Consumer behavior has changed drastically since the advent of e-commerce. For many people, especially in the core consumer segment of 25- to 45-year-olds, the convenience of ordering or shopping with the click of a button outweighs the effort of setting foot in a retail store. While e-commerce is impacting traditional retail, these shifts do not mean brick-and-mortar retail is going away. In this blog, we’ll take a look at the changes we are seeing in this sector of commercial real estate.
During the COVID-19 pandemic, traditional retail was heavily impacted. Online shopping surged and many retail tenants opted to close shop permanently or shifted their business model to e-commerce. The retail vacancy rate in Q4 of 2020 was 7.5 percent and jumped to 8 percent in Q1 of 2021. Fortunately, the Phoenix-metro retail market has rebounded and in Q3 2024, the figure stands at 5 percent. Other major urban areas in the Southwest are experiencing the same recovery with vacancies down and rents increasing.
Retail Reimagined
Retail, as we’ve known it, is changing to attract consumers and give them a reason to step away from their screens and come out. Traditional shopping spaces are being transformed into experience-driven destinations. The spaces are evolving to include dining, entertainment and outdoor free spaces for activities and events. The mixed-use developments are also blending residential and office spaces within the retail setting, creating cohesive community environments. This is just one aspect of Arizona’s commercial real estate market that is booming.
While some consumers prefer the ease of online shopping, traditional retail offers pride of place, it enhances the livability appeal, and it has a lot to offer the consumer too. Here are some of the benefits traditional retail continues to bring to the community:
- A focus on customer service: Physical stores provide customers with unique in-store experiences.
- Boost the local economy: A larger portion of the consumer’s spending stays within the community, this creates a cycle of reinvestment, and local businesses typically spend more with other local businesses too.
- Job creation: Local businesses are often the biggest employers in our community.
- Community engagement: Local retailers are more likely to be involved in community events, which support local schools and charities.
- Environmental impact: When you buy from a local retailer, it can often reduce the need for long-distance transportation and extra packaging, minimizing the carbon footprint.
Latest Retail Trends
Arizona is at the forefront of several current trends that are reshaping the commercial real estate industry – the retail market is just one of them. Projects such as the redevelopment of the Paradise Valley Mall are redefining retail in the greater metro Phoenix area, creating lifestyle destinations. Successful retailers also offer an omnichannel approach allowing customers to shop both online and in-store. This strategy allows for the seamless return of items. It not only allows customers to avoid trips to the post office, it brings them back into the stores. Retailers are also providing customers with the option of in-store ordering and pick-up. These services give shoppers more flexibility and convenience and a reason to come back to shop in person.
The Landmark Title team frequently works with developers creating mixed-use projects, providing escrow and title services for complex commercial real estate transactions. For more than 40 years, Landmark Title Assurance Agency has delivered its expertise in the commercial real estate sector in Arizona and expanded to Nevada. To learn more about the Landmark Title and our team of professionals focused on personalized service, get in contact here.