Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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New strategies infl uence demand for brick and mortar stores. by Beth Mattson-Teig Retail is one property sector that never has time to rest on its laurels. As they battle the lingering eff ects of the recession and increased online shopping competition, retailers are once again shiſt - ing store strategies. The steep economic downturn forced many retailers to clean house by eliminat- ing underperforming stores, upgrading loca- tions, and taking a hard look at their broad approach to future growth. T e chief task going forward is how to squeeze more effi - ciency — namely lower costs and higher sales — out of brick-and-mortar stores in a world where online shopping is rapidly increasing. "I think that the number of stores are going to be reduced, the size of the stores is going to be reduced, and the operat- ing functionality of the stores is going to increase," says Henry Englehardt, CCIM, a senior vice president at Colliers Interna- tional in Walnut Creek, Calif. CCIM.com Bricks and Clicks Retailers are challenged with the task of transforming strategies and operating models into a "store of tomorrow" to attract greater customer loyalty and a larger share of customer spending. Certainly, brick- and-mortar retailers are doing everything they can to embrace the high-technology shopper, working to combine the in-store experience with the convenience of online shopping with either direct delivery or in- store pick-up. But online retail continues to exceed sales growth from traditional brick-and- mortar channels at an alarmingly high rate. In fact, the average growth rate of online sales has been about 20 percent annually, while the growth rate for traditional retail sales is averaging about 3 percent per year, according to a 2011 retail study by Deloitte Consulting. May | June | 2012 27 Big-box retailers are already shrink- ing store footprints to reduce expenses. "Offi ce supply stores were the fi rst, but now you see retailers across the board looking to reduce their store footprints," says Chad Gleason, CCIM, a principal at Real Estate Investment Services in Kent, Wash. Big boxes that currently occupy 20,000 square feet to 25,000 sf are looking to slim down to 12,000 sf to 15,000 sf. "It is a big chunk of real estate, and you have to pay that bill every month," he adds. Big-box retailers are also using smaller footprints to access urban markets. Target, for example, plans to expand its new urban prototype in 2012. T e urban stores range between 60,000 sf and 90,000 sf — half the size of a typical suburban store. Walmart is also looking for new locations for its neigh- borhood grocery, which, at 40,000 sf, is about one-fourth the size of its superstore format. Ian McKinnell/Getty Images