Tucson, Arizona – Tucson’s retail big box sector continues to face similar challenges occuring nationally as online shopping changes the game. Big box retailers such as Sears, Kmart, and Toys R’ Us have lost the battle but other on-line only stores are beginning to open brick and mortar stores and businesses are spreading out their efforts to meet consumer demand, according to CBRE Tucson’s Year-End Big Box Report.
“What many believed to be the final nail in the coffin for retail as we know it: online shipping has swayed a new direction with some on-line-only companies are now finding it important to have physical store presence. Online shopping has challenged traditional brick and mortar retailers to become nimble in a playing field where the lines are blurred on where sales are actually made. “Omnichannel” is the new buzz-word allowing consumers to get what they want, when and where they want it: research online and buy in the store, or check it out in the store and buy on-line, buy on-line and return in the store, etc.
Big box vacancy (spaces greater than 10,000-square-feet) saw an increase of a number of spaces vacant year-over-year, with 49 spaces, but the total square footage vacant increased to 1,162,469-square-feet available at the end of 2018, compared to 44 spaces totaling 946,192 square feet at year-end 2017. Tucson closed out 2018 with 14 vacant big boxes of 30,000 square feet or more up from 9 in 2017.
In total, 381,804-square-feet of big box space was leased in 2018, down only slightly from 2017’s 506,570-square-feet of absorbed big box space.
Experiential retail is the new trend with consumers demanding experience over product in their physical retail. “The ‘3-F’s:’ Fitness, Fun, and Food seem to be the here and now categories that are active and absorbing vacant boxes—a national trend happening in Tucson!” Said Nancy McClure, “Fitness users like the new entrant, VASA Fitness, plus expanding existing: Chuze Fitness and Planet Fitness are filling boxes vacated by grocers, merchandisers, and even has spurred ground-up construction on the peripheral of town. Fun & Food is now often combined with eatertainment venues such as the new Galaxy Movie Theatres; the planned indoor trampoline/ entertainment center, Defy Tucson and Round 1; Top Golf; Dave & Busters with others to follow.”
2019 will bring more challenges for retailers such as grocery, drug, and department stores increasing vacancies. The demand for creative retail is stronger than ever in 2019. Property owners will have to stay nimble to adapt to the market.
“Property owners who are adapting to the changes in retailing, with guidance of real estate advisors, are thriving. To do that they are targeting the most active categories and are proactively working to remove, reduce or modify restrictive covenants to allow such uses as entertainment, fitness, and conversion to call centers and other office uses. Most retailers are working to modify their store sizes, and number of stores to adjust to customer demand.”
For full report: Big Box Report Year-End 2018