The Ticking Time Bomb for Suburban Retail
Lightning-speed deliveries and autonomous cars could accelerate the current big-box implosion.
Thanks largely to the rise of e-commerce, chains like Macy’s, Toys “R” US, and Best Buy are shuttering faster than analysts predicted even a year ago, with at least 24 major retailers planning store closures in 2018.
According to some forecasters, there’s an even larger retail apocalypse on the horizon. As overbuilt malls, corporate mergers, and autonomous vehicles converge, “the ingredients are in place for major disruption,” said Rick Stein, the founder of Urban Decision Group, a Columbus, Ohio-based planning consulting firm.
Speaking on a panel in Portland, Oregon, on Monday, Stein made the case for which commercial areas will suffer most from new consumer habits mingling with technology: car-oriented suburban retail.
Already, American retail is overbuilt by about 50 percent, according to Stein. With about 24 square feet per capita, the U.S. has by far the most retail space of any country in the world, with about 25 percent more than the next closest country, Canada. (That’s data from the publicly traded real-estate group GGP and the financial blog Zero Hedge.)
While megamalls and luxury shopping centers in more affluent areas have fared better, mid-sized to large “regional” retail centers and strip malls, of which there are about 7,500 across the U.S., are struggling most with vacancies and declining profit. States like Nevada, Arizona, Virginia, Ohio, and New Jersey have some of the most overabundant big box and strip mall properties, and they’re increasingly overexposed as more Americans shop online and take advantage of fast delivery speeds.
Those speeds are getting faster. Already, Amazon offers a two-hour “Prime Now” delivery service for about 25,000 retail items to Prime subscribers in at least 30 U.S. cities. In some of them, including Columbus, customers can pay for delivery speeds of one hour and faster. “One-hour delivery, for every U.S. market, is inevitable,” said Stein, and possibly within a few short years.
Which online retailer will be the first to standardize blink-of-an-eye delivery? First to mind is Amazon, especially with its recent acquisition of Whole Foods giving it a real-estate foothold in nearly 500 locations near affluent households. Or maybe it’s Walmart, with its 5,000 locations and strong presence in more rural communities. “Their reach is absolutely insane,” said Stein, speaking at Urbanism Next, a conference about autonomous vehicles, e-commerce, and the sharing economy hosted by the University of Oregon.
Maybe Amazon won't be the first to crack lightning-speed delveries. (Stein/Study/Robbins)
Or perhaps it’s CVS. Some 82 percent of the U.S. population lives within a 15-minute drive of its 11,000 locations. With the trend for corporate mergers and acquisitions, companies like these (and many others) are gaining real-estate footholds at a rapid clip. What if, for example, Amazon absorbed CVS as its widely anticipated move into pharmacy business? Such a prize would also set the company up with a convenient “hub and spoke” network for snap-of-the-finger deliveries in virtually every U.S. urban market. Stein illustrated the notion with a slide of the Columbus region.
Imagine the delivery speeds a company like Amazon could achieve with more acquisitions. (Stein/Study/Robbins)