signs of the massive reordering taking place in the retail space. While there are some markets that have managed to stay afloat and even thrive, the national retail picture is decidedly bleak.”
According to Ten-X, North Jersey’s employment figures are growing at a slow pace, and the population grew just 0.5 percent in 2017. Demand for space in will remain positive throughout 2019 and 2020, but Ten-X said it is going to fail to offset supply. Retail vacancy will most likely edge to about 9 percent in 2019, then decline slightly over the next two years as the supply pipeline slows, it said. Net operating income will likely fall 1.6 percent per year in 2019 and 2020, it said, with only a modest bump up in 2021.
“In today’s market, there is limited upside for retail fundamentals and we expect further declines in both the number of actual stores and the size of their footprints,” Muoio said. “With fewer shoppers coming in the door, brick-and-mortar locations simply do not need as much in-store inventory as they used to. We’ve seen many traditional retailers partner with e-commerce companies in recent months, underscoring the importance for even brick-and-mortar stalwarts to have significant e-retail components.”
Detroit (No. 1), Kansas City (No. 2), Chicago (No. 3) and Memphis (No. 5) were also among the top sell markets. According to TEN-X, these cities, including North Jersey (No. 4), face difficult retailing conditions which are linked to poor local economic conditions. These conditions may include lack of population growth, tepid job growth or an overabundance of new supply.
The report also indicated that Austin, Denver, Dallas, Houston and Salt Lake City are markets where investors should consider buying retail assets. These areas, TEN-X said, benefit from expanding populations, job and wage growth and increased shopper counts.