3rd Quarter Retail Recap

Video Index:
0:00 The first Blockbuster store opened on this date in 1985.  There is only one remaining store.
1:20 Just Closed: Land in Moreno Valley
2:12 Retail bounces back to pre-pandemic levels
4:21 How gyms are bouncing back, post-quarantine
5:47 How will retailers meet the labor demands this holiday season
6:59 Top 25 Multi-family markets based on rent growth (SoCal is well represented!)

Hello Investors!

I’m Mike Lin, and I’m a commercial real estate broker based in Southern California.  I help owners of retail properties determine the value of their real estate and help to sell them for top dollar.

Here’s this week’s newsletter.  Enjoy!

Just Sold: 1.19 acres in Moreno Valley


I recently brokered the sale of a 1.19 acre parcel of land in Moreno Valley on Sunnymead Blvd right off the Frederick St. exit off of the 60 freeway.  Chris Lindholm, who is a licensed architect and land specialist at Progressive, and I worked on this deal which was purchased by a developer who plans to develop retail properties on the site.

Over the past 12 months, I’ve sold a variety of retail properties, from vacant land to day cares, single tenant fast food, and shopping centers ranging from less than $1MM up to $9MM.

If you have a property that you are thinking of selling, the market is hot right now, as we’ll see later on in this video. The first step is getting a complimentary opinion of value from an active local broker who specializes in your product type. So just reply to this email, and I’ll be glad to help.

The last Blockbuster store

On this day in 1985, the first Blockbuster store opened in Dallas.

At the time, most video rental businesses were local mom and pops. Blockbuster was the first company to take video rental to a national level. Blockbuster grew to over 5,700 stores. You certainly rented from them and they may even have been your tenant!But as everyone knows, Netflix came along, Blockbuster failed to adapt, and by 2010 they declared bankruptcy.

But did you know that there is still one Blockbuster store open? It’s located in Bend, Oregon, and apparently, it still operates on technology from 1992. The employees use floppy disks and the computers aren’t even connected to the Internet. In addition to $3.99 video rentals, the store stays afloat by selling merchandise and even renting out the store on AirBNB to local residents.

Many freestanding Blockbuster stores, and their competitors like Hollywood Video stores, have been converted to banks or multi-tenant retail centers. Do you own a former video store building?  The evolution of these once-popular stores is all part of the ever-changing landscape of retail real estate.

Retail bounces back to pre-pandemic levels

According to the CDC, 60% of Californians are now fully vaccinated. So that’s a big factor in shoppers returning to stores.

Costar recently released a report recapping retail activity in the third quarter of this year.

Total retail sales, excluding eCommerce are now 15% higher than pre-pandemic levels.
Logically, the strongest shifts were in categories that were most affected by the pandemic, such as clothing, gasoline, and restaurants.

Store closures and bankruptcies are trending to be the lowest in many years.  I think it’s important to realize that with so many closures and bankruptcies taking place in 2020, there just weren’t as many weak retailers remaining in 2021, but this is still a good sign.

Many retailers are in expansion mode and new leases are being signed at a record pace.  Total volume of leases signed in the third quarter is expected to hit a nearly four-year high of 79 million square feet, and leasing activity has now increased in each of the past five quarters after hitting a multi-decade low in the second quarter of 2020.

The most active lessee in the third quarter of this year was Burlington, who is rolling out small-format stores signed leases for over 200,000 square feet.  Gyms, which are enjoying a resurgence now, are also rapidly signing new leases, with Planet Fitness and Crunch signing numerous leases during the quarter, spanning over 400,000 square feet.

Single-tenant net lease properties have remained very popular even throughout the pandemic, but nationwide, the multi-tenant market is coming back, too. After accounting for less than 45% of total volume between the second quarter of 2020 and the first quarter of 2021, sales of multi-tenant retail assets increased during the second and third quarters of 2021 to 48.5% and 50.2%, respectively.

Many gyms are bouncing back to pre-pandemic levels

Back in 2020, some predicted there would be an end to the gym industry or at least a huge shakeout. But a year later, some parts of the industry are thriving. Gyms like Planet Fitness and Crunch are expanding rapidly, as people are focusing back on wellness and staying fit.

According to Placer.ai, a company that measures foot traffic based on anonymous cell phone data, In June and July, foot traffic to fitness centers nationwide was down by only about 3% compared to 2019 data.  In August, the gap increased to -4.8% because of increasing cases of Delta variant.

Planet Fitness, Anytime Fitness, and Crunch Fitness grew by 4.9%, 0.5%, 28.1%, respectively compared to 2019.
Boutique fitness gyms have also done well, with Pure Barre, Club Pilates and CycleBar having posted positive increases of 7%, 29%, and 6% comparing August of this year versus August 2019.It hasn’t been a full recovery for all gym brands, however. Foot traffic to Orangetheory, LA Fitness, Gold’s Gym, and 24 Hour Fitness were down versus 2019, -5.2%, -20.8%, -22.1%, and -40.6%, respectively.  The reason for this is that many of these gyms are located in major cities that have been hit harder by COVID cases.
So, the data prove that not everyone is staying at home on their Peloton bike, or doing Apple Fitness workouts.  People are getting out to work out and socializing at gyms, and that’s great to see for our overall health, as well as for the retail industry.

How retailers plan to meet labor demand this holiday season

Holiday shopping generally begins earlier and earlier each year, and due to shipping bottlenecks, it seems everyone is preparing super early this year. Retailers need to staff up for this holiday season, where sales are expected to be 9% higher than last year.  But if you haven’t heard, there’s a massive labor shortage out there.  So how are retailers dealing with this issue to hire more workers?

Major retailers are doing everything they can to meet the upcoming demand by offering higher wages, bonuses and even tuition assistance.

Amazon just announced that they are going to hire at least 150,000 seasonal workers across the US with an average starting pay up to $22 per hour, a sign-on bonus of $3,000 and an additional $3/hour for some shifts, as well as paid tuition.

Walmart plans to hire 150,000 new US store associates with the incentive that most will be permanent and full time positions. They’re promising reliable schedules, tuition reimbursement, and a clearly defined career path for advancement.

This season, Target is looking to hire 100,000 seasonal workers, and is offering an app where they can easily swap schedules with other workers.
These are just the retailer’s hiring plans.  It remains to be seen if they will actually be able to succeed in hitting these hiring targets.

The top 25 Markets for Current and Forecasted Multifamily Rent Growth

The US Multi-family market continues to set records in terms of growth rates as asking rents increased by 11.4% in September  Rents are at an all-time high, averaging $1,558. Yardi Matrix, a real estate data firm, summarized which markets have had the highest growth rate this year.

Three Southern California markets made the list.  Los Angeles is forecasted to have 10.2% rent growth by the end of the year,
Orange County is forecasted to grow 10.9%, and the Inland Empire is forecast to be up 18.7% versus last year!  Way to go, IE!

If you own rental property in Southern California, this has been a good year for you! It remains to be seen if the rally will continue through 2022.

That’s all for this week! Thanks for reading, and I’ll see you next time!


Connect with me here:
Website:  https://mikelincre.com
YouTube: https://www.youtube.com/MikeLinCRE
LinkedIn: https://www.linkedin.com/in/MikeLinCRE
Twitter: https://twitter.com/MikeLinCRE
Email: mike@progressiverep.com

Mike Lin, CRE