Commercial Real Estate Forecast panelists: It’s a dog-eat-dog world in retail

by Dan Rafter

Technology is changing the way industrial facilities are built and how retailers sell their merchandise, according to the panelists at the 14th annual Commercial Real Estate Forecast held by Illinois Real Estate Journal, Chicago Industrial Properties and Midwest Real Estate News.

Anthony Pricco

Anthony Pricco

Anthony Pricco, principal and partner with Bridge Development, said that technology — and specifically Amazon — has changed the expectations of industrial users.

Today, tenants are increasingly seeking 32-foot clear heights, a change from just five years ago when 24-foot clear heights were the norm in industrial facilities. Tenants are also focused more than ever on automation, following, perhaps, the lead of Amazon, Pricco told the full-house crowd at this morning’s conference.

“Go to an Amazon building and you’ll see a three-story building in which everything is fully automated,” Pricco said. “And the Amazon formula is constantly changing. They are always tinkering with their models.”

Andrew Hochberg

Andrew Hochberg

On the retail side, technology and ecommerce continue to hurt brick-and-mortar shops, said Andy Hochberg, chief executive officer and managing broker with Next Realty. The holiday shopping season, he said, was a weak one for brick-and-mortar shops.

But there are ways to succeed in the traditional big-box and storefront market, today’s panelists said. The first step? For big-box retailers, it comes down to location, Hochberg said.

“If you have a good location, I believe it will still be filled,” Hochberg said. “And it will still be filled at a decent rent.”

There have been changes, though, many of them spurred by the number of people ordering products online. The rule of two, for instance, doesn’t always hold today. According to that rule, two retailers of the same kind could thrive in a market. Think Bed Bath & Beyond and Linens n Things. Today, though, it’s not always possible for two like retailers to thrive in many markets, Hochberg said.

“Now it is more of a situation where 1.5 or 1.6 of a concept can survive in a market,” he said.

Hochberg shared this classic joke to illustrate his thoughts on today’s retail market: There were two hunters running from a bear. One hunter asked the other, “How will we outrun this bear?” The other hunter said, “I don’t have to outrun the bear. I only have to outrun you.”

That, Hochberg said, perfectly illustrates today’s retail market: You don’t have to a superstar, but you do have to be better than your fellow big-box, brick-and-mortar competitors.

“There really is a dog-eat-dog mentality in retail today,” Hochberg said.

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