Welcome to the deep dive where we really try to get into some of the more interesting trends that are shaping the commercial real estate world, right? And today, we are laser focused on retail, what’s happening right now in early 2025. Yeah. And everything from, the surprising resilience of brick and mortar to the rise of the resale market.

We’re gonna touch on a few notable things happening right here in the DFW Metroplex, of course. Absolutely. And ultimately we’re going to try to explore how these trends could impact you. Whether you’re, a potential investor, or a business owner, or just somebody who’s, interested in this kind of stuff.

One of the things that I think is really fascinating is that, despite the pandemic’s push toward e commerce, physical retail is proving it’s far from dead. Yeah, it’s really interesting to see, we all thought, or a lot of people thought, that, the retail apocalypse was upon us, that everybody was going to be buying everything online.

But what’s fascinating is that, as people have come out of their COVID cocoons they’re wanting to get back out. They’re wanting to go into stores. They want to have that experience again. Those retail apocalypse pronouncements we’re hearing, a few years back, a bit premature for sure.

While the pandemic certainly accelerated online shopping, we’re now seeing, a return. to in person retail. Yeah. And and even expansion in some sectors. Absolutely. And it’s it’s like a reversion to the mean, people tried the online thing exclusively and they’re missing that in person experience.

Yeah. Yeah, for sure. For sure. Take Jim shark, for example, this this UK based. activewear brand that started online is now strategically expanding into physical stores. They recently opened a permanent location in New York City after a successful pop up. Yeah. And now they’re setting their sights on new markets like Dubai.

This move by Gymshark really highlights, I think, a growing trend of online brands recognizing the value of a physical presence. Yeah, they’re looking for that brand building and that customer experience. It’s not just about selling goods anymore. It’s about creating a Tangible brand experience that really resonates with customers and, even established retailers are adapting as well.

Lululemon, for instance, aims to strike a balance between their physical and their online sales, recognizing the importance of both channels for reaching different customer segments. And then Footlocker is another great example. They’re focusing on transforming their stores into community hubs, right?

By offering unique experiences that go beyond just browsing merchandise, so this evolution of brick and mortar retail. I think presents an interesting opportunity for investors. Absolutely. It’s no longer just about investing in a property. It’s about understanding which retailers have the right strategies.

To really thrive in this new landscape. Yeah. Identifying those retailers who are successfully blending online and offline experiences and catering to those evolving customer preferences that’s crucial for making smart investments these days. Absolutely. Absolutely. So let’s shift gears to another trend that’s reshaping retail.

And that’s the remarkable rise of resale. Yes. Particularly the apparel market. Yeah. Secondhand clothing is booming. Driven by Millennials and Gen Z. Yeah. The younger generations. They’re drawn to its sustainability. And the thrill of finding unique items. And this isn’t, this isn’t just a passing fad, right?

Yeah. The resale market is projected to reach a staggering 53 billion by 2025. That’s right. And this growth is impacting, You know, the real estate landscape as well. Resale chains like Plato’s Closet, Once Upon a Child are expanding rapidly, often taking up space in, what we call Class B shopping centers.

Yeah. And landlords are really welcoming these tenants. They’re recognizing their ability to attract that consistent foot traffic and revitalize spaces that might have been struggling in the past. And what’s really intriguing is that even traditional retailers are taking notice of this resale boom.

Yeah. Many are launching their own resale programs or partnering with existing platforms to tap into this growing market. Yeah they’re seeing the writing on the wall. A recent survey by ThredUp, that’s a popular online resale platform, found that nearly three quarters of traditional retail executives Feel the pressure from the growth of resale.

Wow. So brands like American Eagle, Levi, Banana Republic they’re either launching or have already launched their own resale programs. Wow. Wow. So this blurring of lines between traditional and resale. Retail raises an interesting question. Will there be room? for both models in the long run?

I think the answer is likely yes. Okay. But the relationship between the two is going to continue to evolve. We can probably expect to see a more dynamic and perhaps even collaborative retail landscape Okay. in the future. And really what that means is that both the traditional retailers and the resale businesses, they need to be adaptable.

And they need to be innovative. Yeah. to stay ahead of the curve. Now let’s turn our attention to a region that’s really standing out. In the retail sector, and that’s Texas, specifically the four largest metros, Dallas Fort Worth, Austin, Houston, and San Antonio. These markets are demonstrating strong retail performance, bucking some of those national trends.

Yeah. And a key factor that contributes to their success is what we call right sized retail inventory. Okay. What that means is that there’s a healthy balance between supply and demand. Okay. Unlike some areas that experienced overbuilding in the past. So this balance, it helps to maintain a vibrant retail sector.

Yeah. Where businesses can thrive and investors can find some promising opportunities. Okay, so grocery stores, particularly H E B, are playing a significant role in driving new construction in Texas. This really aligns with the broader trend of grocery anchored retail remaining resilient, even during those times of economic uncertainty.

Okay. People still need to eat. They still prioritize those essential shopping needs. And those grocery stores, they serve as anchors that attract other businesses to the shopping center. Yeah, for sure. For sure. And DFW is a prime example of this. We’re seeing a surge in in new. grocery store openings with H E B expanding its footprint alongside those, established players like Sprout and Trader Joe’s.

Yeah. So this influx of grocery stores, not only does it benefit the retailers themselves, but it also creates these opportunities for complementary businesses to, to flourish in their shopping centers. It’s a positive ripple effect that strengthens the overall retail landscape. Now this brings us to a crucial consideration for any. Real estate project. And that’s the capital stacks. Yes. Essentially the financing behind these developments. And it’s interesting to note that even with those higher interest rates we’ve seen in early 2025 there’s still liquidity available.

for commercial real estate projects. That’s right, and you know what’s even more positive is that borrowers are finding that they have more options because of that increased competition among lenders. So this competition is actually driving more favorable terms and deals for those who are seeking financing.

So we’re seeing private equity step in. to fill the gap. Yeah. In cash neutral refinance. Which I think indicates a shift in the lending landscape. Yeah. New players are emerging and potentially changing the dynamics of CRE finance. Okay. Okay. So This influx of capital coupled with predictions of declining interest rates later in the year could create a window of opportunity for investors.

It’s a great time to be thinking about getting into the market. Yeah. Yeah. And it highlights the importance of planning ahead and building relationships with those lenders to be ready to capitalize when market conditions are favorable. Yeah. Speaking of opportunities let’s let’s zoom in on a specific city within the DFW or Metroplex that’s experiencing exceptional growth.

And that’s Frisco, Texas. Frisco is booming. Yeah. This city is witnessing. Like a remarkable surge in development driven by, this thriving innovation ecosystem and major corporate relocations. And their strategic planning and focus on attracting those high quality employers is really paying off.

They’re attracting both businesses and residents leading to a really booming real estate market. Yeah. The numbers are truly impressive in 2024 alone. Frisco saw the equivalent of the Empire State Building’s worth of space leased. Wow. That’s incredible. This speaks volumes about the city’s attractiveness for both businesses and residents.

If you connect this to the bigger picture, Frisco’s growth really reflects a broader trend of population and economic activity shifting to the Sunbelt. This region’s experiencing this really dynamic growth and cities like Frisco are at the forefront. Now before we move on to some of the other fascinating developments in the retail landscape.

Let’s take a closer look at the changing world of malls and shopping centers. Yeah, that’s a big one. It is, and what’s particularly interesting is how some of the traditional like retail giants are adapting to evolving consumer behavior. Walmart, for example, known for its, vast big box stores is making a That’s a kind of surprising move that they’re acquiring a mall near Pittsburgh. They are. They purchased the Monroeville Mall, an annex, and there’s speculation that they might open one of their, signature big box stores within the mall itself.

So it’ll be fascinating to see how they re imagine this space and what this means for the future of malls. This bold move by Walmart really demonstrates that even the largest retailers are recognizing that they need to experiment, they need to adapt. The future of retail might lie in creating these mixed use destinations that offer a diverse range of experiences, not just shopping.

Imagine a mall that seamlessly combines the convenience of a Walmart super center. With specialty shops, restaurants, entertainment venues, and perhaps even residential spaces. Yeah. It’s a compelling vision. It is. And it’s not just Walmart making waves in the in the mall space.

Canadian retail REIT Primaris recently closed two major deals, acquiring full ownership of a mall in Ontario and 50 percent ownership of one in Alberta. So these acquisitions, they add. Like over 1 million square feet of retail space to their portfolio. That’s a big bet on malls. Yeah. Yeah. These strategic moves, I think they signal a strong belief in the future of, those enclosed shopping centers.

It seems investors are seeing the potential to revitalize these spaces and transform them into those vibrant community hubs. Exactly. And speaking of revitalization. Yes. We’re also witnessing a kind of resurgence of interest in brick and mortar bookstores. Really? Yeah. Barnes and Noble is planning to open like over 60 new stores this year, which is a record setting number for them.

Yeah. So this is a positive sign, I think, for the bookselling industry, which faced some challenges in recent years. Yeah. So it’s encouraging to see this. This comeback, bookstores offer like this unique browsing experience that’s simply impossible to replicate online.

You can’t smell a book online, right? And they often serve as these community gathering places, fostering a love of reading and hosting events that bring people together. So this resurgence, I think it underscores the the enduring appeal of those physical stores and the power of, creating an experience that goes beyond just purchasing a book.

A product. Absolutely. It’s about more than just the transaction. And on a slightly different note, the the children’s clothing retailer, Bye Bye Baby. Yeah. Is getting a new lease on life. Okay. After being acquired by Beyond Inc. for five million dollars. Oh, wow. Yeah. So it appears that Beyond Inc.

sees potential. Yeah. In both the online and the brick and mortar presence of of Bye Bye Baby and Bye Bye Baby. The brand has a strong future in this evolving retail landscape. So this is, positive news, I think, for parents and fans of the brand who are, concerned about its future.

It highlights the resilience, I think, of well established brands that adapt to changing market dynamics. And speaking of international retail South Korea’s CJ Olive Young. Okay. Is making its debut in the U. S. market. Okay. With its first store opening in Los Angeles. This expansion is fueled by the, the growing popularity of Korean beauty products here in the U.

S. So it’ll be interesting to, to observe how American consumers respond to this new retail concept. Yeah. And whether it sparks a broader trend of international brands entering the U. S. market. The entry of international brands like C. J. Olive Young really adds to the diversity of the retail landscape, and it introduces consumers to these new products and new experiences.

And, while some retailers are expanding, others, unfortunately are facing challenges. The discount retailer, Bargain Hunt, recently filed for bankruptcy, and is shutting down all 92 of its stores. That’s a shame. Yeah. This serves as a reminder of, The competitive nature, I think, of the retail industry and how some businesses struggle to, to adapt to evolving consumer preferences and and economic conditions.

Yeah. It really underscores the importance, I think, of. Of staying ahead of the curve and constantly innovating to, to remain relevant in the eyes of of those consumers. Absolutely. The closure of Bargain Hunt is a loss for its employees and customers, who enjoyed its unique treasure hunt shopping experience.

Yeah. But it also presents an opportunity potentially for other retailers to fill the void and cater to the needs of Bargain Hunt’s former customer base. Yeah. Yeah. One retailer’s Misfortune is another one’s opportunity. So the retail landscape is in constant flux, with both, successes and challenges.

Yeah. And those who can adapt and innovate and understand those nuances of the market are more likely to thrive. Absolutely. As we move deeper into 2025 we’ll continue to track these trends and analyze their impact on the market. Definitely. So speaking of of the market, let’s let’s take a closer look at some recent trends.

data on single pennant retail sales volume and and cap rates. These metrics provide valuable insights, I think, into the current state of the market and can inform investment decisions. And I’m always interested to see, how these figures are fluctuating because they can indicate emerging trends and and potential opportunities.

Absolutely. According to a recent report from Northmark, the single tenant net lease retail sector, it experienced both highs and lows in 2024 in terms of investment volume. Interesting. Interesting. So let’s break down those fluctuations a bit. What were the specific ups and downs that characterize the market?

The third quarter of 2024, we saw a significant jump in investment volume, reaching 2. 4 billion in transactions. Okay. So that represented a notable increase from the previous quarter. However, Okay. This momentum didn’t carry over. into the fourth quarter. So what happened in the fourth quarter that led to this change in momentum?

Investment activity just slowed down considerably. Okay. Total deal value for the year, it came in at 8. 6 billion. Okay. Making 2024 the slowest year for this sector in over a decade. Wow. So this slowdown, it can be attributed to several factors. Okay. Including rising interest rates. Yeah, that makes sense.

Higher borrowing costs can certainly make investors more cautious, because it affects their potential returns. Exactly. Rising interest rates make financing more expensive, which, which impacts an investor’s profitability. Yeah. And this leads to, greater selectivity in the deals they pursue.

And it’s not just interest rates that are influencing the market. Cap rates, which essentially, represent the rate of return an investor can. can expect on a property are also rising. Yeah. And the single tenant net lease sector cap rates have been steadily climbing in, in recent quarters.

Okay. And as of early 2025, they sit at 6. 74 percent on average. Okay. So this is a significant increase from the 6 percent mark. They hit earlier in 2024. So what does this rise in? And cap rates signify for investors? Essentially it means that properties are becoming relatively more expensive Okay.

Compared to their net operating income. Okay. So investors are having to pay more Okay. For that same level of income. So it, it appears that the the single tenant retail market is facing some headwinds right now. Yeah. With both, rising interest rates and cap rates. Yeah. Contributing to a slowdown in Yeah.

Investment activity. Yeah. That’s a fair assessment. However, it’s important to remember that single tenant net lease properties still offer several advantages that make them attractive to certain investors. So what are some of those inherent advantages that continue to draw investors to this asset class?

Single tenant net lease properties they often come with long term leases with stable tenants. They typically involve minimal landlord responsibilities and they offer predictable cash flow. Which can be really appealing to investors seeking stability and lower risk.

Okay. Okay, so despite those challenges, these inherent advantages of single tenant retail, they continue to attract certain investors. Absolutely. And it’s worth noting that the market is also being driven by positive trends, such as the ongoing expansion of those popular retailers Dollar General, Starbucks, Walmart.

These companies are investing in new store formats, technology and omni channel strategies to stay ahead of the curve. It’s interesting to see how those major players are adapting to this evolving retail landscape and their continued investment in, new store formats, technology and omni channel strategies.

I think it. It indicates a positive outlook for the future of retail. They understand that consumers still value Convenience, affordability, and a seamless shopping experience, whether it’s online or in store. And speaking of convenience and affordability let’s touch on another trend that’s gaining traction in the retail world.

And that’s the success of of dollar stores. Dollar stores are doing really well. Yeah. Dollar General, in particular is experiencing impressive growth. Yeah, they recently appointed a new executive vice president to oversee their expansion efforts. Okay. That really solidifies their commitment to growth.

Can you elaborate on, on, on Dollar General’s expansion plans? Yeah. And the strategy behind their their growth. Sure. Their focus is on national store expansion developing processes to improve efficiency and implementing initiatives to enhance their overall operations. So they’re also actively remodeling existing stores and relocating those underperforming locations.

So they’re not just focused on. Opening new stores. But also optimizing their existing footprint. Yeah. To maximize profitability. Exactly. And their efforts seem to be yielding positive results. Their latest earnings report. Yeah. Announced a 5 percent increase in net sales year over year.

Wow. Which is a very positive sign in the current retail environment. Yeah, for sure. For sure. Dollar General’s success, I think, it underscores that persistent demand for, those affordable and convenient shopping options, particularly in rural areas and smaller communities.

And this demand is likely to continue, especially if economic conditions remain uncertain. Consumers tend to prioritize those. of value oriented retailers when they’re, facing economic challenges. Absolutely. Now let’s turn our attention to another crucial aspect of the retail landscape, and that’s the transformative role of technology.

Technology is huge. Yeah. Technology is becoming, Increasingly essential for retailers of all sources. It’s no longer just about, having an online presence. Yeah. It’s about leveraging data. Artificial intelligence and automation. Yeah. Yeah. To create those personalized.

And seamless shopping experiences. Yeah. So many retailers are are investing heavily in these areas. What are some of the the key technological trends that you’re observing? Okay. In the in the retail sector? One, one major trend is the use of artificial intelligence to, to personalize product recommendations, optimize pricing, and improve inventory management.

Okay. Okay. AI’s ability to, analyze these vast amounts of data to understand consumer behavior and predict future trends it’s really quite remarkable. It is. Another, significant trend is the rise of cashierless checkout technology. Oh, yeah. This innovation allows shoppers to, to simply walk out of a store with their purchases without waiting in line.

And I’ve personally experienced this technology in a few stores. Yep. And it’s incredibly convenient. Yeah. It definitely enhances the shopping experience by, Streamlining the checkout process and from a retailer’s perspective, yeah. It can help to reduce labor costs, and improve operational efficiency. Yeah, no it’s evident that technology is playing a transformative role. It is in the in the retail industry and. Alongside this technological evolution, another exciting trend is the growing emphasis on experiential retail. Yeah, consumers are increasingly seeking experiences that that engage their senses and create these lasting memories rather than, simply purchasing products.

Many retailers are incorporating entertainment, dining, and social elements into their store designs. To create these immersive experiences. Yeah, they’re recognizing that they need to offer something, unique and engaging to draw those shoppers away from their screens and into their stores.

It’s fascinating to see how retailers are getting creative with their store concepts, creating spaces that are inviting, interactive, and memorable. This trend is likely to continue as retailers strive to, differentiate themselves and foster a loyal customer base. Yeah. Yeah.

Seems like the future of retail lies in, in finding the right balance between online and offline experiences, leveraging technology and providing both value and convenience to consumers. That’s it. That’s a great summation. The retail landscape is dynamic and constantly evolving, and those who can adapt, innovate, and understand the nuances of the market will be the ones who thrive.

Now as we delve deeper into the retail sector. Let’s let’s take a closer look at some of the specific challenges and opportunities that are shaping the industry in in 2025. All right. One of the most significant challenges as we’ve already discussed is the the rising cost of capital.

Interest rates, they remain relatively high. Yeah. Which makes it more expensive for retailers to, to finance their operations. You’re right. And expansion plans. And this is particularly challenging for smaller retailers. Yeah. Who may not have the same access to capital.

As their larger counterparts. Another challenge is the ongoing labor shortage. Oh, yeah. Retailers are finding it increasingly difficult to find and retain qualified employees, especially in a tight labor market. And this shortage is leading to higher wages and increased competition for talent, which can put pressure on retailers profit margins.

Absolutely. And on the consumer side, inflation continues to be a concern. And, consumers are becoming more, more prepared. price sensitive and are seeking ways to, to stretch their budgets. Yeah. And this puts pressure on retailers to maintain those competitive prices, which can be difficult in an environment of rising costs.

So it, it seems like retailers are facing a confluence of challenges, rising costs, labor shortages and inflationary pressures. A lot to juggle. Yeah. Yeah. But it’s important to remember, I think that amidst these challenges, there are also significant opportunities for retailers who can who can adapt and innovate.

Absolutely. So let’s shift our focus to those opportunities. What are some of the the bright spots on the horizon for the for the retail sector? One of the biggest opportunities, I think, is the continued growth of e commerce. Okay. Online sales are still on the rise.

And this trend is projected to continue. So retailers who can create a seamless and personalized online shopping experience. Are well positioned for success. Absolutely. Another opportunity lies in the increasing demand for convenience. Okay. Consumers are busier than ever and are looking for ways to save time and simplify their lives.

So retailers who offer convenient shopping options such as curbside pickup, home delivery and mobile ordering. Yeah. are meeting this demand head on. And finally, there’s a growing trend towards sustainability. Consumers are becoming more, more environmentally conscious.

Yeah. And are seeking brands that, that align with their values. Okay. So retailers who can embrace sustainable practices and offer those eco friendly products are likely to resonate with this growing segment of consumers. Absolutely. The retail landscape is constantly evolving and it presents a dynamic and exciting environment for both businesses and investors.

Now, as we wrap up. Part one of our deep dive into retail real estate. Yeah. Let’s contemplate a question that’s relevant to, to both investors and consumers. Okay. What does the future hold for malls and shopping centers? That’s the million dollar question. It is, yeah. This question has been debated for years, especially with with the rise of online shopping.

But malls and shopping centers they’re not going away anytime soon. No. They’re simply evolving. To meet the changing needs and expectations of of consumers. They’re having to adapt. Yeah I agree. They’re transforming to provide a more, more holistic experience.

Beyond just shopping. Exactly. We’re seeing a shift towards these mixed use developments that combine retail, residential, office, and entertainment spaces. And these developments are creating vibrant community hubs that offer a diverse range of options for everyone. And they’re attracting a new generation of consumers who are looking for those experiences that go beyond just purchasing products.

Yeah it’s fascinating to witness. It is. How these spaces are being reimagined. Yeah. To create, more, more engaging. Yeah. And interactive experiences. Absolutely. As we continue our deep dive in part two. Okay. We’ll explore the specific trends shaping the future of malls and shopping centers.

So we’ll delve into topics like. Experiential retail, the rise of food halls, the integration of technology. Looking forward to it. So stay tuned for more insights and analysis as we continue to unpack the world of of retail real estate. Welcome back to the final part of our deep dive into retail real estate.

We’ve we cover a lot of ground, from the the surprising resilience of brick and mortar stores to the exciting rise of experiential retail and the transformative power of technology. And we’ve also explored how crucial it is to adapt to change, understand those local market dynamics, like the healthy balance of retail inventory we see in Texas and really just sees the many opportunities that this ever evolving sector offers.

Let’s zero in on a few. Key takeaways and strategies to help you navigate this dynamic market. First it’s clear that the lines between physical and digital retail are becoming increasingly blurred. Yeah. And successful retailers today, they’re really embracing that, omni channel approach creating a seamless experience for consumers, whether they’re shopping online in store or, through mobile apps. So for investors, this means seeking out those retailers who truly understand their target audience and are investing in technology to create those Personalized and engaging shopping experiences across all channels.

Yeah. And for business owners it’s about finding those innovative ways to integrate those online and offline operations, to build that cohesive brand experience. Think about leveraging technology to personalize offers, provide those convenient. Pick up and delivery options and gather that valuable customer data to improve your strategy.

Another crucial takeaway is the rising importance of of experience. Yeah. Consumers are no longer just looking to. to buy products. They’re seeking those immersive experiences that engage their senses, create lasting memories, and foster a sense of connection. So some malls and shopping centers, they’re responding to this shift by transforming into destinations that offer that diverse mix of retail, dining, entertainment, and even residential spaces.

And this trend toward mixed use developments. This is creating vibrant community hubs. It is. That attract a wide range of tenants and shoppers and it creates a more dynamic and engaging environment. So for investors this means seeking out properties that are well positioned to benefit from this trend.

Consider those locations with Strong demographics, a mix of existing and planned amenities, and a developer with a proven track record of success. And for business owners, it’s about finding creative ways to enhance the customer experience within your space. Think about incorporating those elements of entertainment, personalization, and community engagement into your into your store design and marketing efforts.

Now let’s let’s talk about a critical aspect that often gets overlooked in real estate discussions, and that’s the human element. Ultimately, the success of any retail venture depends on people. So we’re talking about, attracting the right tenants for your property, cultivating a positive work environment for your employees and building those genuine relationships with your customers.

Exactly. As an investor, carefully evaluate the tenant mix of a potential property. Yeah. Look for businesses that complement each other and create that synergistic environment that attracts that diverse customer base. And enhances the overall appeal of The property and as a business owner, remember that your employees, they’re your brand ambassadors investing in training and development programs, empowers them to provide that exceptional customer service and create a welcoming atmosphere for your customers.

And never never underestimate the power of community engagement, right? Get involved in local events, support local charities and create those opportunities for your for your customers to connect with each other and your brand on a deeper level. Building those strong relationships within the community, can lead to increased customer loyalty and generate those valuable word of mouth referrals, which are essential for success in today’s competitive market.

As we as we wrap up our deep dive into retail real estate, remember that the key to success lies in, in understanding the trends, adapting to change and focusing on creating value for both investors and and consumers. And if you’re looking for expert guidance to navigate the complexities of the DFW retail market.

Yeah. Eureka Business Group is here to help. We are. We have a deep understanding of the local landscape. Yeah. And a passion for helping our clients achieve their, they’re real estate goals. We specialize in connecting businesses with the perfect retail spaces and assisting investors in finding those profitable opportunities that align with their investment strategies.

So contact us today and let’s let’s explore the possibilities together. Thanks for joining us on the deep dive. We we look forward to exploring more fascinating insights with you in our upcoming episodes.