The Decline of Retail: Fact or Fiction and Lessons in How to Respond

By Sarah T. Lemke

There is no denying that the retail sector has changed over the last 15 years. Open any trade publication or newspaper and you will find headlines touting the death of retail and the decline of brick and mortar retail. Shifts in the retail environment have been attributed to the rise of e-commerce and changing consumer demands, as well as the failure of some large-scale retailers who were facing massive debt burdens from private equity financings and the economic difficulties associated with COVID-19 economic recovery. However, retail over-saturation in the United States has also played a significant role in forcing a right sizing of the market.

Despite ongoing retail store closures and bankruptcies, a silver lining has emerged and there are many lessons to learn from the experiences of the last 15 years. According to research from Coresight, for the first time in many years, there were more store openings in 2022 than closings and 50% fewer closures than the year prior. 2023 is on track to show continued progress in store openings with openings exceeding closures for the second year in a row. A closer look at these trends and examining which stores are closing versus those that are opening new stores reveals that retail is not, in fact, dying but evolving. Only those retailers that can adapt to changing consumer preferences and harness the power of e-commerce and technology will thrive in this new climate. Similarly, owners of retail properties need to evolve their thinking about how to best meet consumer demand and populate their centers.

As developers of retail and mixed-use properties, our team at New England Development is constantly evaluating changes in the market, considering the best mix of tenants and looking for ways to reinvent our centers. For example, acknowledging that the vast majority of retail sales still occur in brick-and-mortar stores, we are working with digital-native brands to open stores in our centers to expand their brand awareness and find additional ways to connect with their online customers. Evolving retailers are creating “hybrid shopping” opportunities, offering a convenient place for shoppers to try on merchandise, buy online and pick up in store, with same day delivery offered by many stores.

Additionally, where in the past a large number of retail tenants may have been apparel focused, the last few years have seen a shift toward a wider mix of uses in retail centers, with a particular emphasis on adding more experiential retail, restaurants, and fitness and entertainment users. Lastly, where appropriate, converting retail into complementary uses, such as office, lab and/or residential uses, can help activate a center and bring more shoppers to the center. For example, at New England Development, we are underway with a redevelopment of CambridgeSide, a 3-story, 1 million sq. ft. interior shopping mall in East Cambridge where we are converting the former Macy’s, Sears and Best Buy anchor-stores, as well as the third floor of the mall, into an additional 1 million sq. ft. of lab/office and residential development. The two levels of remaining retail will continue to serve an integral role at the center of the project and provide important shopping, service, dining and entertainment opportunities for the region and new tenants and residents of the redeveloped center. By reducing the amount of retail in favor of other uses, strategically choosing the most successful retail operators and providing a broader mix of experiences at the center, real estate owners can be well positioned to respond to the changing retail market.

Sarah T. Lemke is senior vice president, project development at New England Development