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Page 12 — Retail Properties Quarterly — August 2017
State of Retail
VISIONARIES EXCEEDING EXPECTATIONS
ONE PROJECT AT A TIME
AN EMPLOYEE OWNED, COLORADO CORPORATION
Acurrent retail storyline in the
national media is that the
days of regional malls are
numbered. The assumptions
underlying this narrative are
that purchases are moving online,
retailers are going bankrupt, and
millennials have rejected the sub-
urban mall and the lifestyle it rep-
resents. Unfortunately, these claims
are not entirely unsubstantiated.
On a national scale, the number
of store closures is reaching a level
unseen since the depths of the
Great Recession in 2009. Between
January and April, major retail
chains announced plans to shutter
over 3,500 stores nationally. This
accounts for more than 62 million
square feet, or
0.6 percent, of all
retail real estate
across the coun-
try – a significant
amount of space to
go dark in the span
of four months.
Credit Suisse pre-
dicts that up to
8,600 brick-and-
mortar stores will
close their doors in
2017.
Much of the
focus for this deterioration has been
placed on millennials, the rise of
e-commerce and the cultural shift
toward experience-based spending.
In the current digi-
tal age, it is argued
millennials no lon-
ger go to physical
stores to buy the
few material pos-
sessions they have,
and the increased
popularity of
e-commerce has
given all consum-
ers a new avenue
for purchasing
goods. Retailers
are now faced
with the difficult
task of adapting
to compete with
the growing nature of e-commerce,
shifting demographics in America’s
suburbs and the rise of experience-
based retail.
Despite the growing number of
stories that focus on malls’ demise
and the reality that approximately
12 percent of all retail purchases are
completed online, regional malls
nationally have had positive net
absorption since 2010 (the only blip
in absorption was in 2009 at the
height of the recession). At the end
of 2016, occupancy across the U.S.
was 95 percent, equating to 848 mil-
lion sf of space.
The story within the Colorado
retail sphere is even more upbeat.
There has been over 1.2 million sf
of positive net absorption in the
state’s 19 malls since 2010, with
current occupancy over 96 percent,
equating to 19 million sf of occu-
pied space.
While Colorado isn’t completely
immune to bankruptcies and
closures from retailers such as
Sports Authority, J.C. Penney, Sears,
Gordmans, Golfsmith and Payless
ShoeSource, the volume of clos-
ings appears to be less severe in
the state than in other parts of the
country.
For example, Sears Holdings,
which operates both Sears and
Kmart stores, announced it would
close 237 stores nationwide in
2017. Only two of the 237 are in
Colorado, which leaves 44 Sears
and six Kmart locations opera-
tional throughout the state. Macy’s,
another prominent mall anchor,
also underscores Colorado’s rela-
tive resiliency. In 2017, Macy’s
announced it would shutter 68 of
its stores nationwide, but none of
Colorado’s 14 Macy’s locations were
closed.
Why the seemingly optimistic
outlook for Colorado’s retailers
compared with the national trend?
Colorado’s economy is outperform-
ing much of the nation. A large con-
tributing factor for this growth is
that, according to a recent study by
Zillow, 18- to 34-year-olds account-
ed for 35 percent of Denver’s popu-
lation growth from 2010 to 2014, up
from 26 percent in the first 10 years
of the century.
Not surprisingly, malls with the
highest levels of occupancy are in
areas where the millennial popula-
tion is growing rapidly. Despite all
the attention on urban living, it is
anticipated that many millennials
will follow a similar path as past
generations and eventually make
the migration to suburban America
where they will be settling down,
Larry Thiel
Managing director,
Transwestern,
Denver
Brian Landes
Director of
GIS/location
intelligence,
Transwestern,
Walnut Creek,
California
Transwestern
Several traditional malls in Colorado, including the Streets at SouthGlenn, already
have made the transformation into community destinations.