‘Doomsday Scenarios’ Don’t Tell Retail’s Story

Dire reports of the retail sector’s struggling segments are extrapolated to the entire industry, Reagen says.

NEW YORK CITY—It’s a time of evolution in retail, yet early-stage evolution should not be confused with end-stage disease for the sector. “Doomsday scenarios cited in news coverage are extrapolated to the entire industry, rather than to the vulnerable segments which are truly struggling,” says Melissa Reagen, Americas research head at TH Real Estate. “In our view, the average-to low-performing retail centers are seeing value declines, while there is no evidence of the same for high-performing malls and shopping centers.”

Moreover, a new report from TH Real Estate doesn’t anticipate value declines occurring for these better-positioned retail centers, either, “as long as the operating performance of these properties continues to be strong and owners are able to access the debt markets.” Reagen says the firm sees “compelling buying opportunities for high-performing power centers, lifestyle centers, neighborhood/ community centers, grocery-anchored centers and malls.” High-performing retail assets are characterized by “a strong experiential component, continual adaptions that complement e-commerce, and strategic, forward-looking capital improvements that address shifts in consumer behavior and adapt to current technology.”