Though retail real estate has suffered greatly from the massive closures of major brick-and-mortar retailers in the past year, there are still ample investment opportunities in the sector. Tenants, owners and investors could find opportunities in the sector as retailers strategically transform their business models and physical locations to embrace e-commerce and become more experiential.
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TH Real Estate said in a 2018 outlook report that there are three ways the retail sector will be transformed this year. The firm called it the three R's of retail: reduce, reuse and recycle.
Reduce
Rather than ditching all of their space, a number of retail tenants are opting to decrease square footage in order to hone their focus on the stores that are performing well. Others are choosing to get rid of the brick-and-mortar locations altogether in favor of e-commerce.
Reuse
Some landlords are getting creative in their attempts to keep pace with the shift in consumers shopping preferences, and are repurposing spaces instead of getting rid of them. Malls are adding tenants like grocers, gyms and medical offices, while retailers are turning spaces previously used for shopping into pickup-and-order counters where consumers can easily collect items purchased online.
Recycle
While many retail spaces can be revived with an update, others have met their end. This has presented an opportunity for investors and developers who are turning these previous retail spaces into multifamily, residential, office, healthcare, self-storage and industrial properties.
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