Future Cities

Tourists Matter More Than 'Clicks' for Retail Performance in Many Markets

June 1, 2022

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The rise of e-commerce has had a profound impact on demand for industrial. The effect on retail real estate, particularly neighborhood and strip centers, is less clear.

CBRE Econometric Advisors (EA) forecasts that online retail sales will grow by 6% annually over the next decade. Theoretically, online sales growth at this level should impact rents that can be achieved at neighborhood and strip retail centers.

However, CBRE EA’s market analysis shows that a one percentage point increase in e-commerce sales has only a slightly negative impact on 5-year brick-and-mortar rent growth.

The least affected markets are major tourist hubs, such as Honolulu, Nashville and Las Vegas. The boost these markets receive from visitors eager to spend – and the markets’ greater sensitivity to discretionary spending overall – appears to be more consequential than e-commerce activity. Conversely, the e-commerce impact will be more pronounced, but not to a severe degree, in markets where retail rents are already in decline.

FIGURE 1: Difference between e-commerce-boosted rent growth and the baseline 

Costar, CBRE Econometric Advisors

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