The pandemic cast a long shadow over physical retail, with some experts predicting its demise as shoppers increasingly embraced e-commerce. But in a surprising twist, brick-and-mortar stores are staging a comeback in 2024, and it’s the suburbs leading the charge. The recent back-to-school season provided fresh proof of this resurgence, as consumers defy economic worries and flock to stores. This revitalization is particularly good news for shopping center REITs like Regency Centers and Kimco Realty, which are seeing increased foot traffic and tenant demand at their suburban locations.
Despite inflation and stubbornly high interest rates, shoppers are opening their wallets. August saw a 0.7% increase in consumer spending, fueled by back-to-school needs and a strong job market. It’s a sign of resilience that’s giving both retailers and investors – including those invested in REITs – a reason to smile.
This positive trend aligns with the findings from the International Council of Shopping Centers (ICSC). Their recent survey indicates that back-to-school sales are exceeding expectations, with families focusing on fully equipping their children for the academic year. A robust labor market and wage growth are key factors in enabling this spending, despite inflationary pressures.
One clear trend is the renewed popularity of suburban shopping centers. These conveniently located hubs offer families a one-stop shop for all their back-to-school needs. Busy schedules make these easily accessible centers a major draw, benefiting REITs that own properties in these prime locations. The ICSC’s survey echoes this sentiment, highlighting a preference for open-air centers and strip malls among back-to-school shoppers.
Retailers have adapted by blending the digital and physical worlds. The “buy online, pick up in-store” model has boosted both online sales and foot traffic. This hybrid approach caters to today’s consumer, who wants flexibility and convenience. It’s a strategy that’s proving successful for retailers and landlords alike, further enhancing the appeal of shopping centers for REIT investors.
The back-to-school season is proving that reports of brick-and-mortar’s death were greatly exaggerated. It’s also a testament to the enduring appeal of experiential shopping and the ability of retailers to adapt in an ever-changing landscape. For REITs with a focus on shopping centers, this resurgence spells good news, with potential for increased occupancy rates and rental income in the coming months. As the ICSC data suggests, this trend is likely to continue, making shopping center REITs an attractive option for investors seeking stability and growth in the current economic climate.
