Cushman & Wakefield's Garrick Brown November and December represent “make-or-break time for retail,” says Brown..

NEW YORK CITY—Local meteorological conditions will determine whether specific US locales have a white Christmas, but it appears that brick-and-mortar retailers at least won’t be having a blue one. For the Thanksgiving weekend that formally inaugurates the holiday shopping season, the International Council of Shopping Centers is expecting 81% of consumers to do so in physical stores rather than virtual ones—a figure that rises to 95% when omnichannel sales are factored in. And the National Retail Federation predicts that sales in November and December will increase 3.6% to $655.8 billion, slightly above the average of 3.4% the industry has seen since 2009.

Furthermore, in a report surveying the entire commercial property landscape, Green Street Advisors notes that “the consumer has been a key driver of otherwise tepid economic growth this year.” That being said, the report also cites “weak sales growth at traditional brick-and-mortar retailers like Macy’s” and predicts that two-thirds of retail sales growth in the foreseeable future will occur in e-commerce.

In a retail-sector snapshot issued this past Friday, Fitch Ratings focused on the ongoing effort Macy’s is making to monetize its real estate, most recently taking the form of a partnership with Brookfield Asset Management. The partnership allows Brookfield to redevelop or expand up to 50 of Macy’s owned stores. Additionally, Fitch noted that General Growth Properties paid $46 million for five Macy’s stores, with the intention to redevelop four of these locations while retaining the Tysons Galleria location in McLean, VA.

Cushman & Wakefield’s Garrick Brown and Ben Conwell examined the impact of e-commerce on the supply chain (largely positive) and brick-and-mortar retail (not so much) in a webinar earlier this month. “November and December comprise the biggest shopping season of the year, and for many retailers sales during these two months represent a major percentage of annual revenue,” said Brown, head of retail research for the Americas at Cushman & Wakefield. “In short, this is a make-or-break time for retail.”

The good news, said Brown, is that “we anticipate 3.7% overall holiday retail sales growth in 2016, despite the election and hinging somewhat on weather as a wildcard. A number of interesting trends will impact both bricks-and-mortar and e-commerce retail this season, including the continuation of ‘Christmas creep,’ with discounting and markdowns motivating bargain-seeking consumers to start shopping earlier.”

E-commerce fulfillment practice group leader at Cushman & Wakefield and former Amazon North American operations real estate director, Conwell noted that demand remains strong across all industrial product types, including large peripheral fulfillment centers and smaller close-in fulfillment centers, sortation hubs and last-mile depots—thus bearing out Green Street’s estimate of a 20% boost in demand for industrial thanks to e-commerce. In some instances, Conwell told the webinar audience, major retailers have been working to leverage their brick-and-mortar stores in this mix.

“Last-mile fulfillment continues to be the main driver and biggest challenge for e-commerce,” Conwell said during the webinar. He noted that retailers are “increasing their push to be better, smarter, faster and cheaper, and to position the right inventory closer to the customer at the right time.”

Meanwhile, delivery companies have been working hard to keep up with surging demand, especially during the holidays. “Consider this: UPS is projecting 13 of 21 holiday delivery days before Christmas to exceed 30 million shipments, as compared to average non-peak volumes of 18 million shipments per day,” said Conwell.

Meanwhile, there are certainly bright spots in the brick-and-mortar realm. Fitch noted that the third quarter was “relatively quiet” on the store-closing front, and that retailers in expansion mode, such as Dick’s Sporting Goods, TJ Maxx and Ulta Cosmetics, have taken space in Sports Authority locations that went dark this past summer.

“Restaurants and service providers (nail and hair salons, spas, health clinics, etc.) continue to see strong growth and have been leasing space in growing numbers,” according to Fitch. “Sales growth in these sectors is offsetting losses to e-commerce at traditional retailers.”