A rendering of the Meijer Bridge Street Market coming to Grand Rapids, an example of the type of physical retail that is thriving today.
May 3, 2018 | Dan Rafter
The headlines are filled with major store closures. Sandwich chain Subway just announced it plans to close 500 of its U.S. locations this year, while GNC reported that it will shutter 200 of its vitamin and supplement shops.
Earlier this year, Toys R Us made news when it announced it was closing all 735 of its stores this year, ending its U.S. business. And department store chain Carson’s will close all its stores by late this summer, wrapping up more than 160 years of retail operations.
The news, then, appears to be bad for physical retailers. But that’s a bit misleading. Not all brick-and-mortar retailers are struggling. Many are actually thriving. And in many Midwest markets? Retail is showing solid, if not explosive, growth.
Those retailers that are doing well are embracing the omnichannel approach, focusing both on physical stores and bustling online presences. You might visit a physical location, view a limited number of products on display and then make your actual purchase on a Web site. The retailer doesn’t care where you buy its product, as long you buy it.
So, where in the Midwest is retail performing well? Grand Rapids, Michigan, is a good example. According to CBRE’s first quarter Grand Rapids retail report, the average retail vacancy rate during the quarter here stood at 6.9 percent, down from 7.2 percent in the fourth quarter of 2017.
The retail market in Grand Rapids saw positive absorption of 96,566 square feet, too.
CBRE said that Grand Rapids’ Central Urban Area is seeing an influx of new retail opportunities. The most notable of these is the Meijer Bridge Street Market, a 37,000-square-foot urban grocery store; the Warner Building project, which includes 10,000 square feet of retail; and the Diamond Place mixed-use development, which will include 22,000 square feet of retail.
Finally, there’s the Studio C project that will include a 47,200-square-foot movie theater and 14,500 square feet of additional retail.
Grand Rapids isn’t the only market in the Midwest and across the country that is seeing a bit of a retail rebound these days. The Urban Land Institute, in its 2018 forecast, said that an expected increase in consumer spending should provide a boost to the U.S. retail market in 2018 and 2019.
The institute predicted that retail vacancy rates across the country would hit an average of 9.8 percent in 2018 and 9.9 percent in 2019. Those rates are higher than, say, in Grand Rapids right now, but are actually lower than what experts with the Urban Land Institute predicted six months earlier.
The Urban Land Institute also predicted that retail rental rates should grow at 2 percent in 2019 and 1.8 percent in 2019. Those aren’t booming numbers, but they do show that retail rental rates should rise at least somewhat during the next two years.
Chris Coleman, VP of Development at Wingspan, periodically shares his thoughts and observations on property development news.