All right. Get ready. Cause we’re going deep into retail this week. Yeah. The week of December 27th, 2024. And while you’ve given me a really fascinating mix of sources for this one. Oh yeah. Yeah. We’ve got real estate reports, articles about specific companies. We’ve even got some consumer behavior analysis.

Seems like we’ve got a pretty good snapshot of where retail is right now. You’re right. With all its complexities. Definitely. Lots of contradictions too. Exactly. So what we’re going to try to do in this deep dive is help you make sense of it all. Right? Mm hmm. What are the forces shaping the future of retail?

Should you be paying attention to? And where are the surprises hiding? I think you’re right. There are definitely some surprises in this data. For sure. And I think a good place to start might be with the surprisingly resilient economy you mentioned. Yeah, okay. The U. S. economy, you know, projected to grow 2 to 4 percent in 2025.

Wow. Which makes it a global bright spot, really. Really good news for retail, right? Absolutely. Absolutely. Strong economy usually means more people spending. Yeah, more consumer spending. Exactly. Exactly. But here’s where things get interesting. Okay. The commercial real estate market is also seeing, um, really low supply levels.

Oh, wow. Which is pushing up those rental prices. So it’s a landlord’s market. It is. Across the board. Residential. Industrial. Yeah. And, yep, retail. All of them. So even before we get to specific stores. Right. Or trends even. Yes. It’s important to understand this backdrop, you know? It is. It’s crucial. It is crucial because it means retailers are operating in an environment where Costs are high.

Costs are high. But But the potential for profit is high. Yeah. If they can attract If they can attract those All those spending dollars. Yeah. Precisely. Okay. Now, there’s one sector that’s not quite as rosy, though. Office space. Okay. High vacancy rates. Yeah. And we’ve got those rising interest rates.

They’re really creating Refinancing pressures. Yeah. Refinancing pressures for a lot of companies. Yeah. Some developers are even looking at, uh, this is interesting, office to residential conversions as a way to adapt. Makes you wonder, if those conversions happen, will they create new retail opportunities in those transformed neighborhoods?

It’s a good question. It is, yeah. It’s something to think about. But for now, let’s get back to those retail hotspots. Okay. And all the data’s pointing south. Way south. Measly. Way south. The Sunbelt’s dominance in retail is undeniable. I mean, it really is. Cities like, you know. Oh yeah, hit me with them.

Phoenix, Las Vegas, Atlanta, Orlando. Huge. They’re topping the charts in terms of performance. Yeah. Strong population growth. Uh huh. Business friendly policies. For sure. And that, uh, that desirable lifestyle that everyone wants. Yeah. Drawing people in. Drawing people in. Exactly. But there was one surprise in the top 10 best performing retail markets.

Oh. What’s that? Columbus, Ohio. Interesting. The only non sunbelt city to make the cut. Hmm. Columbus seems to be benefiting from a few key factors, though. Like, well, we’ve got the growth of Ohio State University, and then also major investments from, uh, you know, big tech giants like Intel and Amgen. Meta.

Meta. Meta. Yeah. So it’s not just the sunbelt, but it is hot. It’s hot. Okay. Ready for a blast from the past. Okay. Strip malls are making a comeback. Ah, the humble strip mall. Remember those? I do. They’re experiencing a resurgence, big time, strong leasing activity and vacancy rates even lower than indoor malls.

That’s interesting. That one surprised me. Yeah, me too. So what’s driving this strip mall revival? Well, a few things. Okay. Um, first, They’re largely Amazon proof. What do you mean by that? Meaning they’re anchored by those businesses that people just need to visit in person. Okay. You know, like grocery stores or pharmacies.

Makes sense. Those everyday errands, you know? Yeah. Bring in the foot traffic, which benefits the whole center. Right. Exactly. Okay. They also tend to have a lot of, uh, local Service oriented businesses. Like, give you some examples. Mail salons, dry cleaners, restaurants. All that good stuff. Yeah. All those things that are harder to replace with online shopping.

Right. Right. And then also, from a business owner’s perspective, the rents are often more affordable in strip malls. Makes them attractive. Very attractive to both tenants. And investors. And investors, yeah. Yeah. Some are even seeing them as, um, what they call value add opportunities. What does that mean?

Meaning they can buy the property, improve it, and then increase its value. So maybe the next time I’m, you know, driving through my local strip mall, I should be thinking of it as a potential investment opportunity. It’s a great example of how what’s old can become new again. Yeah, it really is. Especially when it meets the needs of today’s consumers and businesses.

Absolutely. But strip malls aren’t the only format showing resilience, are they? No, they’re not. We’re also seeing the power of those, uh, what do they call them, dense retail clusters. Yes. Whether it’s a bustling high street in a city. Yep. Or a vibrant, you know, suburban town center. Right. People just crave that sense of place.

You know, a destination, a shopping destination. With energy. With energy, variety, that’s something you just can’t replicate online. It’s the experience. Yeah. And these dense retail areas are seeing high foot traffic. Definitely. Which is driving up those rents and attracting those investors. For sure. So, whether it’s a revitalized strip mall or a buzzing city street, you know.

Right. The takeaway is clear. What’s that? People still value those physical shopping experiences. They do. Especially when they offer something unique and engaging. For sure. Okay. You’re welcome. But, as we know, you know, consumer behavior is constantly evolving. Always changing. It is, yeah. Yep. Even with some economic uncertainty, November retail sales actually exceeded expectations.

Wow. Yeah. So that tells us that The American consumer is Is still willing to spend. Especially heading into the holidays. Yeah. Right. Exactly. It’s like a vote of confidence for the retail sector. It is. Yeah. Exactly. Okay. And speaking of things people are spending money on Yes. Let’s talk about a trend that I think is going to make everyone’s mouth water.

Okay. Fried chicken. Oh, I love fried chicken. Visits to fried chicken restaurants are through the roof. Really? Yeah, and it’s not just those big chains. Eh. Even smaller brands are seeing strong growth. Like what? So you’ve got those established players like Raising Cane’s, Dave’s Hot Chicken, Church’s Chicken.

They’re all expanding. Right. But then you’ve also got up and comers like Urban Bird Chicken and Lane’s Chicken Fingers attracting, like, these loyal followings. That’s interesting. It is interesting. So what’s driving this fried chicken frenzy? I don’t know, is it comfort food in uncertain times? Desire for indulgence?

Maybe. It’s probably a combination of factors, you know? Yeah. But I think it also speaks to that desire for experiences we were just talking about. You could easily order delivery, but people are choosing to go to these restaurants. They are. You know, it’s about the atmosphere, the social aspect, maybe even a bit of nostalgia.

Yeah, maybe those long lines are part of the appeal. Could be. But it’s not all about comfort food. Some more traditional retail categories are making a comeback too. Oh really? Like what? Remember bookstores? Oh yeah, I love the bookstores. Well Barnes Noble is seeing a resurgence. Interesting. More customers making dedicated trips to their stores.

Wow. Showing that renewed appreciation for that, you know. That physical bookstore experience. Yeah, that physical bookstore experience. It aligns with this broader trend of the return to experiences. I love that. You know, after years of being cooped up at home, people are eager to get out, connect with others, engage with their communities.

Yeah. Whether it’s dining at a favorite restaurant or browsing through a bookstore, these experiences offer something that online shopping just can’t replace. It’s a really powerful reminder that retail is about more than just transactions. Absolutely. It’s about creating a sense of place, fostering connections, offering experiences that resonate with consumers.

Couldn’t have said it better myself. However, not all retail stories have a happy ending, right? Unfortunately not, no. We also came across a company that’s struggling, even in this relatively healthy economic environment. Yeah, the Container Store. The Container Store, oh wow. Yeah, the home organization retailer.

Filed for Chapter 11. Chapter 11, Bankruptcy Protection. Wow. They’ve been hit by, well, a combination of things. Increased competition, higher expenses. Makes sense. And, interestingly, a sluggish housing market. The housing market connection surprised me. Yeah, it’s interesting, right. So when people aren’t moving as frequently, they’re less likely to invest in Home organization products.

Home organization products, yeah. It seems intuitive, but In hindsight! Yeah, in hindsight. Yeah, but it highlights how interconnected these various sectors of the economy really are. It’s like a domino effect. It is, yeah. And In the container stores case, it’s led to some difficult decisions. Unfortunately, yeah.

What’s the plan? Well, they plan to keep their stores open, at least for now. Okay. And emerge as a private company within the next two months. Wow. This situation raises some important questions about the challenges these businesses face. Specific retailers face, even in a relatively healthy economic environment, you know.

It’s a good reminder that even in a growing economy. Yeah. Not all businesses. Are guaranteed to succeed. Yeah. Adaptability and innovation are crucial. Crucial. Yeah. Especially in a rapidly changing retail landscape. Okay. Speaking of adaptability and innovation, let’s move on to a rivalry that’s heating up.

Okay. And could have some major implications for the future of retail. All right. Me with it. Amazon versus Walmart. The battle of the Titans. It is. It really is. Here’s where it gets really interesting. I’m ready. Amazon is diving head first into online auto sales. No way. Would this be the next big disruption?

That’s the million dollar question. It is. Amazon is definitely leveraging its vast ecosystem and brand power. I mean, how could they not? Right. And they’re partnering with Hyundai to build this, uh, direct to consumer approach. That’s a key difference from Walmart’s strategy. Yeah. How so? Well, Walmart is relying on its existing infrastructure.

Okay. And that physical presence to offer those auto services through partnerships with companies like CarSaver. Yeah. So Walmart is playing to its strengths. They are. Utilizing its vast network of stores. Uh huh. And it’s already established customer base. Huge. Yeah. So what do the experts think about this developing competition?

Well, Michael Zakor from 5 New Digitals Okay. Believes that Amazon’s strategy is all about building trust and familiarity. It makes sense. He points to the fact that Amazon’s starting with, uh, A smaller selection vehicles and focusing on those customer ratings and reviews just like they do with other products on their platform.

Classic Amazon tactic. It is, yeah. Start small, build trust, and then scale rapidly. Exactly. What about Walmart’s approach? Well, Arius Webster Berry from Webster Berry Marketing. Okay. He emphasizes the power of convenience. Yeah. And that existing infrastructure. Okay. He believes that Walmart’s ability to offer, um, a more seamless integration of online and offline services like, Like what?

Financing, maintenance. Okay. Will appeal to, uh, a broad range of customers. It seems like both companies have a solid chance of success. They do. But they’re approaching the market from very different angles. Exactly. And that’s what makes this rivalry so fascinating to watch. It is. It’s this classic battle of e commerce giant versus brick and mortar behemoth.

Each with their own Their own set of advantages. Yeah. This raises an important question, though. Oh, what’s that? What does the future hold for those traditional car dealerships? That’s a good question. Will they be able to compete Yeah. with these giants, or will they become relics of the past? Only time will tell.

I think only time will tell. But one thing’s for sure. What’s that? This competition is gonna be a game changer. It is, and it’s just one example of how the retail landscape is constantly Evolving. Yeah, you’ve gotta stay nimble, adapt to changing consumer preferences, and embrace those new technologies if you want to survive.

Survive. Could not agree more. Yeah, it’s an exciting time to be following retail. It is, it really is. Yeah, it’s like, it’s almost like watching this expert speaker. Giant game of chess, you know, with, with Amazon and Walmart making their moves. Strategic moves. Yeah, strategic moves and counter moves. But while they’re battling it out for market share.

Right. There are also some broader trends at play. Oh, absolutely. That are shaping the whole retail landscape. For sure, and one of the most interesting ones. Okay. Is this shift toward. What some people are calling the calling it experiential retail. Okay, it’s this idea that people are seeking out more than just products more than just Yeah, stuff, right?

They want they want an experience. They want a sense of community. Okay, a connection with the brands. The brands they support. The brands they support, exactly. So how are we seeing this play out? Well, take the, the resurgence of bookstores, for example. Okay. People could easily buy books online. Oh, yeah, for sure.

They’re choosing to go to physical stores. They’re going to Barnes Noble. They are, they’re going to Barnes Noble. And it’s not just about buying a book. It’s about the atmosphere, the, the discovery process. Right. The joy of just browsing. Browsing the shelves. Browsing the shelves. And maybe you find something unexpected.

It’s like a treasure hunt. It is, it is. It’s an experience that online retailers just can’t replicate. And bookstores aren’t the only one. No, not at all. We’re seeing this in the food and beverage industry too. Remember that fried chicken frenzy we were talking about? Oh yeah, how could I forget? People are choosing to dine in.

Yeah. At those restaurants. Even when they could order delivery. They could order delivery, stay home, put on their comfy pants. Exactly. But they’re not. They’re not. They’re going out. They are. They’re going out. They’re waiting in line. Yeah. It’s about the social aspect. The ambiance. The feeling of being part of something.

Yeah. Bigger than yourself. Like, those lines are a part of the experience. I think you might be right. And it speaks to this deeper human need. For connection. For connection and community. Yeah. Something that’s been so important. Absolutely. After years of, of social distancing, isolation, people are craving those real world interactions.

Yeah, they want to, they want to gather with friends, share meals, share meals, experience things together. And retailers are noticing. They are. They’re designing spaces that encourage interaction. Okay. Creating those events. Experiences that draw people in and focusing on that sense of community around their brands.

It’s a smart strategy. It is. Because at the end of the day. Yeah. It’s not just about selling products. It’s about It’s about building those relationships. Yeah. And creating those lasting connections. And customers. Exactly. Which are so valuable. They are. Especially now. Yeah. In a world where consumers have more choices than ever.

More choices than ever before. But speaking of choice. Yes. Let’s circle back to e commerce. Okay. Brick and mortar retail’s evolving. Mm hmm. But online shopping. Yeah. It’s still growing. It’s not going anywhere. At a rapid pace. It’s not going anywhere anytime soon. So what’s interesting to me is. Yeah. We’re seeing this convergence.

Oh interesting. Between the online and offline world. It’s like the lines are blurring. The lines are blurring. That’s a good way to put it. So retailers are using technology to enhance that in store experience. Yeah. And then those online platforms are trying to create those more personalized. Uh huh.

engaging shopping experiences. And consumers are benefiting from this. They are. Absolutely. They have more options. Right. More convenience and more control over how they shop. Think about the strip malls we were talking about. Good. They’re benefiting from the fact that they offer that mix of, um, you know, essential services.

Groceries. Yeah. Groceries, prescriptions. Things that are hard to buy online. Things that are hard to buy online, but they’re also adapting to the digital age. How so? By offering online ordering. Okay. Curbside pickup. All those other convenient services. It’s about meeting the consumer where they are.

Exactly. Whether that’s online. Yeah. Offline. Or somewhere in between. I like that. And that’s a key takeaway for anyone who’s involved in retail. Whether you’re Whether you’re a business owner, a business owner, investor, an investor, or just a consumer. The future of retail is really about creating those seamless and engaging experiences that blend the best of both worlds.

I love that. Blending the best of both worlds. Now, speaking of blending the best of both worlds, okay, let’s talk about another trend that’s a really reshaping retail, right? The rise of the omni channel consumer. Omni channel? What is that? So the omni channel consumer is someone who seamlessly moves between online and offline channels when they shop.

So like, give me an example. So they might. Browse products online. Then go visit a store to see the product in person. Uh. And then make the purchase using their phone. Oh, okay. So they’re using all the tools. All the tools at their disposal. Exactly. To create that personalized experience. And retailers are having to adapt this.

It seems like it would be hard to keep up. It is. It is. They need to create a consistent brand experience across all channels. That’s absolutely. Throughout the website. Social media. Social media, yeah. Physical stores. It’s a tall order. It is. But the retailers who can successfully navigate this, this omni channel landscape, Yeah.

They’re the ones who are going to win over the hearts and wallets. These savvy consumers. But these savvy consumers, exactly. So it’s not just about having a presence on multiple channels. Right. It’s about creating an integrated experience. A seamless experience. Where consumers can move between those channels easily.

Without having to, you know, repeat information. Start the journey over. Right, exactly. It’s about removing those. Those friction points and making the shopping experience as smooth and enjoyable as possible. So this requires retailers to invest in technology, technology, data analytics, customer relationship management tool.

Yeah. All of that. It’s a big investment. It is. But it’s one that’s probably going to pay off in the long run. Yeah, because consumers are looking for brands that, that understand their needs. Understand their needs and make their lives. Easier. Yeah. Easier. And those brands are the ones that are going to thrive.

In the years to come. Before we move on, I want to touch on something we mentioned earlier. Yeah. The role of technology in retail. Oh yeah. Yeah. Technology seems to be playing a bigger and bigger role. It really is. In every aspect. In every aspect of retail. From managing inventory. Uh. To customer service.

Uh, trucketing. To marketing. It’s everywhere. And we’re seeing some really innovative applications of technology emerging. Oh, like what? Well, some retailers are using AI, Okay. Artificial intelligence, To do what? To personalize product recommendations, Okay. Optimize pricing, Uh huh. Even create these virtual shopping assistants.

That sounds like something straight out of a sci fi movie. I know, it’s amazing how far technology has come. And it’s only gonna get, More sophisticated. More sophisticated. So, retailers who embrace these advancements, Yeah. Yeah. Yeah. They’re going to be able to create these truly personalized and engaging shopping experiences for their customers.

Like they’ll be able to anticipate our needs before we even know what they are. Exactly. And that level of personalization is incredibly powerful. It is. It can build loyalty, drive sales, and create a truly differentiated brand experience. So technology. While it’s often seen as a disruptor, in retail, it’s also an enabler.

It is. It’s giving retailers new tools and insights. Absolutely. To better understand their customers. And create more compelling. Shopping experiences. And this is especially important in today’s competitive landscape. Consumers again have more choices than ever before, more choices than ever before. Now, speaking of competition, okay, let’s circle back to that epic battle between Amazon and Walmart.

Oh yeah. The battle of the Titans. We talked about their move into auto sales, but they’re also competing fiercely in other areas like what? Like, grocery delivery, online marketplaces. It’s a rivalry for the ages. It is, it really is. And it’s impacting the whole retail landscape. It is, they’re constantly pushing each other to innovate.

To innovate. Lower prices. And improve that customer experience. It’s like they’re raising the bar. For everyone else. For everyone else. Which, you know, can be frustrating. It can be. For a competitor. But ultimately, it’s good for us. It’s good for the consumer. It is. We get more choices. More choices. Lower prices.

Lower. More convenient services. And this constant stream of innovation. So as we move into the final part of our deep dive. Okay. What’s the one takeaway you want our listeners to remember? I want them to, I want them to be an active participant. Okay. Don’t just shop. Observe. Observe, okay. Notice what’s working.

Uh huh. What’s falling behind. What excites you as a consumer. Okay. Because those are the clues. To where retail is heading. To where retail is heading next. Ooh. I like that. Are we talking about becoming like more conscious consumers? Yeah, yeah. Maybe even spotting those retail trends? Absolutely. Before they hit the mainstream.

Exactly. It’s about, you know, being aware of the forces at play, understanding your own needs and preferences. As a shopper, and maybe even asking yourself, what’s, what’s missing? What could make my experience better? Because maybe that’s the seed of the next big retail innovation. It could be. But before we get too far ahead of ourselves, right, let’s bring it back to the concrete takeaways.

Yeah. Good ideas from all these sources. We’ve covered a lot, a lot of ground. Let’s distill it down to what’s most important. All right. First off. Those macro trends. Right. They matter. They do. That strong U. S. economy. It’s a tailwind for retail. Yeah, it is. But so, are those high commercial real estate costs?

No, they are. You as a consumer might not see those directly. Right. But they influence everything. Oh, yeah. From store locations to pricing. They do. And it’s worth noting. How’s that? Those real estate trends are playing out differently across different sectors. Oh, interesting. Office markets facing challenges.

Right. Industrial and residential are strong. Uh huh. Retail sits somewhere in the middle. With certain formats, like those strip malls. Yeah. And dense clusters outperforming others. So for investors. Yeah. Those nuances are really important. They are. It’s not just about retail is good or bad. Right. It’s about understanding which segments are poised for growth.

Okay. So you’ve got those macro forces. Right. And then layered on top of that, you’ve got. That’s Sumer behavior. That ever changing landscape of consumer behavior. It’s always changing. And one thing that stood out to me. Yeah. Is this, uh, Yeah. Yeah. This return to experiences. Oh, yeah. It explains that fried chicken frenzy, the bookstore resurgence, even the appeal of those vibrant high streets and town centers.

People are craving that connection. They are. That authenticity, that sense of community that you just can’t find online. And those smart retailers, they’re tapping into that. They are. By creating those spaces and experiences that foster connections. So think about what that means for you as a consumer.

Maybe it’s not just about finding the cheapest price. Right. Maybe it’s about supporting those businesses that align with your values. Yeah. That offer an experience that you actually enjoy. That make you feel like you’re part of something. Part of a community. Part of a community. It’s about voting with your dollars.

I like that. You’re supporting the kind of retail landscape that you want to see thrive. Okay, we can’t talk about retail without talking Oh, I know what you’re going to say. The elephant in the room. E commerce. E commerce. It’s this force that continues to reshape the industry. It does. But what’s so fascinating to me is how it’s blending It really is.

With the physical world. We talked about the omni channel consumer. Right. Who’s shopping seamlessly across All those online and offline channels. And that’s putting pressure on retailers. It is. To create these really integrated experiences. Okay. It’s not enough to just have a website. And a store. And a store.

They need to work together. Which means investing. In technology. Technology, yeah. Data. You doubt. Personalized recommendations. All those things that make shopping smoother and more tailored. To your needs. Exactly. And as technology keeps evolving. Yeah. We can expect to see even more innovation. No.

Absolutely. In this space. Think AI powered shopping assistants. Okay. Virtual reality experiences. Wow. Personalized promotions delivered right to your phone as you walk past the store. It’s, it’s mind blowing. It is. The possibilities are endless. But amidst all this change. Right. One thing remains constant.

What’s that? The battle between Amazon and Walmart. Oh, of course. Their rivalry is shaping the entire industry. It really is, in such profound ways. They’re moving to auto sales. Yeah. Just one example of how they’re constantly pushing those boundaries. They’re forcing everyone to keep up. It’s like a game of one upmanship.

It is. Which can be frustrating for their competitors. For sure. But it benefits the consumer. It does. We get more choices. More choices, lower prices. Lower prices, more convenient services. That constant stream of innovation. So, As we wrap up this deep dive into the world of retail, what’s that one key takeaway?

Be an active participant. Okay. Don’t just shop. Don’t just shop. Observe. Observe. Notice what’s working, what’s falling behind, what excites you. What excites me. As a consumer. Yeah, yeah. Because those are the clues to where retail is heading next. I love that. And maybe, just maybe, you’ll spot the next big opportunity.

Before anyone else does. It’s an exciting time to be following retail. It really is. It’s a reminder that the future of retail isn’t predetermined. It’s not. No, it’s being shaped right now. It is by the choices we make as consumers, as investors, investors, business owners. So stay curious, stay curious, stay engaged and keep your eyes peeled.

Keep my eyes peeled for that next big thing. Until next time. See you later.

 Welcome to our deep dive. We’re looking at commercial real estate trends today. You’ve given us a lot to work with news articles, economic analyses, even some interesting retail developments. Yeah, quite the mix. We’re going to break it all down, help you understand where commercial real estate is headed, especially as we get closer to 2025.

Right. A big question is this whole. Extend and pretend thing, is it really coming to an end? It’s a big question. A lot of folks are wondering. Your sources actually give us a lot to consider. We see stuff about loan modifications, delinquency rates, and even some political and economic factors at play.

Yeah, it’s all connected. Plus, we’ve got those specific examples, like the McKinney National Airport expansion and Bloomingdale strategy in Texas. Always good to have those real world examples. Makes it more tangible. Absolutely. Let’s start with McKinney, actually. That airport story is fascinating. They’re moving forward with a commercial terminal, but it’s smaller than what they originally proposed.

Voters rejected a bigger bond measure last year. Yeah, back in 2023, residents voted down a 200 million bond. Now the city council is moving forward with a 70 million plan. So, smaller scale. Yeah, it’ll be smaller. Three gates, five parking positions for the planes. But still a big addition. Significant. And they got federal funding for it, right?

That’s right. They secured some federal funding, low interest infrastructure loans and grants. Interesting. It seems like there’s a lot of faith in the airport’s potential. Definitely. The airport already brings in 29 million a year for the region. And with commercial flights on the horizon That number’s only going up.

Exactly. Plus, they’re working on a separate runway expansion. Another 24 million going into that. McKinney’s really investing in their future. It’s a great example of how things can work out, even when the first plan hits a roadblock. They adapted, found another way. But let’s step back a bit. Look at the bigger picture of lending in commercial real estate.

Your sources point to a lot of loan modifications happening, especially for those non owner occupied borrowers. Yeah, that’s a trend we’re watching closely. In the first 9 months of 24, the median percentage of those modifications jumped 65 basis points. That’s significant. It is. Any idea what’s behind that?

Well, one thing that really sticks out is what’s happening with the smaller banks. They’ve seen a huge increase in modifications. A 217 percent jump. 217%? Wow, that’s a massive increase. What’s driving that, do you think? It seems like those smaller banks are feeling the heat. They’ve got all these underperforming commercial real estate loans.

The modifications are a way to buy time, hoping things turn around, they’re trying to avoid foreclosures if they can. So it’s kind of a temporary fix, kicking the can down the road a bit. You could say that, yeah. It delays things. For some properties, though, it’s just delaying the inevitable, and we see this happening in the office CMBS market, too.

Only 11 percent of the loans maturing in September were actually paid off in full. Almost half got short term extensions. It’s a big difference from what we used to see. So, lenders are getting less and less patient with just extending things. Seems like it. Does this tie into that extend and pretend question?

Definitely. It’s all connected. These short term extensions have helped prevent a total market meltdown. But for how long? The clock’s ticking, lenders are starting to get picky, especially about assets that aren’t performing well. Makes sense. They can’t just keep extending forever. So what’s the timeline here?

When do we think things might hit a breaking point? Well, from what the sources suggest, 2025 could be a turning point. We’ll likely see more properties in distress hitting the market. That often leads to prices going down. Which can create opportunities for some. But challenges for others. Exactly.

Especially when it comes to financing. That’s a crucial point. We’ve been talking about these big market trends. But how does all this affect someone like you who’s actually making decisions about commercial real estate right now? Well, you gotta understand the current situation. But you also have to look ahead.

Anticipate these potential shifts. Lenders might get stricter. Certain sectors like office headwinds. All of that has to factor into your strategy. It’s not just about finding a good deal. It’s about finding a deal that makes sense in this changing environment. Okay, before we go too deep there, I want to touch on something else that popped up in your sources.

These smaller stores popping up everywhere. Ah, yes. That’s an interesting trend, isn’t it? It is. Starbucks, Tim Hortons, even Bloomingdale’s are getting in on the act. Everyone seems to be embracing smaller spaces. It seems counterintuitive though, right? Why make your store smaller when you could have more space for merchandise or customers?

It’s not just about size. It’s about efficiency and adapting to how people shop these days. These smaller formats often help retailers cut costs, streamline their operations, and cater to customers who want things fast and easy. So it’s about keeping up with the times. Exactly. And we’re seeing this with Bloomingdale’s, right?

They’ve got their Bloomy’s concept. Smaller stores, a more curated selection, a focus on the in person experience. Right on. And they’re opening one of those Bloomy’s stores in Frisco, Texas. Part of a bigger mixed use development. Bye. And speaking of Texas, it’s booming with new retail space, especially what they call first generation space.

Brand new construction, never been occupied. Houston alone has added almost 25 million square feet of it since 2020. That’s incredible. Seems like developers are pretty optimistic about Texas. They are. A lot of activity there, a lot of growth. But even within Texas, you see different trends playing out depending on the sector.

Retail might be thriving, but the Dallas Fort Worth multifamily market tells a different story. Yeah, your sources show rents actually going down in Dallas Fort Worth. Yeah. For the second year in a row, that’s kind of surprising given how strong the Texas economy is overall. It is. And these declines are across the board.

All property classes, even those fancy four and five star rentals, they’ve dropped by 2. 1 percent over the past year. So what’s causing those rent declines? The main thing seems to be a mismatch between supply and demand. They’re building more units than the market can absorb. That puts downward pressure on rents.

So Advantage Renters in Dallas Fort Worth right now. For now, yeah. But the predictions say rents could stabilize in 2025, maybe even start going up again in 2026. Of course, that’s just a prediction. Things change. They do. Speaking of changing trends, there’s that story about data centers taking off in Irving, Texas.

Oh yeah. Microsoft and QTS Realty Trust, they’re planning seven data centers there. Seven. And the city council is giving them some pretty sweet deals to make it happen. Like cutting their property taxes in half for the next decade. That’s right. A 50 percent reduction for 10 years. That’s a big commitment.

But cities are really fighting to attract those tech giants. Data centers bring jobs, investments, you know, a certain prestige. It’s all part of Irving’s bigger plan to grow their economy. It reminds us that real estate isn’t just about buildings. It’s about the economic forces that shape those buildings.

The communities around them. And while we’re on the topic of transformation, there’s that interesting story about the old Raytheon manufacturing plant in Dallas, the one that’s becoming a Porsche dealership. That’s the one park place dealerships bought the 15 acre site planning a big redevelopment, A great example of how old industrial spaces can find new life.

Could be retail, entertainment, even housing. Absolutely. It shows how adaptable real estate is. Needs change. Markets change. We’re seeing this across the country. Old factories are becoming all sorts of things. It’s fascinating. And in this case, it really highlights how strong the luxury car market is in Dallas.

An aerospace factory becomes prime real estate for a high end car dealership. But now, let’s zoom out again. Consider the bigger economic and political picture. Okay. Because your sources had some insights there as well. Yeah, there’s a lot going on. The Fed’s been cutting interest rates. But they’re also hinting that they might slow down those cuts in 2025.

Right. They just lowered the benchmark rate by 25 basis points. Right. But their message is clear. They’re going to be more careful moving forward and that combined with some uncertainty about the new Trump administration’s policies. Yeah. Well, it’s making the stock market a bit jittery. Yeah, there’s definitely some anxiety.

Investors are trying to figure out how those policies will play out, especially when it comes to taxes and tariffs could have good and bad effects. depending on the sector. It’s a lot to take in. Hard to predict what will happen, but it’s important to stay informed. Understand how these big economic and political trends might affect the commercial real estate market.

Absolutely. Everything’s connected. Creates both opportunities and challenges. Okay, so we’ve covered a lot in this first part of our deep dive. We talked about specific developments like the airport and that Raytheon plant. We looked at broader trends in lending and retail. We even touched on the economic and political landscape.

We did. A lot to digest. It is. But the key question is, what does all this mean for you, the listener? How do you make sense of it all? How do you apply it to your own decisions? That’s what we’ll dive into in the next part of our deep dive. We’ll connect these dots, explore what it all means for someone navigating commercial real estate in 2025 and beyond.

Okay, so we’ve laid out some pretty big trends that are shaping commercial real estate, but let’s get more specific now. What does this all mean for someone who’s actually out there trying to navigate this market in 2025? Right, let’s try to connect these dots. We were talking about the potential end of extend and pretend, which could mean, More distressed assets hitting the market.

That’s sounds kind of scary, but it could also be a good thing, right? Exactly. Could this be a chance to pick up some properties at a discount? I mean, that would be pretty appealing for someone who’s looking to get into the market or maybe expand their portfolio. It could be, but there’s a trade off.

Remember those alternative capital sources we discussed, the private equity firms, credit funds, they’re stepping in to fill the gap left by the traditional banks. But they’re not doing it out of the goodness of their hearts, right? They want higher returns, stricter terms, that kind of thing. Exactly. So it’s not just about finding a good deal It’s about finding a deal that works with this new Piter financing environment You might need to get a little creative a little more resourceful to make things happen.

So opportunities Yes, but with some added challenges What else should someone be thinking about as they’re looking at commercial real estate in 2025? One thing to remember is that not all property types are created equal We talked about the challenges in the office sector, and even some weakness in the multifamily market, at least in certain areas like Dallas Fort Worth, those trends don’t just disappear overnight.

Right, all those empty office buildings aren’t suddenly going to fill up, even if extend and pretend does fade away. The multifamily market, well, maybe it’s stabilizing, but it’s still very much a renter’s market in a lot of places. Exactly. So, you need to be really careful about what type of property you’re investing in, and where, on the other hand, we’ve seen how strong industrial properties can be, particularly in markets like Texas, where the data center boom is driving a lot of demand.

And let’s not forget about retail. It feels like things have shifted away from that retail apocalypse, doom and gloom we were hearing a few years ago. It has. The retail landscape is definitely changing, but it’s not dying. The success of these smaller format stores, the continued demand for first generation space, especially in Texas, Those are all good signs.

It’s all about adaptation, right? Both for the retailers themselves and for anyone looking to invest in retail properties. Absolutely. Understanding the specifics of each market and property type is essential. What works in Houston might not work in New York City. The key is to look beyond the headlines.

Really dig into the data, talk to local experts, and develop a deep understanding of the market you’re interested in. So due diligence is more crucial than ever. Don’t just jump into something based on a gut feeling. Take the time to really vet the opportunity, and speaking of the bigger picture, we can’t ignore those economic and political uncertainties looming out there.

Right, those play a role too. The Fed’s rate cuts give borrowers some breathing room, but they also raise concerns about inflation down the road, and then there’s the wild card of the incoming Trump administration, and how their policies might impact everything from taxes to trade. It’s a lot to keep track of and honestly it can feel a bit overwhelming.

How does someone even begin to make sense of all this and translate it into something actionable? That’s a great question. I think the main takeaway is that the commercial real estate market is in a state of change. The old rules might not apply anymore. Those who can adapt, innovate, and be proactive will be the ones who come out on top.

It’s not about riding the waves. It’s about learning how to surf, so to speak. Okay, so we’ve talked about the need for adaptability, the importance of due diligence, and being aware of these broader economic and political forces. What are some concrete steps someone can take to prepare for 2025 and beyond?

Well, first and foremost, research. Don’t just rely on gut feelings or what you hear from your buddies. Immerse yourself in the data, analyze the trends, and connect with experts in the specific markets you’re interested in. So go beyond just reading a few articles, really dive deep and develop a solid understanding of what’s happening in the market.

Exactly. There are some great resources out there like CoStar that provide tons of data and analysis on the commercial real estate market industry, publications, research reports, networking events. Those can all be valuable sources of information. And don’t underestimate the power of networking. Building relationships with other professionals in the field can give you a real advantage.

Absolutely. Networking allows you to tap into the collective wisdom of the industry. Learn from other people’s mistakes and stay ahead of the curve. You can get insights that you won’t find in any report or database. Okay, so research, data analysis, and networking are key. What about the financial side of things, especially given that tighter lending environment we talked about?

That’s crucial. Having a strong financial foundation is essential. This means maintaining a good credit score, getting pre approved for financing if you’re planning to borrow, and being realistic about your investment goals and your risk tolerance. So don’t jump into a deal just because it seems like a good price.

Make sure you understand the financial implications and that you’re comfortable with the level of risk. Exactly. And remember, flexibility is key in this market. Be open to considering different types of properties, exploring alternative financing options, and adjusting your strategy if things change. Be adaptable.

Be responsive. Don’t get stuck with a rigid plan that might not work in this fluid environment. Right. And finally, I would add patience and discipline to that list. The commercial real estate market is cyclical. There will be ups and downs. Don’t let the short term noise distract you from your long term goals.

It’s about having a clear vision and sticking to it even when things get a little rough. Exactly. By combining thorough research, sound financial planning flexibility, and a patient approach, you can set yourself up for success in this ever changing world of commercial real estate. Great advice. So much to think about.

It really comes down to being proactive, informed, and adaptable. Now I have one final thought before we wrap up this part of our deep dive. We’ve talked about the rise of those smaller format retail stores, and the increasing demand for first generation retail space, especially in Texas, and we’ve also discussed the data center boom happening in certain markets.

Yes, two seemingly separate trends. Where are you going with this? What if those trends could converge? What if data centers became anchors for new retail development? Data centers as retail hubs. That’s an interesting idea. Think about it. These data centers create a lot of high paying jobs, which attracts people who need services, amenities, places to shop and eat.

What if developers started incorporating those smaller format retail stores, maybe even some drive through only concepts, into those data center campuses? That’s not something we saw in your sources, but it’s definitely food for thought. It could be a win win, right? Data centers get the convenience of having these amenities on site for their employees and retailers tap into a built in customer base with money to spend.

It would definitely require some out of the box thinking and collaboration between developers, retailers, and the data center operators themselves. Yeah. But if done right, it could be a really innovative approach to mixed use development. It’s just a thought, but it highlights how important it is to think differently and explore those unconventional opportunities, especially in a market that’s changing as rapidly as this one now, with that idea in mind.

Let’s move on to the final part of our deep dive, where we’ll tie everything together and consider the key takeaways for you, our listener. Sounds good. Let’s do it. Alright, we’ve covered so much in this deep dive. Airport expansions, loan modifications, the rise of the smaller format stores, data centers booming, even talked about data center retail hubs, it’s a lot.

You initially came to us with a pretty specific question though. Right. Is the extend and pretend era truly over in commercial real estate? Yeah, that was the big question. And based on everything we’ve seen, it’s looking like the answer might be yes. The sources really point to lenders getting tired of this game.

Especially when it comes to those office properties that are struggling. It seems those short term extensions, the ones that have been keeping things afloat, might be hitting their limit. Exactly. And even big institutional investors are starting to lose patience. We saw that quote from Glenn Grimaldi, the CEO of Navtel Credit Partners.

He didn’t mince words. He was pretty clear. So, heading into 2025, it looks like lenders will be more careful about those extensions, more scrutiny, more demands from borrowers. Right. And for you, the listener, this means you need to be ready for a market that could be a bit wilder. More ups and downs. Might be some great deals coming out of distressed sales.

Getting the financing. That might be a whole other story. So what can our listeners do to prepare for this shifting market? Any advice? Sharpen those due diligence skills. Don’t just skim the surface. Dig deep into those financials. Really understand the local market. Make sure you’re comfortable with the risk you’re taking on.

So it’s more than just finding a property with a good price tag. Way more. You have to understand all the details. Make sure it fits with your plan and your risk tolerance. Absolutely. Good due diligence isn’t just about avoiding the bad deals, it can help you find hidden potential. Maybe that old Raytheon plant isn’t just for a Korsha dealership.

Maybe it’s a chance to build something totally new, a mixed use development that brings the whole area back to life. It’s about seeing the possibilities that other people miss. Having that vision, that entrepreneurial spirit. And speaking of possibilities, we were just talking about the data center boom and the rise of those smaller retail stores.

Hmm. What if someone put those two things together? You’re thinking about data centers becoming like anchor tenants for retail. Exactly. Imagine it. A data center campus with a bunch of those smaller stores around it. Maybe some drive thrusts. Serving the people who work there and live nearby. A whole new model.

Now that’s interesting. It’s different. For sure. But I like it. Could be a win for everyone. Developers, retailers, the data center companies themselves. Exactly. It shows how thinking outside the box, adapting to the changes, can lead to some really cool opportunities. And I think that’s the main takeaway from all of this.

The commercial real estate world is constantly changing. You have to embrace the change, stay informed, and be proactive. That’s how you thrive. Couldn’t have said it better myself. So, to our listener, we say embrace the change, stay informed, and never stop exploring. The future of commercial real estate is yours to create.

Well said. And with that, I think we’ve successfully navigated this deep dive into commercial real estate trends. We covered a lot, from airport expansions to those data center retail hubs. Hopefully you’re leaving here feeling more informed and inspired. Knowledge is power, right? The more you understand about this market, the better decisions you’ll make.

Absolutely. Keep learning, keep exploring, keep pushing the boundaries. Until next time, happy investing, everyone.

 Welcome back. Today, we’re diving deep into commercial real estate. You know, you’ve given us a really fascinating mix of sources for this one, economic forecasts, some development news, even some articles on retail trends. We’ve gone through all of it to bring you the insights you need to know. And we noticed you’ve got a particular interest in the Dallas Fort Worth market.

Yeah. It’s a hot market. It is. And the DFW economy seems to be humming along nicely, which usually that’s a pretty good sign for CRE. Right. But we’ve got some economic headwinds nationally, so I’m curious to hear your perspective on how things might play out. Well, you know, it’s not always as straightforward as we’d like, so.

Let’s start with the labor market, nationally. We’ve added almost 2 million jobs this year, according to our commercial real estate news. Typically. That’s fantastic news for CRE. More jobs mean more demand for office space, retail space, industrial properties, the whole nine yards. Right. It makes sense. Yes.

But. We also know that interest rates are stubbornly high. One of the Investor’s Business Daily articles we’ve got even suggested the Fed might not cut rates as much as everyone thought next year. How does that factor into things? Yeah, that’s the million dollar question. Higher interest rates mean it gets more expensive to finance those property purchases.

And that makes investors a little bit hesitant. Especially when they don’t know where rates are headed. And, historically, rising interest rates have often led to a slowdown in CRE transactions. Deals take a lot longer to close. Projects might get put on hold. Investors get a lot more cautious. So, we’ve got these two forces at play here.

A strong labor market that’s pushing things forward, and high interest rates that seem to be, you know, pumping the brakes a little bit. What’s the historical interplay between these forces been like in CRE? It’s fascinating to see these forces play out against each other. The key is to find how they balance out that strong job growth.

We’ve got can drive demand for commercial properties, but those high interest rates can stifle investment. So what you’re going to want to watch for in the coming months is how those forces interact. Keep a close eye on job growth, but at the same time, you really want to pay attention to what the Fed is saying and doing with interest rates.

If job growth remains strong and interest rates stabilize or even start to come down a little bit, that could be a really positive signal for the CRE market. Okay, so a bit of a balancing act now. Let’s zero in on the DFW market for a second. CoStar reported that DFW added 74, 800 jobs in the year ending in October.

And here’s the kicker, that growth was across all sectors. Yeah, that kind of broad based job growth, it’s a strong indicator of a healthy, diverse economy. It’s just definitely something that attracts businesses and investors, looking at CRE opportunities. Absolutely. And speaking of attractive markets.

Office employment, which has been a little bit sluggish nationally. It’s showing signs of life and DFW. That’s definitely worth noting, especially considering the national trends, right? And coup star even highlighted some specific examples of this new office leases for companies like Goldman Sachs and Wells Fargo in the area.

Do you think this is a sign of recovery for the office sector? Or is this just a temporary blip? What do you make of it? I think It’s a little bit early to call it a full blown recovery while those new leases are encouraging. We do have to consider the bigger picture We’re still in a period of adjustment where companies are figuring out their office needs and those hybrid work models Are becoming more and more common.

The real question is whether this stabilization in DFW. Yeah is unique to this market Or, if it’s the beginning of a broader trend. Okay, I see your point. Now, let’s shift gears for a second. To a company that’s been making a lot of headlines in CRE lately, Amazon. And this time, it’s not about their online shopping dominance.

You’re talking about their push into same day prescription delivery. Exactly. Amazon is building a massive fulfillment center. In DFW specifically for this and they’re planning to roll out same day medication delivery to almost half the country by next year. They’re even incorporating robots and AI into these pharmacies.

It’s like something out of a sci fi movie. It’s a pretty build move. Yeah. That speaks to Amazon’s aggressive expansion strategy. Particularly in the healthcare sector, it’s pretty fascinating to see how they’re leveraging technology to disrupt traditional industries. It is. But I’m curious, beyond just the pharmacy aspect of things, what does this move tell us about Amazon’s broader strategy?

And how might it impact the CRE landscape, especially in DFW? This move signals a couple of things that are really important. First, Amazon’s need for logistics and distribution space is only going to grow as they continue to expand these same day delivery services require these massive, strategically located facilities.

Second, it really emphasizes their commitment to automation. And cutting edge technology. They’re pouring money into robotics and AI to optimize efficiency and speed, which has huge implications for the types of facilities they require. So if you think about DFW specifically, how could this move influence industrial real estate demand?

You can expect to see continued strong demand for warehouse and distribution centers in the region. But it’s not just about size anymore. These facilities need to be more and more sophisticated. Incorporating robotics, AI, all these advanced technologies, developers and investors who can meet those specific needs will be in a fantastic position to capitalize on this trend.

The innovations in DFW don’t stop there. We also have the brand new Texas Stock Exchange setting up its temporary headquarters in Dallas. Yeah, that is a total game changer. For the Dallas business scene, you. A new stock exchange has the potential to attract more financial firms to the area, boosting job growth and demand for office space.

It’s really exciting to think about all those ripple effects, but what about the long term implications of a new stock exchange? What should people be looking for to understand how this might all play out in Dallas? If we connect this to the bigger picture, the establishment of a brand new stock exchange.

It can signal a shift in the financial landscape. It could lead to increased competition and innovation in the industry. As for Dallas specifically, just keep an eye on the types of companies that are drawn to the area. Are we seeing a big influx of financial institutions, tech firms, startups, the mix of businesses that choose to locate near the exchange?

It’s going to be a strong indicator of its long term impact on the Dallas market. Alright, we’ve covered a lot of ground already. The labor market, interest rates, some major developments in DFW, and even Amazon’s foray into futuristic pharmacies. Now, let’s dive into another hot topic in CRE, retail. That’s a sector that’s been undergoing a lot of transformation over the past few years.

It has. One of our sources, Chain Storage, had a really interesting piece on the evolution of open air centers. You know, they’re moving away from those traditional anchor stores and embracing what they call experiential retail. We’re talking outdoor gathering spaces, restaurants, entertainment. It’s almost like mini town squares.

It’s fascinating to see how developers are adapting to those evolving consumer preferences. It’s an essential shift. In the past, those open air centers really relied. Uh huh. On those big anchor stores. Yeah. To draw shoppers in. But with the rise of online shopping and all those changing consumer habits, developers are realizing they need to create destinations that offer more than just shopping.

It’s about creating. Mm hmm. A sense of place. Yeah. And community. That’s all about the experience. Right. Right. You know, creating spaces where people, they want to hang out. They want to socialize, enjoy themselves. And, This trend toward experiential retail, it could create opportunities for local businesses as well.

These centers could actually drive demand for smaller, more specialized retail spaces, which would benefit independent retailers and restaurants. What are your thoughts on that? I completely agree. The rise of experiential retail really offers a unique opportunity for local businesses to thrive. They can differentiate themselves from those big national chains.

By offering unique products, personalized service, you know, that local touch that really resonates with people. It’s about creating that sense of community and fostering those personal connections. We’ve got a great example of this in action. Chain Storage, they highlighted a development project in Naperville, Illinois, where a developer is transforming what’s essentially a vacant corner into a restaurant destination they tapped into.

Yeah. The community’s desire. For more walkable, vibrant spaces, and they’re even incorporating a theater and an ice rink into the development. Talk about creating an experience. Yeah, that’s a fantastic example of placemaking. It’s about going beyond, just building structures. And instead, creating spaces that foster a sense of community, encourage social interaction, and enhance the overall quality of life for residents.

It’s a really inspiring approach to development. Yeah. How can developers replicate this success in other locations? What are those key ingredients for creating these vibrant, community driven spaces? We’re replicating that success. It starts with a deep understanding of the local community’s needs and desires.

Developers need to engage with residents, listen to their preferences, and incorporate those insights into the design and planning process. It’s about creating a sense of ownership and belonging. For the people who are going to be using those spaces and when it’s done well, placemaking can generate benefits for everyone involved.

For investors, it can mean increased property values, higher rental rates, and a stronger return on investment. For the community, it means a better quality of life, stronger social connections, and a real sense of pride. Okay, we’ve talked about the big picture, zoomed in on DFW, explored the rise of experiential retail, I even touched on placemaking.

Now, get ready for this one. We’re going to talk about dry cleaning vending machines. Dry cleaning vending machines. Yes, you heard that right. One company is installing these vending machines in apartments, offices, even retail centers, focusing on those high traffic areas. And they’re partnering with JLL.

To roll us out on a larger scale, it seems, both ingenious and a little bizarre, at the same time, what do you make of this trend? I think it’s a perfect example of the growing demand for what we call hyper convenience in retail. Consumers are more and more pressed for time. And they’re looking for those quick, easy solutions for everyday needs without sacrificing quality businesses that can deliver that kind of seamless on demand service, they’re getting a real competitive advantage.

It’s like the next generation of the vending machine. What other examples of this hyper convenience trend are you seeing pop up and how might it reshape the commercial real estate landscape down the line? Think about automated grocery stores. Mobile ordering a pickup, even the rise of drone delivery services.

These are all examples of how businesses are using technology and innovation to meet that growing consumer demand for instant gratification. This trend is likely to drive demand for smaller, more strategically located retail spaces that cater to crypt transactions and on demand fulfillment. We could see an increase.

In micro fulfillment centers, dark stores, even repurposed retail spaces designed for those hyperconvenient services. It’s amazing how quickly things are changing. Now, let’s take a look at retail investment for a moment. We’ve got some data from chain storage showing that some cities are outperforming others.

In terms of retail investment returns, Vegas is a top performer fueled by its tourism and strong retail sales. And then Charleston, South Carolina is another standout thanks to its population growth and higher than average incomes. What makes these cities so attractive to investors? The key is understanding those factors that are driving retail performance in each market.

Vegas benefits from that constant stream of tourists, which creates a really consistent base of shoppers. Charleston’s appeal really comes from its combination of population growth. Those rising incomes. And its own vibrant tourism industry. These factors create fertile ground for retail businesses to flourish.

And that attracts investors, seeking strong returns. Are there any hidden risks or opportunities that people should be aware of when they’re considering investments in these markets? Of course. Every market has its own little nuances. While Vegas enjoys that robust tourism sector, it is heavily reliant.

On the leisure and hospitality industry, which can be vulnerable to economic downturns. Charleston’s rapid growth can lead to some challenges like increased competition for retail space and rising operating costs. The key takeaway here is to do your due diligence, understand the unique dynamics of each market and weigh those potential risks and rewards.

Before you decide to jump in. Sound advice. All right. For our final stop on this retail journey. Let’s talk about Tractor Supply, the nation’s largest rural lifestyle retailer. They’re on an aggressive expansion path, planning to open 90 new stores in 2025. That is impressive growth, especially when you think about the broader trends we’ve been talking about in the retail sector.

Right. They’re tapping into what they call the life out here trend, offering a wide range of products from pet supplies to farming equipment. What are the main drivers behind this trend and how might it affect commercial real estate? The The life out here trend reflects several significant shifts in society.

We’re seeing a growing interest in sustainable living, self sufficiency, a desire for more space, and connection to nature. And this is driving population growth in rural areas and creating a really strong demand for businesses. That catered to that lifestyle. Tractor supplies expansion is a direct response.

To this burgeoning market and their success shows the potential for other retailers and businesses that are targeting this segment. So this life out here trend, it’s more than just a fad. It appears to be a much more fundamental shift in lifestyle preferences that’s likely to have a lasting impact on commercial real estate in rural areas.

We can see increased demand for retail space, housing, even mixed use developments that cater to this specific demographic. It’s definitely something to keep a close eye on. It’s amazing to see how these trends impact all these different sectors of the CRE market. You know, we talked about the rise of experiential retail, this demand for hyperconvenience, the growth of online shopping.

Oh, I can’t forget. About that ongoing evolution of the industrial sector driven by e commerce and all those sophisticated logistics operations that we’re discussing earlier. All of these trends are really reshaping the CRE landscape. It really is a dynamic time for the industry. But here’s something I’ve been thinking about.

You know, as we’ve been talking about all these trends and these technological advancements, what about the human element? How will all these changes impact the way that we interact with physical spaces? That’s a really crucial question. Has our lives become increasingly intertwined with the digital world?

The role of physical spaces needs to be reimagined. What’s going to draw people to those brick and mortar locations when they can do so much online? The answer probably lies in creating experiences that can’t be replicated virtually, creating spaces that foster genuine human connection and a sense of community.

We touched on placemaking, and I think That’s a perfect example of how developers are starting to think differently about the purpose and design of those physical spaces. Makes a lot of sense. Okay. Before we wrap up, I wanted to circle back to something we talked about earlier, the labor market. We talked about how a strong labor market is generally positive for CRE, but I noticed something interesting in our commercial real estate news source.

It looks like hiring in the leisure and hospitality sector is still Below pre pandemic levels, that is great observation. A little bit of a paradox when you consider the overall strength of the labor market that we’ve been seeing. Exactly. So what’s going on there? Why is that particular sector lagging behind the leisure and hospitality industry was hit incredibly hard by the pandemic.

Those lockdowns, the travel restrictions, social distancing measures really forced widespread closures. And let the significant job losses the sector has made progress since then, but it hasn’t fully recovered. Yeah, I can see why that would be the case. Our source also mentioned that the increase in office absorption, meaning companies leasing more office space, is being driven primarily by the Professional and business services sector.

That’s right. We’re seeing that shift in demand as we move further away from the peak of the pandemic with some sectors, we’re covering much more quickly than others looking at these different pieces of the puzzle, right? What does this tell us about the broader economic recovery and its impact on the CRT market?

It points to an uneven recovery With some sectors leading the charge, while others are still playing catch up, and that’s bound to have different effects on different types of commercial real estate. While we were seeing that increased demand for office space in some segments mm-hmm . The slower recovery and leisure and hospitality could have an impact on hotels.

Yeah. And other tourism related properties. It’s important to look beyond just those overall economic numbers. Right. And really dig into the sector specific trends. Absolutely. That nuanced understanding of those trends. Is crucial for investors and developers as they’re making decisions about where to allocate capital and what types of projects.

They should prioritize, they need to be able to anticipate those shifts in demand and adapt accordingly. Well, I think we have officially unpacked all of your sources for today. It’s been a really great conversation. Really insightful. Always a pleasure to delve into these topics and explore all those forces that are shaping the CRE landscape.

I agree. Before we sign off, any final thoughts you want to share with our listener? Just this, the CRE world is constantly evolving. There’s always something new happening, some new trend to watch, some new opportunity to explore. It’s a really dynamic field. And staying informed is absolutely key to navigating its complexities.

I couldn’t agree more. And that’s what makes these deep dives so fascinating. There’s always something new to learn and explore in the world of CRE. Exactly. It’s a field that, Constantly adapts new technologies, changing demographics, evolving economic conditions keeps you on your toes. It does. Speaking of evolving, you know, we’ve touched on so many interesting trends today from the rise of experiential retail to that increasing demand for hyper convenience.

But I’m curious, as we wrap up here, is there one trend that you find particularly intriguing or maybe one you think our listener should keep an eye on? That’s a great question. I think the convergence of technology and real estate is particularly compelling. We’ve talked about how e commerce has reshaped the industrial sector, and we’re beginning to see how things like AI and robotics are influencing everything from pharmacy fulfillment centers to those dry cleaning vending machines we talked about.

It’s really fascinating to see how technology is not just changing how we use space, but But also, how we design and build it. Yeah. That’s a really good point. And as we think about the future, it makes me wonder how these advancements will impact the role of physical space in our lives. That’s the million dollar question.

As we become more and more digitally connected, the value proposition of physical space needs to evolve. It’s not just about functionality anymore. It’s about creating those experiences. Fostering connections. Providing. That sense of place and community. Those are all things. That technology. Thank you. It can enhance, but it can’t fully replicate them.

Hmm. I think. That’s a really great takeaway for our listeners today. The world of commercial real estate, it’s complex, it’s always changing, but by understanding those key trends and driving forces, it can help you make more informed decisions, whether you’re an investor, developer, or just someone with a real interest in the future of our built environment.

Absolutely. Thank you. And remember. The CRE landscape is full of opportunities. Stay curious. Yeah. Stay informed. And embrace the possibilities. Well said. This has been your deep dive into commercial real estate. We hope you found it valuable, and we’ll see you next time for another fascinating exploration.

 Welcome back everybody for another deep dive into commercial real estate and retail. This week, uh, well, it’s a whirlwind news from Blackstone’s global strategy to the resurgence of bin stores. Yeah. You heard that right? Bin stores. Bin stores. Our primary source this week is CoStar News, commercial real estate news week of December 6th, 2024, and a few related articles as always.

So let’s dive in. Let’s start with the big players. Blackstone has been on an acquisition spree, dropping a cool 50 billion in real estate in just the last year. 50 billion? 50 billion with a B. Wow. That’s a lot of properties. It is. And what’s interesting is they’re not just focusing on the U. S. market.

They’re snapping up properties in Europe, particularly logistics facilities. Which might seem counterintuitive with the global economy, like, Slowing down. So why Europe? Well, Europe currently offers lower borrowing rates and higher capitalization rates compared to the us. For those unfamiliar with capitalization rates or as they’re often called cap rates cap, they’re used to estimate the potential return on a real estate investment.

So a higher cap rate generally suggests a better potential return. So Blackstone is strategically positioning itself to capitalize on what they see as favorable conditions in Europe. Makes sense. And speaking of smart moves, they’re also heavily investing in data centers. Both in Europe and the booming Asian market.

This is a trend that Nadeem Medjie, Blackstone’s head of real estate America’s highlighted in a recent interview, he said, and I quote, data is the new oil and it’s clear the black zone believes that controlling the infrastructure for that data is key. Absolutely. And to illustrate just how rapidly the sector is growing, consider this.

Phoenix, Arizona, a city with a significantly smaller population than Detroit, Michigan, actually has more data center space. Wow. So it’s not just the where, it’s the when and the why. Yeah. All right. Let’s switch gears from global power plays to a company facing some tough decisions closer to home. Dollar Tree, the parent company of FamilyDollar.

Seems to be struggling with their family dynamic. They certainly are. They’ve already closed over 670 underperforming family dollar stores, and may shut down another 25. Back in June, they even announced they were exploring options for the chain, including a potential sale or spin off. They purchased Family Dollar back in 2015, but the chain has been grappling with profitability, facing fierce competition from other discount retailers, and feeling the pressure of inflation’s impact on their target customer.

Yeah, and to make matters worse, analyst Neil Saunders is skeptical that Dollar Tree will find a buyer willing to pay their asking price. So it’s a tough spot to be in. All right, now on a completely different note. We have the curious rise of bin stores. Bin stores? Yeah, bin stores. Yes, you heard that right.

Bin stores are essentially discount havens, where merchandise is literally piled high in bins, offering deep discounts on everything from clothing to electronics. So it’s a treasure hunt for bargain hunters. Exactly. What’s driving this trend? It’s all about a perfect storm of factors. Surging merchandise returns a tough economic climate squeezing consumer spending, and retailers desperate to liquidate excess inventory.

Just to give you an idea of the scale of this, the return rate for online purchases in the U. S. hit a record 17. 6 percent in 2023. Wow, 17. 6%. That’s a mountain of merchandise looking for a new home. It is. So these bin stores are like the ultimate recycling centers for unwanted goods. It’s a clever business model, but is it sustainable in the long run?

That’s the big question. On the one hand, they have low overhead, they’re quick to set up, and there’s clearly a demand for deeply discounted goods. But on the other hand, the competition is fierce. Inventory can be unpredictable, and there’s a potential for them to cannibalize sales from the very retailers they’re buying from.

It’s like a delicate balancing act, then. Speaking of balancing acts, Black Friday just wrapped up, and the reports are coming in. It seems like we’re seeing a mixed bag of results this year. Yeah, there are some positive signs. Foot traffic at malls was surprisingly strong, particularly at higher end properties.

And several major retailers are reporting double digit sales increases. Yeah, I’m hearing that American dream. That mega mall in New Jersey saw a foot traffic surge 25 percent compared to the last two Black Fridays. But there’s a catch, right? Online sales were down. Exactly. It seems consumers are rediscovering the appeal of in person shopping.

As one retail expert put it, Shopping online is convenient, but it can be lonely. People are craving that in person experience, the thrill of the hunt, the instant gratification of walking out with their purchases. Plus no waiting for deliveries. So it’s back to brick and mortar, but with a twist. So what’s the overall verdict on holiday spending?

Are the experts feeling optimistic? Well, it depends who you ask. Rudolph Million of Woodcliffe Realty Advisors is encouraged by the strong foot traffic and in store sales he’s seeing. But Neil Saunders of Global Data is less enthusiastic, citing high consumer debt, and the fact that the holiday shopping season is shorter this year due to a late Thanksgiving.

So the jury’s still out on holiday spending. Now let’s head south, where we’re seeing a different kind of retail boom. Dallas Fort Worth is experiencing a surge in demand for luxury retail space. What’s driving this trend? Well, it’s a combination of factors. The Dallas Fort Worth region is experiencing significant population growth, particularly in the outermost suburbs, and there’s a growing demand for luxury experiences and high end brands.

So it’s not just about buying things. It’s about a certain lifestyle. Yeah. How is this demand translating into real estate numbers? Well, there’s over 116 million square feet of total space in these higher end retail properties. And they’re commanding premium prices around 387 per square foot. 387 per square foot, yeah.

That’s significantly higher than other areas. But retailers are clearly willing to pay for the prime locations and the affluent customer base. It seems so. It’s a testament to the power of location and a discerning clientele. Now, before we move on, I have to ask about a blast from the past. Didn’t TGI Fridays just file for bankruptcy?

Yes, they did last month. Last month. But here’s where it gets interesting. The former CEO, Ray Blanchett, has just acquired nine company owned TGI Fridays locations out of bankruptcy court. So, he’s betting on a comeback. It seems so. What’s the story there? Well, the deal, which costs 30. 5 million, includes locations in both Maryland and Texas, some of which are among the most profitable in the chain, like those at the Dallas Fort Worth International Airport.

BFW. DFW. Okay. It’s a bold move, considering the challenges facing the casual dining industry, but he clearly sees potential in the brand and its ability to adapt. So we’ll have to wait and see if nostalgia and a revised menu are enough to lure diners back. We will. Now let’s switch gears to the office market.

What’s the latest in the Dallas Fort Worth region? We’re seeing a tail of two cities. In Fort Worth, there are some encouraging signs of stability in the office market, with an average vacancy rate of 18%. 18%? That sounds relatively healthy. What about Dallas? Dallas is facing a tougher time with higher office vacancy rates.

It seems businesses are still hesitant about making long term commitments, even as the pandemic’s impact fades. This is leading to a lot of uncertainty for office landlords and developers. It’s a reminder that even within a single region, you can have very different micro markets. So who’s making moves in this uncertain landscape?

Well, in Fort Worth, we have Wilkes Development, a local real estate investor showing confidence in the market. They recently acquired one Ridgeman Center, a 10 story office tower, and plan to invest 9 million in upgrades. 9 million? Yeah. That’s a pretty significant investment. They must see potential there.

Now let’s turn our attention to the workforce. We keep hearing about a strong job market, but worker satisfaction seems to be lagging. That’s right. Despite the strong job market, recent data from Gallup paints a concerning picture. Only 18 percent of workers report being extremely satisfied with their jobs.

So what’s going on here? Are people just being picky? It’s more nuanced than that. Companies are increasingly focused on efficiency and cost cutting measures, which often translates into heavier workloads and restructured teams for employees. As a result, As a result, many workers feel stuck, overworked, and disempowered.

That doesn’t sound like a recipe for a happy workforce. What are the potential consequences of this trend? If it continues, we could see an increase in both burnout and turnover. It could also negatively impact productivity and company culture. This is a critical issue that businesses need to address if they want to retain top talent and maintain a positive and productive work environment.

Seems like companies need to find a way to balance their focus on efficiency. with the well being of their employees. Absolutely. It’s a delicate balance, but finding that sweet spot is essential for long term success. Well said. Now let’s shift gears again and talk about something a little more, uh, well, fun.

Pizza Hut is trying out a new drive thru concept. Pizza Hut, along with other restaurant chains, are trying to keep pace with changing consumer preferences. And declining dine in traffic, so they’re exploring drive thru and other innovative design concepts that emphasize convenience. Okay, so what’s so special about their drive thru concept?

Are we talking pizza drones here? Not quite drones yet, but they’re definitely thinking outside the pizza box. Their parent company, Yum Brands, recently opened a drive thru only Pizza Hut. In Plano, Texas, with a dedicated menu featuring items that are easy to eat on the go. This is actually Pizza Hut’s first ever drive thru centric menu.

That’s a pretty savvy move. It caters to our on the go lifestyles. Exactly. They’ve already been incorporating elements like online ordering and curbside pickup. So this drive thru concept is a natural next step. It’ll be interesting to see how this new format performs and if it’s rolled out to other locations.

Speaking of comebacks, get ready for this one. Chi Chi’s is making a return. I thought this chain was gone for good. It was until now. Michael McDermott, son of the co founder of Chi Chi’s, just announced an agreement with Hormel Foods to revive the brand. They’re aiming to open a yet to be disclosed number of restaurants in 2025.

Wow, that’s unexpected. What’s driving this blast from the past? Are they banking on nostalgia alone? Nostalgia might play a part, But McDermott believes there’s still a strong appetite for casual dining experiences, especially those that evoke a sense of family and tradition. He’s updating the menu to appeal to modern tastes while still maintaining the essence of the Chi Chi’s brand.

I have to admit I’m curious to see how they pull it off. Okay, last but not least, we have the National Restaurant Association’s latest survey. What are the key takeaways? The survey reveals a growing sense of optimism among restaurant operators about their future prospects. This is despite the many challenges they’ve faced in recent years.

That’s encouraging. What’s fueling this newfound optimism? Well, the trade group’s monthly performance index actually climbed 1. 6 points in November, surpassing 100 for the first time in seven months. A majority of the survey respondents reported that they anticipate same store sales and overall conditions to improve within the next six months.

So there’s a glimmer of hope for the restaurant industry after all. It certainly appears so. But it’s important to remember that we’re looking at a national trend here. Specific markets and segments may vary, so it’s always wise to consider the local context. That’s a great point. Now before we wrap things up completely, are there any other interesting tidbits of information that you think our listeners should know?

There is one more thing. Earlier we discussed those bin stores and the surge in merchandise returns. Well, a striking statistic that didn’t make it into our earlier conversation is that the total value of online purchases returned in the U. S. last year reached a record 247 billion. Wow, that’s an astronomical figure.

It really underscores the scale of this phenomenon and how it’s fueling the rise of alternative retail models like DIN stores. Exactly. It’s a clear sign of the times. And it will be fascinating to observe how this trend develops in the coming years. Alright, I think that’s a perfect stopping point for part one of this week’s Deep Dive.

We’ve covered a lot of ground from Blackstone’s billion dollar bets to the return of Chi Chi’s and the rise of Binz stores. It’s been a fascinating journey through the world of commercial real estate and retail so far. Absolutely, and we’re not done yet. There are a couple more interesting stories from this week’s news that I think our listener will find insightful.

Let’s talk about the office market, specifically how the dynamics of vacancy rates are playing out differently in Fort Worth and Dallas. It’s a classic tale of two cities. Fort Worth is showing some promising signs of stability with an average office vacancy rate hovering around 18%. This suggests a healthy balance between supply and demand.

That sounds fairly optimistic. What’s the situation like in Dallas? Dallas, unfortunately, is facing a tougher time with higher office vacancy rates. Businesses there seem to be more hesitant about committing to long term leases, even as the impact of the pandemic recedes. It’s creating a lot of uncertainty for landlords and developers who are trying to navigate this shifting economy.

Landscape. So even within a single region, we’re seeing very different micro markets at play. It really highlights the importance of understanding local dynamics. Now let’s shift our focus to something that impacts everyone, regardless of industry workers, satisfaction. We’ve talked about this strong job market.

But is everyone actually happy with their work? That’s a great question, and the answer is surprisingly complex. Despite the robust job market, recent data from Gallup reveals a concerning trend. Only 18 percent of workers report feeling extremely satisfied with their jobs. This marks a significant drop from previous years and points to a growing disconnect between employment rates and overall job satisfaction.

That’s a pretty startling statistic. What’s contributing to this decline in satisfaction? It seems to be a confluence of factors. Companies are increasingly prioritizing efficiency and cost cutting measures, often leading to heavier workloads and restructured teams for employees. This can leave workers feeling overburdened, undervalued, and lacking control over their work.

So it’s not just about having a job. It’s about feeling valued and empowered within that job. What are the potential long term consequences if this trend continues? Well, if companies don’t address this issue, we could see an increase in employee burnout, higher turnover rates, and a decline in overall productivity.

It could also negatively impact company culture, and make it more challenging to attract and retain top talent. It sounds like companies need to find a better balance between their pursuit of efficiency and the well being of their employees. I couldn’t agree more. Fostering a positive and supportive work environment where employees feel valued and empowered is crucial for both individual and organizational success.

Well said. Okay, let’s take a break from the serious stuff and talk about something a bit more lighthearted. Pizza Hut is trying out a new drive thru concept. What can you tell us about it? Pizza Hut, like many other restaurant chains, is trying to adapt to changing consumer preferences, particularly the desire for convenience.

They’re experimenting with drive thru formats and other innovative designs to cater to those who are looking for a quick and easy dining experience. So what’s unique about Pizza Hut’s drive thru concept? Their parent company, Yum Brands, recently launched a drive thru only Pizza Hut in Plano, Texas.

What’s particularly noteworthy is that they’ve created a dedicated menu specifically for this format, featuring items that are designed for on the go consumption. This marks Pizza Hut’s first ever drive thru centric menu. That’s a clever strategy. It acknowledges that people are increasingly pressed for time and want their food fast and hassle free.

Precisely. They’ve already been incorporating elements like online ordering and curbside pickup, so this drive thru concept is a logical next step in their evolution. It’ll be interesting to see how it performs and if they decide to expand it to other locations. Now get ready for this. Chi Chi is the beloved Tex Mex chain that many thought was gone for good, Yes, you heard that right.

Michael McDermott, the son of Chi Chi’s co founder, recently announced a partnership with Hormel Foods to revive the brand. They’re planning to open a series of restaurants in 2025, though the exact number and locations are still under wraps. This is quite a surprise. What’s the rationale behind bringing back a brand that’s been dormant for so long?

Are they just banking on nostalgia? While nostalgia undoubtedly plays a role, McDermott believes there’s still a strong demand for casual dining experiences, especially those that evoke a sense of family and shared traditions. He’s revamping the menu to appeal to contemporary tastes, but intends to preserve the core essence of what made Chi Chi so popular in its heyday, I’m curious to see how they re imagine the brand for a modern audience.

It’ll be interesting to see if they can capture the magic that made Chi Chi’s such a beloved dining destination. Absolutely. Speaking of the restaurant industry, the National Restaurant Association just released its latest survey. And the results are quite encouraging. Yeah, that’s good to hear. What’s the overall sentiment from restaurant operators?

Despite the myriad challenges the industry has faced in recent years, the survey reveals a growing sense of optimism among restaurant operators. They’re feeling increasingly positive about their future prospects. That’s a welcome change. What’s driving this renewed sense of optimism? Well, the trade group’s monthly performance index, which tracks key industry metrics, actually rose by 1.

6 points in November, exceeding 100 for the first time in seven months. This suggests a positive shift in momentum. Furthermore, the majority of the respondents reported that they expect same store sales and overall business conditions to improve over the next six months. So it seems like there’s light at the end of the tunnel for the restaurant industry after all.

It certainly appears that way. However, it’s important to remember that this is a national trend, and specific markets and segments within the industry might experience different outcomes. So while there’s reason for optimism, it’s also wise to consider the local context and specific challenges facing individual businesses.

That’s a great point. Now before we move on to our final thoughts, are there any other interesting nuggets of information? that you think our listeners should know. There’s one more thing I’d like to highlight. Remember our earlier conversation about bin stores and the surge in merchandise returns? Well, here’s a statistic that really underscores the magnitude of this trend.

The total value of online purchases returned in the U. S. last year reached a staggering 247 billion. Wow, that’s an astronomical figure. It really puts the scale of this phenomenon into perspective. It’s no wonder that alternative retail models like BIM stores are gaining traction. Exactly. It reflects a significant shift in consumer behavior and the retail landscape as a whole.

It’ll be fascinating to observe how this trend evolves in the coming years and what innovations it sparks. Okay, I think it’s time to wrap up this part of our deep dive. We’ve explored a wide range of topics, from the contrasting office markets of Fort Worth and Dallas, to the surprising comeback of Chi Chis and the rise of BIM stores.

It’s amazing how much ground we’ve covered in this week’s Deep Dive. It really speaks to the dynamic nature of the commercial real estate and retail industries. You know, there’s always something new happening. Always a trend to analyze a story unfolding. Yeah. It’s like we’ve taken a whirlwind tour of the entire market.

From billion dollar deals to struggling chains, innovative concepts and the surprising return of brands we thought were gone forever. Absolutely. Absolutely. Absolutely. And. Amidst all this change, there’s a common thread that connects it all adaptation, whether it’s Blackstone strategically positioning itself in global markets, or former CEOs betting on the revival of beloved brands.

Everyone is trying to find their footing in this evolving landscape, right? And even consumers are adapting. We’re seeing shifts in shopping https: otter. ai And consumers shaping those forces through their choices makes you wonder what the future holds for these industries. Absolutely. What trends will emerge next?

What innovations will disrupt the status quo? And how will consumers and businesses continue to adapt to the ever changing realities of the market? Those are the questions that keep us on our toes and make this such a captivating field to follow. But we don’t want to just leave you with questions. We want to leave you with a challenge.

Yes, a challenge to take what we’ve discussed today and apply it to your own world. Think about the trends we’ve explored and consider how they might be playing out in your own industry, your community. Or even your own life. So are you seeing similar shifts in consumer behavior? Are businesses in your area adapting in innovative ways?

And how are you personally navigating these changes as both a consumer and perhaps as a business professional? We believe that true understanding comes from connecting these broad trends to our own individual experiences. It’s about recognizing the patterns the force is at play, and using that knowledge to make informed decisions.

So as you head back into your world, we encourage you to keep these trends in mind. Observe, analyze, and adapt, because in a market as dynamic as this one, the ability to adapt is the key to thriving. And remember, we’re always here to guide you through the ever changing landscape of commercial real estate and retail, so stay curious, stay informed, and stay ahead of the curve.

Thanks for joining us on this week’s Deep Dive.

 Welcome back to the Deep Dive. This week, we’re going to take a deep dive into commercial real estate. Oh, should be interesting. Yeah, we’ve got a whole stack of news articles and reports and analyses, uh, you know, everything you sent over. Great. Really focusing on, you know, what’s going on in this last quarter of 2024, especially here in DFW.

Yeah, you picked a really interesting time to do this. Oh! Yeah, because we’ve got like this weird puzzle going on. Okay. On the one hand, investment in commercial real estate is down significantly this year. Right. I mean, transaction volume in Q3 hit its lowest point since 2011. Yeah, I saw that 2011 number.

Whoa! And I was like, wait a minute. Yeah. But you know me, always looking for the silver lining. Yeah. And there are signs pointing to a possible rebound in 2025. Yeah. 2025. True. So what’s making everyone so optimistic? Well, just think about it. The 2024 election just wrapped up. Right. And that alone injects, like, a dose of certainty back into the market.

Yeah, that makes sense. Investors don’t like uncertainty. Election years, they tend to kind of hold back and wait and see what happens. So is that what’s driving up the uncertainty? Commercial property prices. I was looking at the costar data for October and their repeat sales transactions. So, you know, properties being sold again totaled over 10 billion higher than the same time last year.

Yeah. That’s a big jump. Yeah. Yeah. You’re exactly right. That is a key indicator that investors are feeling more confident. Yeah. They’re willing to make those big purchases again. Yeah. And it’s not just the election results. Okay. The Federal Reserve cutting interest rates plays a big role too. Right. Of course.

Makes borrowing more attractive. So investors are more comfortable taking on debt. to do deals. So it’s like a chain reaction. Exactly. Lower rates, more borrowing, more deals. Exactly. More activity. Yeah. Okay. So where are investors focusing their attention these days? Are they playing it safe or are they, you know, branching out a little?

That’s what’s really interesting. We’re seeing a wider range of opportunities pulling investors in. Data centers are hot right now, driven by You know, our constant need for more data storage and processing. And then you’ve got investors looking at distressed assets, office buildings, shopping malls, looking for bargains, and a potential turnaround.

So like there’s opportunity in the uncertainty. Exactly. Yeah, I like that. They’re seeing the potential. Okay, well, I definitely want to dive deeper into the performance of those specific sectors, DFW. Let’s do it. Okay, let’s start with industrial real estate. All right. I mean, it’s booming, especially here in DFW.

Well, booming. It’s actually leading the nation in industrial sales. That’s right. Even surpassing the Bay Area with over 3. 3 billion dollars in sales in just the first three quarters of this year. Yeah, through Q3. Yeah. Crazy numbers. Yeah, it’s huge. I remember reading about Stone Peak buying that massive 1.

1 million square foot industrial property in Fort Worth. Oh, yeah. for 11 million. Wow. It just shows the confidence investors have in this area. That’s a huge vote of confidence for sure. Yeah. DFW’s location is great, strong economy, access to major transportation hubs. Right in the middle of everything.

Yeah. Makes it perfect for logistics and distribution. Yeah. Can’t beat it. And all that high demand is pushing vacancy rates lower than the national average. True. But I did notice that they’re slightly higher than last year. Yeah, that’s true. Exceeding both national and historical averages for our region.

Yeah, you gotta look at those nuances, right? Yeah, so even in a strong sector like industrial, you gotta, you know, pay attention to the details. Yeah, it’s not a one size fits all situation. All right, well let’s shift gears to office real estate. Okay. This sector is facing some serious challenges right now.

Okay. Definitely some headwinds. Yeah, and it’s currently almost half of all distressed assets in the commercial real estate market. Yeah, almost half. It’s a lot. That’s a pretty big number. Yeah, it is. What’s causing all this distress in the office sector? Is it all because of work from home? Work from home is definitely a factor, but it’s not the whole story.

Okay. Rising interest rates are hitting this sector hard. Right. A lot of companies are downsizing, re evaluating their office space needs. Yeah. And that leads to more empty offices. Makes sense. And Nathan Things, he’s a senior VP at Kidder and Matthews. Okay. He pointed out some really alarming signs. Oh, like an increase in unpaid vendor invoices and property liens.

It’s not good. So those are like red flag, definitely red flag that a property might be in trouble. Yeah. Early warning signs that they’re struggling financially, but are there any bright spots in the office sector? There are some glimmers of hope. Okay. Fester, they’re a real estate firm focused on retail.

Okay. But they’re seeing strong leasing activity in some markets, like Denver. Really? Yeah. So it’s not all doom and gloom. Okay. Certain office spaces are still in demand. Right. Especially those catering to specific industries or offering really desirable amenities. So it sounds like adaptability is key.

Absolutely. The ones that can adapt are the ones that will survive. Which brings us to our next sector, retail. Right, retail. This one’s been on a wild ride for years. Yeah, no kidding. With the rise of online shopping. It’s been a roller coaster. So what are we seeing now? We’re seeing a fascinating transformation.

Okay. Companies are adapting in really creative ways. Give me an example. Okay. Burlington stores. Okay. I know Burlington. They’re strategically acquiring vacant stores, a lot of which were occupied by struggling retailers like Bed Bath Beyond. So they’re capitalizing on those closures. Exactly. Yeah.

Potentially getting prime real estate at a discount. Smart. And they’re not alone. Okay. We’re seeing physical stores. Taking on new roles in the retail ecosystem. Oh, really? Yeah. Many are now key players in reverse logistics, reverse logistics. It’s basically handling returns from online purchases. Okay. So for our listeners who might not be familiar with that term, imagine you order something online and you need to return it.

Instead of shipping it back, you can just take it to a physical store. Much easier. So much easier. And it probably saves the retailers money on those return shipping costs. And it gets people back into stores. Exactly. More foot traffic. So maybe they’ll buy something else while they’re there. You got it.

It’s a win win. It is. Retailers are getting savvy about blending the online and offline shopping experience. So retail’s not dying, it’s just evolving. That’s a great way to put it. It’s evolving. Alright, well let’s zoom in on our own backyard now, Dallas Fort Worth. Okay. What’s going on here in the commercial real estate world?

Well, one interesting trend is the rise of upscale retail. Oh, really? Yeah. Particularly in Collin County’s outer suburbs, high end brands are doing really well there. Interesting. Driven by population growth and people wanting newer, more luxurious shopping experiences. Yeah. I guess those areas are growing fast.

Yeah. And there’s a big development in the works that could make Collin County even more attractive. Oh, yeah. A 220 million amphitheater. Wow. That’s a serious investment. Yeah. They’re really aiming to make Collin County a destination. Yeah. So, not just for shopping, but for entertainment, too. Exactly. And it, it ties into this broader trend of creating vibrant, mixed use developments.

Yeah. Retail, entertainment, residential, all in one place. So we’ve got this booming industrial market, a struggling but adapting office sector. Trying to find its way. And retail is evolving. Absolutely. Changing with the times. It’s a dynamic picture, that’s for sure. Very dynamic. Lots going on. Well, to Really get the full picture.

We need to talk about those macro trends. Yeah, good point. Things like inflation, consumer spending. Those always play a big role in real estate. Alright, let’s dive into those next and see how they’re impacting things here in DFW. Let’s do it. Yeah, when we talk about macro trends, inflation’s kind of the big one.

Yeah, it’s cooled down but it’s still above what the Fed wants, right? Right above their target. Yeah. And that makes what they do next with interest rates a big deal for commercial real estate. It’s like everyone’s just waiting to see which way rates will go. Exactly. Any change there could really shake things up.

Yeah. It’s a tricky balance, isn’t it? It is. Inflation and interest rates. Mm hmm. Investors are watching carefully. Oh, yeah. For sure. There’s another macro trend we should talk about, and it’s actually looking pretty good. Oh, which one? Consumer spending. Oh, right, right. People are still out there shopping, despite all the economic uncertainty.

Yeah, they are. I bet that’s good news for the retail sector. It is. Especially for those who are adapting like we talked about with Burlington stores. Taking over those vacant retail spaces. Yes. Smart move. Strong consumer spending could really help soften the blow of rising prices and all the uncertainty.

Shows how resilient the market can be. Exactly. Especially in sectors that are, you know, meeting those everyday needs. Well, speaking of resilience and adaptation, I wanted to mention something I read about Dallas. Okay. This whole debate about getting rid of parking minimums for new developments. Oh, yeah.

Sounds like it could really change the city. It could. It’s a big shift in how cities are thinking about planning. Yeah. So, parking minimums are these rules about how many parking spaces developers have to include in new buildings. Right. They’ve been around forever, but now cities are starting to question them.

So, for those listening who maybe haven’t heard about these parking minimums before, why are they being reconsidered? Well, the argument against them is that they lead to way too many parking lots, which take up space, contribute to sprawl, and they don’t encourage walking or biking or public transit. So it’s about more than just parking.

Exactly. It’s about how we design our cities. Creating places that are less car dependent. Right. More walkable, more people friendly. So what’s going to happen in Dallas? Are they actually going to get rid of these parking minimums? Well, the City Planning Commission just reviewed a proposal to do just that.

Wow. And those potential changes are going to the City Council next. Big step. It is. It could really have a ripple effect on development across the whole city. It’s like Dallas is at a crossroads. In a way, yeah. Deciding what kind of city it wants to be. That’s right. Choosing its future. Well, let’s shift gears again.

I’m curious about that whole reverse logistics thing we were talking about earlier. Oh, yeah. Retailers seem to be getting really creative with how they use their stores these days. They are. Online shopping is booming. And that means returns have become a huge challenge. Right. Logistically. And it’s expensive.

Yeah. But some retailers are turning this challenge into an opportunity. Okay. That’s where reverse logistics comes in. So break it down for our listeners. Sure. Let’s say you buy something online. Mm hmm. It doesn’t fit quite right. Right. Instead of packing it up and shipping it back, Ugh, such a hassle. you can just take it back to a physical store.

Oh, that is way easier. Much easier. And it probably saves the retailer money on those return shipping costs. And it gets people back into the store. Exactly. More foot traffic. Which could lead to more sales. You got it. It’s a really smart way to combine online and offline shopping. It is. It’s all about adaptation.

Well, speaking of positive signs, I was reading about how CBRE is predicting a 30 percent growth in investment sales revenue for Q4. Wow, that’s a bold prediction. It is, especially with all the challenges we’ve been talking about. Yeah, what makes them so optimistic? Well, they’re pointing to a few things.

Mm hmm. Certainty after the election, falling interest rates, and a sense that asset values are stabilizing. Okay. Plus, there are just more investment opportunities out there, which is attracting new investors. So maybe not a full recovery yet. Right. But definitely some good signs. Yeah, some encouraging signs.

That seems to be the feeling among the experts. Well, that’s good to hear. Yeah. We’ve covered a lot of ground in this deep dive. We have. From overall market trends to specific sectors, the impact of the bigger economy, and even local decisions here in Dallas. Yeah. It’s a complex picture. Well, it’s been fascinating.

And now as we wrap up this deep dive, I want to leave our listeners with one final thought. We’ve talked about. You know how commercial real estate is shaping things right now, right the present, but what about its impact on the future? The big question. Yeah, how might these trends and see our e influence the way we work?

How we shop even how our cities are planned. Yeah, are we gonna see a major shift? Right in how we use physical space or is this just a temporary adaptation? That is the million dollar question, and it’s tough to say for sure. I think what’s clear is that the line between physical space and digital space is getting blurrier.

That’s true. You know, e commerce is changing retail, remote work is changing offices, and the rise of data centers is changing the landscape of our cities. Yeah, it does feel like we’re in this in between phase, trying to figure out what all this means in the long run. Right, it’s a time of experimentation, you know, adaptation, trying new things.

Yeah. Some trends I think are definitely here to stay. Like what? Like that shift toward experiential retail. Oh yeah. Where stores offer more than just products, it’s an experience. Right. And the demand for flexible office spaces, you know. Mm hmm. Catering to hybrid work. Exactly. People want options. But then you have these other trends that are still kind of up in the air.

Yes. Like what’s going to happen to the traditional shopping mall? The mall, yeah, that’s a tough one. It really is. Nobody knows for sure. It’s like we’re watching our cities evolve in real time. Yeah. It’s fascinating. The choices we make today, developers, city planners, even us as consumers. Yeah. We all play a role.

Those choices will shape the cities of tomorrow. It’s pretty exciting. It is exciting and a little bit scary too. Right. Big responsibility. Yeah. So as we wrap up this deep dive into the world of commercial real estate, what’s the one thing you want to do? I would say this, the future of our cities, the spaces we live and work in, it’s being shaped right now.

Yeah. And we all have a part to play in that. We do. Whether it’s through the choices we make as consumers, the investments we make, or even just by staying informed. Right. Engaging in these conversations. Yeah. I love that. So to our listeners out there. Yeah. Keep exploring these trends, challenge assumptions.

Think critically. And imagine the possibilities. The future is unwritten. Exactly. The future of commercial real estate is still being written, and your insights and actions can be a part of that story. Make your voice heard. Thanks for joining us on this deep dive, and we’ll see you next time for another one.

See you then.

 Hey, everyone ready for another deep dive today. We’re looking into some seriously interesting shifts going on in the retail world. I’m talking the unexpected comeback of urban retail. Yeah, for real, and how AI is about to become your best friend for holiday shopping. It’s kind of funny, we always focus on the huge, obvious trends, but sometimes it’s the small things.

Like, how long a retail lease is that? Tell the real story. Totally. We’ve got reports from CBRE, JLL, and the ICSC, and even some stores. super interesting survey data about AI and how everyone’s planning to shop for the holidays. By the time we’re done with this deep dive, you’ll not only be completely up to date on these trends, but you’ll also have a bunch of fun facts to bust out at your next holiday party.

So let’s kick things off with the CBRE report. Okay. They’re saying the average retail lease in the U. S. is now a whole eight years. That’s up from seven and a half just last year. Yeah, that might not seem like much, but in commercial real estate, That kind of jump really says something. Retailers are feeling a lot more confident these days, especially in those neighborhood and community malls and strip malls, too.

So it’s not just any old retail making this comeback. It’s the places people shop for everyday stuff close to home. It makes total sense that retailers want to be a part of that. But the thing that really caught my eye is that Tampa, Nashville, and San Antonio are leading this trend of longer leases.

What’s making those cities so hot right now? Honestly, it’s a whole mix of things. Those cities are all seeing massive population growth, and their economies are just booming, which brings in even more people and businesses. And that, of course, creates a natural demand for more retail space. It’s that good old supply and demand in action.

Plus, Tampa and Nashville are turning into tech hubs, so they’re drawing in all these young professionals who want convenience and walkable neighborhoods. Interesting. So you’ve got this perfect storm of economic growth and lifestyle preferences driving retail in these cities. But here’s where things get really interesting.

JLL is reporting a full blown urban retail renaissance. After the pandemic hit those areas so hard, who would have thought? It’s a bit of a twist, that’s for sure. But when you look at the bigger picture, it kind of starts to make sense. People are heading back to their offices, tourism is picking up, and consumers are craving that city vibe again.

And it’s not just any stores popping up either. JLL says luxury brands are leading the charge, snagging those prime spots in all the revitalized downtowns. Exactly. Investors are putting their money where their mouth is. They’re seeing the potential in urban retail and betting big on the future of these lively city centers.

It’s a clear shift in the post pandemic real estate scene. And the numbers are seriously impressive. Urban retail’s share of transactions shot up by 180 percent year over year in Q3. We’re talking major cities here. Boston, Chicago, Miami, New York. They’re all back in the urban retail game. It’s really changing how we experience cities these days.

Think about strolling through a vibrant downtown, popping into all these cool boutiques, grabbing some amazing food and catching a show, all within walking distance. That’s the real appeal of urban retail. Okay, so we’ve got retailers feeling optimistic, urban centers are buzzing with activity, but now let’s talk about how AI is getting ready to completely change your holiday shopping game.

This Adobe survey found that a whopping 40 percent of shoppers in the U. S. are planning to use generative AI for their holiday shopping this year. That’s almost half. I gotta admit, I’m super curious about this whole generative AI thing. Can you break that down for us? It’s a pretty fascinating new thing.

Basically, generative AI can create new content, like text, images, even code, based on what it’s learned from tons and tons of data. Think of it like having this super personalized shopping assistant in your pocket. Imagine typing in, find me unique gifts for a tech savvy teenager who’s obsessed with music, and boom.

The AI whips up a list of personalized recommendations, complete with pictures. Product descriptions, reviews, and price comparisons. That’s insane. So it’s not just about hunting down the best deals online. It’s about finding stuff you wouldn’t have even thought of. This could be huge for holiday shopping.

It definitely could. The top ways people are planning to use it, according to this survey, are from for finding those killer deals, tracking down items online super fast, getting brand recommendations and discovering similar products. And what’s even cooler is that it’s not just for the techie early adopters anymore.

People are using it for really practical stuff, especially during the holiday rush. I can totally see why. It’s like having your own personal shopper right in your pocket, guiding you through the craziness of holiday shopping. But what about Good old fashioned Thanksgiving weekend shopping. It seems like the holidays start earlier and earlier every year.

Are people still hitting the stores for Black Friday and Cyber Monday? Oh, absolutely. The ICSC predicts shoppers are going to spend almost 125 billion over Thanksgiving weekend alone. And get this, 90 percent of consumers are planning to shop during that time. So even with all the online shopping and the holidays starting earlier, it’s clear Thanksgiving weekend is still a big deal for shoppers.

It’s fascinating to see how those traditional shopping events are holding their own, even as things change. But tell me, who’s actually doing most of the shopping and spending during Thanksgiving weekend? Well, the ICSC report highlights a pretty interesting trend. It seems that while younger generations like Gen Z and Millennials are more likely to be browsing online and hitting the stores over Thanksgiving weekend, it’s actually Millennials and Gen X who are projected to spend the most.

That’s interesting. Is that a sign of a generational shift in spending power? It’s part of it for sure, but it also just reflects where these generations are in their lives. Millennials and Gen Xers are often at a stage where they have families and bigger households, which naturally leads to more spending, especially during the holidays.

That makes a lot of sense. So we’ve got these big shopping events, but the report also mentioned that deals and discounts are still the biggest motivators for shoppers, with 68 percent of them doing their research ahead of time to find the best bargains. Sounds like people are getting more strategic with their holiday shopping.

Definitely, they’re not just buying on impulse anymore, they’re planning things out to get the most bang for their buck. Especially with how the economy is right now. That means retailers really need to step up their game with those promotions, and create a sense of urgency to grab those shoppers attention.

It’s like a chess match between shoppers and retailers. Mm hmm. And speaking of which, here’s a surprising stat from the ICSC report. Despite all the online shopping, a whopping 88 percent of consumers still plan to shop in physical stores over Thanksgiving weekend. I gotta admit, I thought online shopping would have totally taken over by now.

It really shows how much people still love that in person experience. They still want to touch and feel products, chat with salespeople, and enjoy that social aspect of shopping. But it’s not just about the shopping itself, is it? Malls and shopping centers are changing. They’re becoming more like multi purpose community hubs.

They’re offering dining entertainment and experiences that go beyond just buying stuff. You got it. They’re transforming it to destinations. It’s about spending time with friends and family, grabbing a bite to eat, catching a movie, and maybe doing a little shopping while you’re there. It’s about creating an experience that’s more than just a transaction.

So it’s not just about buying things anymore. It’s about the whole experience, the social interaction, the discovery, that sense of community. It’s about creating places where people want to be. Exactly. And that’s something we’re seeing not just during the holidays, but all year round. This has been a super fascinating look at how retail is changing.

We’ve covered a lot of ground from the surprise comeback of urban retail to how AI is becoming everyone’s shopping buddy. But before we move on to part two, I’m curious. What stands out to you the most from all this? What really strikes me is how resilient and adaptable the retail industry is. Even with all the challenges in recent years, it’s finding new ways to thrive.

From the return of urban retail to embracing AI, the future of shopping is definitely not going to be boring. Couldn’t agree more. It’s a super dynamic and evolving world. And I can’t wait to see what happens next. But for now, let’s take a quick break. When we get back in part two, we’ll dig deeper into the potential challenges and opportunities that are out there for the retail industry.

And we’ll talk about how all of this could impact you as a consumer. Welcome back. It’s super interesting how these seemingly separate trends, longer retail leases, that urban retail comeback, and AI are actually all connected. You’ve definitely got my attention. Tell me more about how these trends all fit together.

Well, think about it. Longer leases tell us retailers are feeling pretty good about the future, and that confidence is partly thanks to the resurgence of urban retail. Right, because more people Living, working and hanging out in cities means a bigger pool of potential customers for those retailers.

Exactly. And this shift back to city centers is opening up all these cool opportunities for retailers to use AI in new ways, not just online, but in their physical stores, too. So we’re not just talking about AI helping us find deals online. We’re talking about it actually changing what it’s like to shop in a store.

For sure. Imagine walking into a store and the AI recognizes you right away, suggests stuff based on what you’ve bought before, and even walks you right to whatever you’re looking for. That sounds like something straight out of a sci fi movie. Yeah. It would be super convenient though. No more wandering around lost trying to find that one specific thing.

Exactly. AI has the potential to make shopping way more efficient, enjoyable, and personalized. But of course, not everyone’s going to be comfortable with that much tech. Some people might find it a bit intrusive or even creepy. That’s a good point. How do retailers find that balance between using all this cool new tech and still respecting people’s privacy?

It’s a tready one. Transparency is key. Retailers need to be upfront about how they’re using AI and give shoppers the option to opt out if they want. It’s about giving people control over their experience. But what about AI’s impact on jobs in retail? There’s a lot of talk about automation taking over from human workers.

That’s definitely a valid concern and a conversation we need to be having as AI becomes more and more a part of our lives. But I don’t think it’s a simple case of robots taking everyone’s jobs. So it’s not all doom and gloom for retail workers then? Not at all. While AI can definitely automate some tasks, it can also free up human employees to focus on things that need creativity, problem solving, and those people skills.

Things that AI just can’t do. So instead of wiping out jobs, it’s more about a shift in the types of jobs in retail? Yes. Exactly. AI can handle those repetitive tasks, like managing inventory or processing transactions, which lets human employees focus on giving amazing customer service, creating those cool in store experiences, or picking out unique products.

That makes a lot of sense. It’s about using AI to help people do What they do best, not replace them altogether. Exactly. And this shift is going to require retraining and upskilling the workforce so they’re ready for these new, more specialized roles. It’s a challenge, but it’s also a big opportunity for retail workers to learn new skills and take on more interesting roles.

Totally agree. It’s about adapting to how things are changing and recognizing that technology can be a tool to create a better future for everyone, not just for making things more efficient or profitable. Speaking of adapting, let’s dive a bit deeper into how physical retail spaces are changing. We touched on this earlier, but I think it deserves a closer look.

For sure, this is where things get really interesting. As online shopping keeps growing, physical stores have to offer more than just a place to buy stuff. They need to become destinations. You’re talking about creating experiences that go beyond just Exactly. It’s about creating that sense of community, a place where people want to hang out, connect with others, and be entertained.

Can you give us some real world examples of what that actually looks like? We’re already seeing malls and shopping centers adding things like restaurants, movie theaters, fitness centers, art installations, and even co working spaces. It’s like they’re turning into little cities within cities. In a way, yeah, they’re becoming hubs for social interaction, entertainment, and even work.

This whole blending of retail, leisure, and work is only going to keep going. Okay, I’m picturing this. I meet a friend for coffee at the mall’s super trendy cafe. Then we browse the bookstore, check out the latest art exhibit, maybe pop into a few stores. And then I head up to the co working space to get some work done.

All under one roof. It’s like a one stop shop for life. Exactly. And that’s just one scenario. Imagine farmer’s markets, live music, cooking classes, book readings, pop up shops. The possibilities are endless. It’s all about that sense of discovery and surprise. You never know what you’ll find when you step into one of these reimagined retail spaces.

But is this model actually sustainable? Can every mall and shopping center pull off this kind of transformation? That’s a great question. And the answer is probably not. Not every retail space is going to be able to do this. It takes a special mix of things. A great location, really understanding the local community, being willing to invest in new ideas, and a good dose of creativity.

So there’s no one size fits all solution for malls and shopping centers trying to adapt? Nope. Each space needs to find its own identity and cater to what its community specifically wants and needs. Those cookie cutter approaches just aren’t going to cut it. It’s all about being adaptable, flexible, and trying new things to see what works.

Exactly, and it’s about understanding that what physical retail is for is fundamentally changing. It’s not just about transactions anymore, it’s about building connections and that sense of belonging. I’m noticing a theme here, whether it’s AI or how physical retail spaces are changing. It’s all about creating a more personal and engaging experience for the shopper.

You hit the nail on the head. That focus on the customer experience is what’s going to make or break you in this ever changing retail world. So what does all this mean for the future of shopping? Any predictions? I think we’ll see even more blending between online and offline shopping. AI is going to play a much bigger role in personalizing the whole experience, both online and in stores.

And those physical stores will keep evolving into these multi purpose destinations that offer way more than just products. Exactly. The future of retail is about creating a seamless, personalized, and engaging experience that really meets the needs and wants of today’s shoppers. This has been such an insightful conversation and I feel like my brain is buzzing with new ideas.

But before we get too carried away with the future, let’s come back down to earth for a minute. When we come back for part three, we’re going to shift the focus to you, the consumer, and explore what all this means for your actual shopping experience in a real practical way. Okay, we’re back for the last part of our deep dive into the future of retail.

And this time, I’m going to talk to you about It’s all about you. What does this whole retail renaissance and the AI revolution actually mean for your shopping experience? It’s a pretty wild time to be a shopper right now. You’ve got more choices than ever before, and technology is giving you all these tools to be a smarter consumer.

Let’s break it down. We talked about this big comeback of urban retail. What are the actual benefits for everyday shoppers? Well, first off, it means more options right in your neighborhood. You can enjoy all the convenience of local shops, the energy of a revitalized downtown, and those unique experiences you just don’t get in the suburbs.

So it’s about having everything right at your fingertips. No more driving out to the burbs for every little thing. Exactly. And with all these luxury brands setting up shop in city centers, you’ve got access to a much wider range of products and services, even if you’re just window shopping. But let’s be real, luxury brands aren’t exactly known for being easy on the wallet.

Is this urban retail boom really good for everyone, or just those with a lot of cash to throw around? That’s a fair point. For this trend to really work, it needs to be inclusive and cater to a mix of incomes and needs. Hopefully, as this urban retail renaissance keeps going, we’ll see a better balance of businesses that appeal to all kinds of budgets and lifestyles.

It’s about creating a healthy retail ecosystem where everyone feels welcome and can find what they need no matter how much they can spend. Absolutely, and that’s where community engagement becomes so important. Retailers need to really listen to what their communities want and offer products and services that make sense for everyone.

Now let’s talk AI. We discussed how it can personalize your shopping and make things super efficient, but I think it’s safe to say some people are a bit uneasy about it. What are your thoughts on that? I totally get it. People are worried about their privacy, their data being safe, and AI being used in ways that feel manipulative.

And those are valid concerns. So how do we navigate this new AI powered world as shoppers? What can we do to protect ourselves? Being aware is key. Be informed about how retailers are using your data, and what AI tools they’re using. Read those privacy policies, don’t be afraid to ask questions, and be careful about what you’re sharing online.

It’s about taking control of your digital footprint and making smart choices about what you’re okay with sharing. Exactly. And you always have the option to say no to data collection or those personalized recommendations if you’re not comfortable. You have the right to control your own data. That’s good to know.

It’s not about rejecting technology altogether. It’s about using it on your own terms. Precisely. And don’t forget, you can always just shop in physical stores where AI might not be as big a thing. The great thing about this retail renaissance is you have choices. You can shop online, in store, or mix it up.

You can embrace AI or choose to limit how much you use it. It’s all about finding what works best for you. And that’s what’s so exciting. This whole changing retail landscape gives you the power to be a more conscious, informed, and picky consumer. You’re the one in control. So as we wrap up this deep dive, what’s the one thing you want our listeners to take away from all of this?

The future of retail is being shaped right now, and you have the power to shape it through your choices, your preferences, and what you demand. Embrace the convenience of technology, but do it thoughtfully and critically. Support businesses that reflect your values and demand transparency and ethical practices from the companies you choose to support.

Well said. It’s about being an active part of the retail world, not just a passive consumer. Thanks for joining us on this deep dive into the future of retail. Remember, the future of shopping is what we make it.

 Welcome to the deep dive today. We’re going to take a deep dive into, um, commercial real estate. Oh, fun. It is fun. And it’s, uh, it’s interesting. It’s always changing. Yeah, definitely. And we’ve got a stack of articles here from CoStar News and CoStar Analytics. They’re really the experts on this stuff.

Yeah, they are. So we’re going to go through these and see what’s, what’s happening out there in the world of commercial real estate. So some trends, trends. Yeah. I love trends. Yeah, it’s all about the trends. Exactly. Ugh. So, let’s jump right in. The first thing I wanted to talk about was, um, Borrowing trends.

The third quarter of 2024 saw a surge in borrowing 44 percent increase over the previous quarter for commercial real estate. Wow, that’s a lot. Yeah, it is a lot. So I’m kind of curious what what was driving that? Well, one thing to consider is, um, Interest rates. And during the third quarter, the interest rate on what’s called the 10 year treasury really dropped significantly.

It actually hit 3. 72 percent in September. So how does that, like, how does a government bond rate impact commercial real estate? Right, so that actually acts as kind of a baseline for interest rates across the whole economy. So when that rate falls, mortgage rates tend to follow suit. And then suddenly, Borrowing money becomes a lot more attractive.

Oh, okay, so it’s like a domino effect then. Yeah. Lower government bond rates leads to lower mortgage rates. Buyers want to jump in and refinance or take out new loans. Exactly, and that’s exactly what we saw happen in the third quarter. Buyers and property owners wanted to lock in those lower rates before they potentially 10 year treasury yields, they climbed back up to 4.

51 percent since mid September. Right. So is that borrowing frenzy over? That is a great question, and it really shows how dynamic the real estate market is. You know, if those yields continue to rise, we could definitely see that borrowing slow down. Those lower rates are already starting to become a thing of the past.

So for anybody listening who might be thinking about investing in commercial property right now, what should they be thinking about? Well, I would definitely say pay close attention to interest rates. You know, the window for those super low rates, that could be closing. We also might start to see lenders and borrowers being more creative, um, with their financing to kind of adjust to this new environment.

That’s interesting. Yeah. It’s going to be interesting to see what happens. Okay. Well, let’s move on from this big picture of interest rates and, um, zoom in on a specific market that caught my eye, Dallas, Fort Worth. It says here that commercial property sales are up 12 percent year over year, but it looks like the real story is in one particular sector.

Industrial properties. Yeah. Whose sales are absolute booming in Dallas, up 53 percent compared to earlier this year. 53%, that’s huge. So, I mean, everyone talks about location, location, location in real estate. Yeah, right. But what else is going on there? Is it just location? Well, location is a big factor. You know, Dallas has a strategic location.

Great transportation network is becoming a prime hub for distribution. But there’s also kind of this bigger trend going on, uh, you know, changes we’re seeing in global supply chains. The pandemic really exposed weaknesses in those long, complex global supply chains. Yeah. So companies are rethinking their strategies.

They want to shorten their chains, bring production closer to their customers, and that means they need more warehouse space and they need it closer to where people actually live. Okay. Dallas Fort Worth is perfectly positioned for that. So it’s not just a physical location, it’s about positioning yourself within these evolving supply chains.

Exactly. And we’re seeing that in other places around the country too, you know, other logistics hubs. So anybody listening who’s thinking about, I don’t know, relocating or starting a business, Dallas might be a good spot to look into. Definitely. Especially if you’re in an industry that relies on, you know, fast and efficient distribution networks, Dallas is a powerhouse for that.

Awesome. Okay, let’s move on. This one, this one’s a little bit of a surprise. We all know the office market has been struggling, vacancy rates are high, lots of empty buildings, but one landlord in Plano, Texas is trying a pretty unique approach to attract tenants. What’s that? Pickleball. Pickleball. Wow. I know, right?

So this landlord is adding pickleball courts and a bunch of outdoor amenities to a vacant office campus. Like, is it a gimmick? Are they on to something? Well, you know, I think it really speaks to the changing priorities of office tenants. What people want is changing. It’s not just about square footage or fancy address anymore.

Companies are realizing they need to create a better experience, offer something more, a sense of community. So it’s less about cubicles and more about creating a workplace that people actually want to be. Exactly. And if that includes pickleball, then so be it. I love it. Yeah. But what does this mean for the future of work?

I mean, are traditional offices just going to become obsolete? That’s a big question. And honestly, I don’t think anyone really knows the answer yet. Yeah. But I think, you know, this focus on amenities and experience, that could really change the office as we know it. It’s a trend to keep an eye on. Okay.

Let’s move on to retail. Okay. Despite some, you know, some challenges, retail real estate is showing some signs of resilience. In fact, in South Florida, retail properties are actually gaining value faster than other types of real estate, even apartments, which are usually pretty hot. Yeah, that’s a great point.

It really goes to show that real estate is all about location. National trends only tell part of the story. So what’s making South Florida’s retail market so strong then? Well, a few things. They’ve got a booming tourism industry, a growing population, and, compared to other markets, a relatively limited supply of retail space.

You can’t forget about the weather, those warm, sunny winters. Right, people want to be there. Yeah, people are out and about spending money. Yeah. That translates into higher rents, higher property values for retail owners, but it’s not just about location. Retailers are also getting creative and adapting to changing consumer preferences.

And there’s some really interesting examples of that. Like what? Like the story about Arco, the convenience store chain. Oh yeah. They’re planning a major expansion, gonna open over 1, 400 new stores, renovate a lot of existing ones. And the big focus is food sales. Really? So they’re going beyond just like gas and snacks.

Yeah, they want to compete with fast food restaurants, offer quick and convenient meal options. Oh, interesting. So they’re tapping into that growing demand for like, grab and go food options. I think it’s a smart strategy. Yeah, especially as people get busier and busier, it just makes sense to have those options.

Exactly. Okay, before we move on, I want to squeeze in one more trend here. The national multifamily market, you know, apartment buildings. The data shows that the vacancy rate might have finally peaked, reached 7. 9 percent in the third quarter. Yeah, that’s right. After a pretty steep climb since 2021, it seems like it’s leveling off.

Okay, but you mentioned earlier that you know real estate is all about location and national trends don’t tell the whole story, so what’s happening on the like a regional level. Well, there are some pretty significant differences. Oh, okay. The Sun Belt, for example, is seeing disproportionately high vacancy rates.

Austin actually leads the pack with a vacancy rate of 15. 1%. Wow, that’s more than double the national average. It is, yeah. What’s going on there? You know, we can actually connect this back to something we talked about earlier, that migration trend to Texas. All those people moving from California and other states, they’re putting pressure on the housing markets.

Right. Increased demand leads to higher rents, and if there’s not enough apartments, then you get higher vacancy rates. Yeah, and that’s a big part of the story here. Some Sunbelt markets are actually seeing a slowdown in multifamily construction. Oh, wow. Which just makes the problem worse. So is this trend sustainable?

I mean, are we heading for a correction in some of these sunbelt markets? Hmm. That’s a great question. And it’s something that analysts are definitely watching very closely. All right. We’re going to take a pause here and come back to explore those questions and a lot more in part two. Welcome back to the Deep Dive.

You know, before the break, we were talking about those regional differences in multifamily market, and that got me thinking about the long term effects these, like, migration patterns can have. Yeah, it’s like a ripple effect. Exactly. It makes you wonder, like, what’s the ripple effect going to be from those hurricanes?

Oh yeah, especially since they hit some of the most popular areas on the East Coast. Definitely those hurricanes, they’re really impacted businesses, especially those that rely on tourism and entertainment. Yeah, even Disney wasn’t immune. Oh wow, they’re not exactly a small operation. What kind of impact are we talking about here?

Well, Disney estimates that, you know, all the closures and event cancellations from those East Coast hurricanes are going to cost them about 150 million in the first quarter of 2025. 150 million. Wow. It’s a big number. That’s huge. It makes you think about, you know, how important it is to have a plan. for dealing with, like, unexpected events.

Right. We talk a lot about the need for resilience and adaptation in business, but a lot of times the focus is on, you know, like, physical infrastructure, making sure buildings can withstand storms. Right. But it’s also really important to think about that resilience in terms of your business model, you know?

Your risk management strategies. How can you adapt to these kinds of disruptions and minimize the impact on your business? Okay, well let’s shift gears now and talk about a trend that seems to be Bucking the trend in a lot of ways. Okay. The power of physical locations. I mean, in an age where so much of our lives has moved online, it’s interesting to see companies actually doubling down on brick and mortar stores.

It is. You know, in a world that’s becoming increasingly digital, we’re seeing a renewed interest in physical spaces. Yeah. Almost like a pendulum swing. So one example that really stood out to me was, um, PNC Bank. Okay. They’re planning to double their branch openings over the next five years. Wow, which seems kind of counterintuitive.

Yeah, it does but you know I think it shows that even though we have all these digital options people still want those physical locations So what’s driving that demand? You know, I think for a lot of people especially when it comes to complex financial matters There’s still that desire for personal touch that face to face interaction.

There’s just a level of trust and a sense of security That’s hard to replicate online It’s like that old saying, sometimes you just need to talk to a real person. Exactly, and PNC is not the only one. Meta, Facebook’s parent company, is also experimenting with physical spaces. Oh, really? Yeah, but they’re taking a slightly different approach.

Oh, okay. They’ve opened a couple of pop up stores in a few cities. Okay. But their focus is less on selling products and more on creating these experiential retail spaces. So what are they doing? Well, they’re showcasing their VR and AI technology, giving people a chance to try it out, experience it firsthand.

So it’s less about traditional retail and more about, like, building brand awareness and generating excitement for meta. Right. They’re using these physical spaces to bridge the gap between the virtual and the real world. I see. Giving people a taste of the metaverse, I guess you could say. Yeah, it’s a smart strategy.

Makes me wonder if that’s the It’s like the future of retail, finding creative ways to blend online and offline to create a more, I don’t know, like a holistic brand experience. I think you’re right. It’s not about online versus offline anymore. It’s about finding the right balance, you know, the synergy between the two.

Consumers want options. They want convenience. They want to shop online in stores or a mix of both. And the retailers that can meet those needs, they’re the ones that will succeed. Makes sense. Yeah. Okay, before we move on, I want to circle back to something we touched on earlier. Um, the rise of convenience stores as, like, food destinations.

Yes. That story of, uh, Arco’s expansion plans. I was blown away by that. Over 1, 400 new stores. With a focus on food sales. Yeah, it’s a bold move, but I think it’s a smart one. They’re really capitalizing on the shift in how people are eating. You know, people are busy. They’re looking for quick, affordable meal options.

Yeah, and convenience stores are perfectly positioned for that. They’re already everywhere. They’re open all the time. They have a built in customer base. Right. It’s a classic example of adapting to changing consumer needs. Instead of just selling gas and snacks, they’re becoming destinations for meals.

We’re going to pause there for now and come back to wrap things up and explore what some of these trends might mean for the future. Welcome back to the Deep Dive. We’ve talked about a lot today, but before we wrap things up, there’s one more trend I wanted to make sure we discuss. Migration. It’s really changing, not just, you know, commercial real estate, but entire regions.

Yeah. And. Um, the article’s really highlighted what’s happening in Texas. Right, especially all the people and businesses moving there from California. Yeah, it’s like every day I hear about another company packing up and heading to the Lone Star State. What, what is it about Texas? And what’s it doing to commercial real estate there?

Look, Texas has a lot to offer businesses, you know, it’s a very business friendly environment, lower taxes, lower cost of living compared to a lot of places, especially California. Yeah. And for individuals, it’s, you know, often a similar appeal, especially that lower cost of living and all those people and businesses, they need places to be, right?

Yeah, driving up demand for commercial real estate, especially in cities like Austin, Dallas, San Antonio. But we talked earlier about how, you know, rapid growth isn’t always a good thing. It’s true. Can create challenges, especially with housing and infrastructure. Exactly. And, you know, we see that in Austin, those high vacancy rates we talked about earlier that suggest that, you know, the supply of housing just isn’t keeping up with all the new people moving there.

And as long as people keep moving to Texas, that pressure on Housing and commercial real estate is just going to keep building. Most likely, yeah. It’s pretty amazing how, like, a demographic shift, like this, the wave of migration, can impact so much. Yeah, the ripple effect. Really makes you think about, like, what’s the future going to look like for these places?

It does. How are they going to keep up with the growth? Yeah. You know? Accommodate all these people, but still maintain a good quality of life. That’s the question, isn’t it? Yeah, you know, it’s something that cities across the Sun Belt are facing. Right. Speaking of the future, there’s one more trend I want to touch on before we wrap up.

This one is a little bit out there. Okay. The metaverse. It seems like science fiction, but people are talking about it. Investing in it. It’s true. How does it connect to commercial real estate? That’s a good question. It does seem like a world apart from office buildings and shopping malls. Right. But there are some interesting connections starting to emerge.

Like we talked about Meta, Facebook’s parent company. Yeah. Opening those pop up stores to showcase VR and AI. Right. They weren’t really selling anything. Right. Just trying to get people excited about the Metaverse. That’s right. Trying to build a bridge between the virtual and the physical. Give people a taste of what it’s like.

What the Metaverse could be, what it has to offer, you know, beyond just games and entertainment. So these pop up stores are almost like a, like a gateway to the Metaverse. That’s a good way to put it. Make it feel a little less, I don’t know, abstract? Yeah. And, you know, as more people get used to VR and AR technology, Yeah.

the lines between the virtual and physical worlds are just gonna get blurrier. It’s kind of mind blowing to think about what we could do. Yeah, it is. Like, imagine attending a conference. in a virtual office tower, or shopping for furniture in a digitally rendered showroom. I mean, the possibilities are endless.

That’s what’s so exciting about it, right? It’s a blank canvas. Yeah. And it’s still early. But I think we’re just starting to explore what it can do. So even though people aren’t, you know, buying virtual real estate just yet. Right. It’s definitely something to watch. Absolutely. I agree. You know, just like all the trends we’ve talked about today, the commercial real estate landscape is constantly evolving.

You got to be able to adapt, to innovate, to embrace new technologies if you want to succeed in this world. That’s a great point to end on, I think. Yeah. Wow. We covered a lot today. Everything from pickleball to the metaverse. We did. Surging borrowing costs, resilient retail. It’s clear that there’s The world of commercial real estate is dynamic.

Yeah, lots going on. Full of surprises. Always changing. Exactly. Well, thanks for joining us on this deep dive into the world of commercial real estate. We hope you learned something new and maybe got you thinking about the trends that are shaping the world around us. Until next time, stay curious.