Today’s Retail Market: MacKenzie’s 4th Quarter Report

Now Trending. The continuing trend for the Baltimore retail market is growth driven by the re-urbanization of key realms of Baltimore City and the major arteries of Towson, Owings Mills, and the 95 Corridor. As job prospects continued to improve in 2015 for every demographic group across the country, the demand for additional housing, particularly among Millennials who have reluctantly left the nest, has intensified. The surge in development in Baltimore City has certainly catered to the Millennial crowd that demands not only affordable and convenient housing, but also entertainment, dining, and lifestyle retail options at their doorstep. The “Live, Work, Play” trend that has developed both downtown and in the denser areas of the suburbs will continue to burgeon these attractive markets.

When asked how the “Live, Work, Play” trend will continue to affect the retail market in Baltimore and surrounding areas, Tom Fidler, Executive Vice President at MacKenzie Retail, responded, “while the real estate community had been expecting dramatic investment in multi-family and supporting retail to make up for lack of construction in the years following the recession, what was not expected was the continued lack of wage growth throughout 2015 has stifled middle class demand.” This was evident in 2015 with the recorded sales growth among retailers that are on opposite ends of the price point spectrum – DollarTree, Ross Dress for Less, Marshalls, Nordstrom, and Bloomingdales. It is even visible in the restaurant categories with strong sales growth in pricey quick-serve concepts such as Panera Bread, Chipotle, and Starbucks, versus middle America casual dining chains like Applebee’s, Ruby Tuesdays, and TGIFridays. Mr. Fidler went on to say, “this has created a ‘haves and have-nots’ oriented market amongst retailers.” Specifically, Mr. Fidler mentioned that companies catering towards consumers seeking luxury products as well as companies targeting towards lower middle class consumers will continue to make more gains in 2016 as the market shows no signs of retracting from this trend.

Store vs. Online. Brick and mortar retail will face its most precarious assault yet from the rapidly growing online platforms that consumers are depending on for their shopping needs. The recent announcement of Amazon’s one-hour delivery service in Baltimore is perhaps the biggest sign of the acceleration towards online platforms. Though, online retail sales make up only a small fraction of total retail spending, web influenced sales are approaching the same level as brick and mortar sales.

Wage Growth Needed. The Baltimore area continues to experience lackluster wage growth which drives any increase in retail sales, above and beyond the needs of a consumer. The reduction in gasoline prices has certainly helped some buyer categories, but, wage growth would be the larger catalyst needed to position the area for changes of any impact. Demand for food will continue to fuel modest rental rate growth in specific markets, while less attractive, less accessible retail properties in sluggish communities will likely remain vacant or at rents below fair market values. Retail product development and growth are continuing to be driven by local density, area expenditures for certain use categories, and area co-tenancy which support overall strength of a retailer and their success.

Click here to download MacKenzie’s 4th Quarter 2015 Retail Market Report.