Resilient. Creative. And adaptable. That describes today’s successful retailers. And it’s why the commercial retail sector is performing so well today.
Remember during the height of the COVID pandemic? The fear was that the pandemic, along with the stay-at-home orders, would shutter the doors of even more retailers. But while some retailers did shut down during the pandemic, many others adapted.
They enhanced their online presence. They boosted their delivery services. They made the lives of their customers easier by introducing curbside pick-up, giving shoppers the chance to drive up to marked parking spaces where a worker filled their trunk with the week’s worth of groceries and cleaning supplies.
This ability to adapt to difficult situations has boosted the strength of the retail sector today. Just ask Trey MacKnight, associate with Omaha’s The Lund Company. MacKnight specializes in the retail sector, and he says that Omaha’s retailers have shown that they, too, are resilient.
MacKnight said that retail sales are slower today, thanks largely to higher interest rates. But leasing activity remains strong.
The formula for retailers’ resilience here? MacKnight says that the savviest of retailers have embraced online sales, enhanced delivery options and curbside pick-up. At the same time, they’ve retained a focus on their physical stores. This combination — the famed omnichannel approach — has provided retailers with several ways to persuade consumers to spend their money.
“A lot of people are thinking that the ecommerce world and digital showrooms are what have been taking over retail. They look at that as the big trend,” MacKnight said. “But what I see is that people want to touch and feel products on the retail side. They want that physical space.”
At the same time, experiential retail remains hot. Consumers today are interested in high-end bowling alleys, indoor miniature golf/bar combinations and, of course, pickleball-themed eateries and bars.
MacKnight said that at least three pickleball concepts have committed to coming to the Omaha market or are actively looking at the market today. And these aren’t small users. MacKnight said each user is looking for 30,000 to 40,000 square feet of space.
But while leasing activity remains strong, sales have slowed. What can change this? MacKnight said that the sellers of retail real estate need to adjust their expectations in line with today’s economic conditions.
“Sellers want a higher number when they sell, but buyers need a lower number,” MacKnight said. “That has been one of the causes of the lull we are seeing in sales.”
MacKnight said that as interest rates continue to rise, sellers are slowly adapting. Those sellers who don’t have to sell, though, are choosing to hold onto their properties and wait for interest rates to either fall or at least stabilize.
And those who have to sell? They need to be realistic.
“If you have to sell you need to look in the mirror and realize that these are the times right now,” MacKnight said. “This is what the market is telling me this property is worth. Those owners are selling. But those that don’t have to sell won’t sell right now.”
Even with the slowdown in sales, though, many of Omaha’s retailers are thriving today. In part, this is because of the habits that retailers embraced during the height of the COVID pandemic. As retailers enhanced their online ordering, delivery and pick-up options, consumers responded, ordering more products.
MacKnight points to some of the restaurants he has placed. In 2019, customers would be fighting for seats inside these restaurants. Today, customers can walk in and pick up their boxed orders from a rack at the front of the restaurant. And more often, MacKnight says, that’s what he sees when he steps inside these establishments: rows and rows of to-go orders.
“These restaurants now have two forms of income that are bringing in the revenue,” he said. “They have online ordering and pick-up while still offering dine-in. These new habits that people learned during COVID times have provided such a boost to their businesses. Kudos to the indivduals who brought new options to their customers.”
Sara Hanke, an associate broker with Omaha’s The Lerner Company, said that Omaha’s retail sector has been resilient not only in the face of higher interest rates, but during the worst of the COVID pandemic, too.
“Our retailers didn’t really slow down during COVID,” Hanke said. “They shifted, though, to meet the needs of customers. There was a greater need for outdoor space for drive-throughs. A lot of retailers have shrunk the footprints of their stores as they focus more on delivery and pick-up. It’s not that retailers slowed down during the pandemic, it’s more that they right-sized their offerings.”
And, yes, some major retailers have declared bankruptcy recently. But while some of those bankruptcies were spurred by COVID, many of them were inevitable anyway. Even without the pandemic, many legacy retailers were going to fall into bankruptcy as shopping trends changed around them.
Hanke said that the influx of big-box space into the market also comes with a benefit: It provides new space for those retailers looking to break into or add to their existing presence in the Omaha market.
“There is some hope here. The lack of retail inventory is high and there is a huge demand for larger retail space,” Hanke said. “Those spaces left behind by big retailers will get gobbled up.”
The lack of space is a real issue in Omaha today, Hanke said. Retailers want spaces that offer high visibility at busy intersections. The quick-service restaurants are also looking for spaces that have enough room for drive-through lanes, often multiple lanes.
The problem is, there simply aren’t enough of these prime spaces for every retailer that wants one, Hanke said.
“The doomsday narrative was always that retail is dead and the big boxes were going to be empty,” Hanke said. “Well, other retailers are filling those spaces. Those spaces might get divided or entertainment or soft goods users might fill them. But they are getting filled, and we are now at the point where there is not a lot out there for retailers looking to relocate or right-size their locations.”
MacKnight, like other CRE professionals working this market, is excited about the new development activity that is still taking place in Omaha.
He’s especially pleased with the focus that retailers have on Omaha’s downtown core. He said that projects such as the revitalization of the Gene Leahy Mall have brought activity back to the city’s downtown. This has benefitted not just the center of downtown, but its surrounding neighborhoods, too, including the areas around Creighton University and Charles Scwab Ballpark.
“We are seeing lots of great retail moving to that area,” MacKnight said. “We are seeing national groups and local individuals that are expanding and trying new concepts. The whole downtown and its surrounding areas have become a hub for innovation.”
Hanke agreed that entertainment-based retail is particularly strong in Omaha today. Just look at pickleball. The sport, a combination of racquetball and tennis, is growing in popularity across the country. Not surprisingly, several companies are embracing the trend and opening entertainment centers that include pickleball courts, bars and restaurants.
This includes Smash Park, which is planning a new location in Omaha. Hanke said that indoor miniature golf and driving range facilities are also popular, with many of the entrepreneurs behind these concepts targeting the Omaha market for new facilities.
Discount retailers are thriving in today’s economy, too, Hanke said. Franchises such as Five Below and Dollar General are opening new locations across the area.
“In the next year, we will see lot of new concepts come to our market,” Hanke said. “We constantly get new restaurants, but we’ll get other new concepts, too. Just look at downtown. We are getting new entertainment centers in our downtown, giving us the entertainment hubs that the downtown area has been lacking.”
Downtown Omaha, of course, is reliant partly on a rebound in the office sector. That is happening, but it is happening slowly. Hanke, though, says that people are eager to get out and visit restaurants, shops and entertainment centers. And when more people are back in the office, that will provide another boost to downtown’s restaurants, shops and retailers, too.
“There has been a real resurgence in social activity after COVID,” Hanke said. “Then there’s the boost that the Gene Leahy Mall has provided. You are seeing more people hanging out and going out to eat in our downtown. There’s a real sense of community downtown today.”