business news in context, analysis with attitude

"Bricks-and-mortar store owners are emerging from the pandemic with surprising strength, posting some of their best numbers in years and plotting expansions as more Americans venture out to buy things again," the Wall Street Journal reports.

"U.S. retail vacancy fell to 6.1% in the second quarter, the lowest level in at least 15 years, while asking rents for U.S. shopping centers in the quarter were 16% higher than five years ago."

And, some context from the Journal:

"The retail real-estate industry’s turnaround reflects a wrenching, decadeslong adjustment that included hundreds of retailer bankruptcies, widespread vacant storefronts and plummeting demand for enclosed malls. Over the past dozen years, construction of new retail has slowed significantly after many years of overbuilding.

"Instead, most developers are opting to renovate outdated properties rather than building new ones. Those that do embark on new projects are more cautious, usually securing leases from tenants before breaking ground. More and more companies that started as online only retailers, like Warby Parker Inc., are also turning to real estate to attract customers and boost growth."

KC's View:

Perhaps the most interesting statistic from the story - "More stores opened than closed in the U.S. last year for the first time since 1995."

I would argue that in all likelihood, the situation is fluid, with trends of the past two decades reversed by a number of factors.  We're coming out of a pandemic, and so people are hungry for physical experiences more than they were before, but in a way that may not be sustainable long-term.

That said, retailers can take advantage of the moment by creating more experiential physical stores that not only will generate short-term business, but long-term loyalty.  But the window won't be open forever, and the currents that took people away from physical stores once again are likely to dominate.