2019 Metro Market Forecast
Retail Perspective
Grant Mechlin, CCIM, Sansone Group
SIOR RETAIL COMMITTEE MEMBERS
Paul Fusz CBRE
John Shuff Pace Properties
Eddie Cherry The Staenberg
Group
Mark Kornfeld Sansone Group
RETAIL FORECAST TOPICS
• E-commerce, Amazon and Omni-Channel Retailing
• The fate of retail as it relates to growth of e-commerce
• Driving factors in retail bankruptcies
• Market over saturation
• Current state of the St. Louis retail market
• Mixed use developments and Retail-tainment
• Most notable developments
• 2019 market outlook
THE RISE OF E-COMMERCE, AMAZON, OMNI-CHANNEL
Consumer shopping preferences and habits have evolved
• New customer focus: Speed, information, convenience, experience, sense of community
• Most successful retailers using Omni-Channel Retailing to reach customers more effectively
§ Defined: a multichannel sales approach that provides the customer with an integrated customer experience across all channels
• Must provide a more streamlined experience across all their other channels § Physical stores, e-commerce, mobile applications, social media,
blogs and online review communities
Website, mobile application, reward program, Facebook page and physical store are all in sync to provide a seamless customer experience
• 75% of their customers visit their website or mobile app before making an in-store purchase
• Sales associates equipped with mobile devices • App links to YouTube and Facebook for training, events and
classes • Membership programs tracks and rewards purchases
Omni-channeling is a powerful tool
E-COMMERCE: FASTEST-GROWING CHANNEL IN RETAILING
Source: Non-adjusted figures from the U.S Commerce Department, Internet Retailer. This data was updated on August 2018.
U.S. e-commerce sales grow 15.4% in 2018 Year-over-year U.S. online retail sales growth by quarter
E-COMMERCE GROWTH ANNUAL RATE COMPARED TO TOTAL RETAIL GROWTH IN THE UNITED STATES FROM 2014 TO 2018
E-commerce outpacing total sales by 300%
Source: U.S. Census Bureau, NKF Research
AMAZON TAKES OVER
• Speed
• Information
• Convenience
• Experience
• Community
Source: eMarketer, June 2018
HOW DOES AMAZON STACK UP AGAINST ITS ONLINE COMPETITORS?
FATE OF BRICK-AND-MORTAR RETAIL?
• Most people believe online sales account for between 60% and 80%
• This can’t be good for retail commercial real estate
FATE OF BRICK-AND-MORTAR RETAIL?
But how much do online retail sales actually amount to currently?
PERCENTAGE OF E-COMMERCE SALES IN US
• 10% of the $5.1T
• 10% growth rate
• E-commerce estimated to reach 14% by 2021
Source: Statista 2018
10%
2018*
PERCENTAGE OF E-COMMERCE SALES IN ST. LOUIS
Source: US Bureau of the Census
9.8%
2018*
So we know e-commerce is still a fairly small piece of total sales….so why all the bankruptcies?
WHAT IS DRIVING RECENT BANKRUPTCIES HERE IN ST. LOUIS? Increased competition
• Low barrier of entry for thousands of online stores to reach customers Merchandising
• Sears/Kmart trouble attracting shoppers • TJX Companies: 18 consecutive quarters of comparable-store sales growth!
Privatization • Toys R Us – TRU files fall of 2017, 735 stores closed • 2005 PE purchase, debt triples to $5B • Competition issue? 2004 sales were 11.2B; 2017 sales were 11.1B
Market over saturation • Mattress Firm files in 2018 • Stores quadrupled from 2012 and 2016 to 3,500; rapid expansion and large company
acquisitions • Over 230 just in Chicago alone
MARKET SATURATION
• 163M total SF of retail space in St. Louis
• Over 55 SF per capita in St. Louis
• 23.5 SF per capita in the U.S.
• Five times that of the U.K. and other European countries
A correction in retail vs. a fundamental shift away from brick-and-mortar stores
Source: ICSC, Planet Retail, Knight Frank Research, As of 2015.
CURRENT STATE OF MARKET
Vacancy: 4.8% (1.1% Mid-County)
Absorption: 30,286 SF
Rental Rates: $13 Avg ($20.20 Mid-County, $16.70 West County)
Entertainment, Restaurant, Grocery and Medical most active
MIXED USE PROJECTS AND RETAIL-TAINMENT
The new cure for retail? • Projects are experiential in nature by combining retail with
entertainment users • Mixed-use developments expand on retail-tainment by
providing customers with Live, Work, Play Environments
Examples of new mixed-use and retail-tainment focused projects: • Ballpark Village Phase 2 • The District in Chesterfield • The Foundry
BALLPARK VILLAGE PHASE 2
Phase I: • 100 million, 100,000 SF • Opened March 2014 • One of the top
restaurant and entertainment districts in the region bringing in over 6 million visitors a year
BALLPARK VILLAGE PHASE 2
Phase II: • Currently under
construction • Over 700,000 SF • Class-A Office • 29-story apartment tower • Live! By Loews hotel • 75,000+ SF of new retail
space • 31,000 SF Onelife Fitness
gym
DISTRICT IN CHESTERFIELD
• $75M project located in one of the top retail trade areas in the region
• Adjacent to Topgolf • 4 restaurant buildings • 45,000 SF indoor concert venue • 90,000 SF entertainment • 20,000 SF food hall • 150,000 SF of existing retail to
remain • Construction to begin in 2019
Redevelopment of the former Taubman Outlet Mall
THE FOUNDRY
Redevelopment of former Foundry building built in the 1800s • 26,800 SF Punch Bowl Social • 10-screen, 1,000-seat Alamo
Drafthouse • 100,000 SF office space • 30,000 SF food hall featuring
top restaurateurs in St. Louis
180M project adjacent to Cortex District in Midtown now under construction
SUMMARY OF STATE OF MARKET
• St. Louis is statistically healthy despite all of the negative pressures on brick-and-mortar stores, and growth of e-commerce and Amazon nationally
• Great new retail projects coming out of the
ground currently
2019 MARKET OUTLOOK
Market to remain status quo
Vacancy
Remain flat in Core
Rise slightly with Sears/
Kmart closures
Absorption
Net Neutral
Creative entertainment uses, minimal
traditional development
Rental rates
Continue to rise through 2019
Core markets have minimal space or new development
Development
Concentration on mixed use and
retail-tainment vs. traditional power
centers
2019 Metro Market Forecast