Consumers want less space, but retailers are struggling

It looks like the real-estate industry has completely gotten over the recession of 2007-2008, based on trends seen in the fourth quarter of 2018.

In Q4-2018, less space per store was leased to new stores, a slight decrease compared to the previous quarter. Back then, a lot of brands, retailers and online companies alike were experiencing a change in customer behavior, with greater reliance on mobile devices, according to DTZ’s Q4-2018 Retail Landscape Report.

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As if a difference in shopping habits wasn’t enough, retail stores experienced a decline in sales, according to the report.

And with a sales drop comes slower deals, especially for retailers in high-cost property markets. DTZ says property tenants renegotiating their current leases at year-end will see higher lease costs. For this reason, Black Friday shopping deals might feel a bit slower this year than in past years.

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But even though the consumer is changing, demand for retail space is growing in high-demand markets like Denver and Boise, Idaho.

“Growth of the online shopping population and expansion of the Black Friday format continues to create demand for retail space,” says DTZ’s COO Bruce Reid. “Our office market is near full, while our retail market continues to remain strong with steady and strong demand from established and new retailers that expand and grow in the Front Range.”

The weak Colorado real estate market is bad news for Colorado’s state-funded student loan program, which has capped interest rates at 3.5% for new loans as a result of the Colorado economy improving.

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“The value in property prices is limited in that it’s not being subsidized,” Reid says. “The state student loan program sees improvement in growth. The value for asset appreciation is limited, with more stable than a performance property.”

DTZ expects Denver to remain a strong real estate market. It has also increased its forecast for energy investment, which fuels the Front Range’s real estate boom.

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