Retail sales in the U.S. grew this past holiday shopping season, though not as much as some in the industry had hoped.
Sales for the 2015 holiday season rose about 3 percent to $626.1 billion, according to National Retail Federation figures, though the number was lower than the federation’s predicted target of 3.7 percent growth.
While many factors can play into such figures — including weather conditions, which were abnormally warm in November and December in many parts of the country — the sales figures raised concern among some about the health of the retail industry.
With more people shopping online, and experiences instead of physical items becoming more popular to buy, changes continue for America’s brick-and-mortar stores.
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With all that said, what’s the state of the retail real estate market in the Wichita area? It’s not bad, though it’s also changing, said Patrick Ahern, a commercial real estate adviser with NAI Martens.
“Retail is pretty healthy here,” Ahern said. “That said, I do think retailers have to ask themselves what their business model will be in five years.
“How much will be online and how much will be brick-and-mortar?”
A recent finding, however, from a national company indicated that retail space vacancy rates have been steadily going up here in the past year.
From the fourth quarter of 2014 to the fourth quarter of 2015, the retail property vacancy rate for the Wichita area jumped from 13.7 percent to 14.9 percent, according to Reis Inc., a New York-based commercial real estate analysis firm.
The 14.9 percent represents the highest rate for Wichita since the second quarter of 2010, when the retail vacancy rate hit 15.3 percent.
David Leyh, a broker with Landmark Commercial Real Estate who specializes in retail, said part of the reason why a number of spaces remain unfilled is because fewer people have gone into business for themselves in the aftermath of the recession.
“Overall, retail is doing well,” Leyh said. “There’s a lot of growth in northeast and northwest Wichita, and a lot of it is national tenant- and regional tenant-based growth. They’re stronger than the local operators.
“This past economic downturn, we didn’t see a lot of people going into business for themselves. They just didn’t do it, so it hasn’t created the small businesses opportunities that fill in the smaller spaces and the lesser-quality properties throughout the city. We’re concentrating a lot of growth in two hot areas.”
In its recent annual real estate forecast, J.P. Weigand & Sons said that retail vacancy rates in the city climbed to 15.5 percent in 2015, up from 13.3 percent in 2014. That’s despite noted strong market areas in northeast and northwest Wichita, and in Derby.
The J.P. Weigand report indicated that activity will continue to be robust in the retail sector, but that it will be mostly driven by “national franchises coming to the market or expanding their presence” in the area.
Development in the area of Greenwich Road near K-96 in the northeast part of the city and in and around New Market Square on Wichita’s west side has been robust in recent years.
Areas along Webb Road on the city’s east side have also been flush with development of late, noted Leyh and Ahern.
“Wichita keeps spreading out,” Ahern said. “A good example of that is Hobby Lobby, which moved about 3 miles east (from Woodlawn and 21st to North Greenwich Road).”
Overall, Reis reported that retail vacancy rates nationwide declined modestly (by about .2 percent) from the fourth quarter of 2014 to the fourth quarter of 2015.
For 2016, the National Retail Federation expects retail sales to grow by 3.1 percent, with online sales forecast to increase by up to 9 percent.
Still, no matter how much online sales increase — keep in mind that most national and regional retailers have a strong online presence now — some services will always necessitate a face-to-face visit.
“You still can’t get a massage or get your hair done online,” said Bradley Tidemann, a commercial broker with J.P. Weigand. “There will probably always be certain businesses that need a brick-and-mortar space.”
With a plethora of new apartments scheduled to go online in the coming years, Ahern said he expects the downtown retail scene to pick up soon.
“I think you’ll see more retail downtown, maybe even by the end of this year,” Ahern said. “Right now, a lot of the retail downtown are places that are open for lunch and maybe close at 2:30.
“I’ve been hearing about the grocery store (downtown) for 18 years — it’s like a mythical creature. I’m not sure exactly what it will be, but we’re going to see an increase.
“Demographics drive retail.”
Leyh said that the costs associated with converting older buildings downtown may also play a role in the lack of retail establishments currently downtown.
“When the buildings get cheap enough, they convert,” Leyh said. “That’s been stalling some areas. Downtown hasn’t grown as fast because people think the buildings are worth a little more than what it takes economically to convert.”
Looking at the bigger picture, Leyh said there will still be a need for physical storefronts, even with the convenience of online shopping.
“People still want to touch, feel and look at things,” he said. “There’s still value in the store.
“A person might go look at an item at Dillard’s or Sears or wherever, then go home, think it over, and eventually buy it online on the store’s site.
“Retail is healthy, but it’s the national retailers. Value-oriented shopping is replacing specialty shopping.”