Gym Rats Are Bullies

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I used to love going to the mall when I was a teenager. Shopping at the latest, trendy acid-wash denim store, buying a record or cassette tape at Sam the Record Man, and of course, interacting socially with teenagers of the opposite sex. What year was that? 1980. Today, the latest denim trend is skinny jeans, Sam the Record Man has been replaced with Apple stores, and social interaction happens on our smart phones rather than in person. The mall scene is not what it once was and malls are no longer busy with shoppers and mall rats. Instead, they are overrun with gym rats.

All across North America, gym rats are bullying the pre-historic mall rats out of the malls and sending them down the road to find a new, safe, warm, and inviting place to hang out and continue to be useless to society. In reality though, gym rats are not the bullies; the bullies are fitness franchises like Goodlife Fitness and Planet Fitness. They are taking advantage of the hundreds of thousands of square feet that are sitting vacant in malls across the country, and in many cases, the vacant space has been sitting empty for years. These bullies are negotiating bargain basement leases at a fraction of what the big retailers like Sears and The Bay used to pay.

Amazon and other online retailers are disrupting and reshaping the landscape of malls and retail space. I would be surprised if Sears and The Bay survive the next decade, or decide to do business in the same capacity as they are doing today.

As consumers, we are finding that online shopping is much easier and more rewarding than ever. Alexa, Amazon’s voice activated service, can search, order, cancel, and return whatever consumer product you desire by simply talking to the Amazon Echo device and asking for Alexa’s help. Alexa will quickly show you hundreds of retail products that are of interest to you and often at discounted prices. No more driving to the mall, fighting to find and paying for a parking spot, and walking up and down the long corridors of the mall looking for the perfect “whatever” at the right price. Alexa does it all for you in a few seconds without you needing to leave the comfort of your home. Once you have picked the item, Alexa automatically charges your credit card and ships it to your home, which arrives within 2-3 days. Quick, efficient, incredible selection, and discount prices. It is simply amazing! What more could you ask for?

Will this new retail model be the demise of all retail stores? I do not believe it will. One of the main reasons I went to the mall as a teenager was for the social interaction. We all crave social interaction at some level, and the Amazon “online malls” cannot sate our need for socializing. Retail stores that can gratify this need by creating customer engagement, between the staff and customers, customers themselves, and with the corporate office, will remain in business. The customer desires an experience that Amazon cannot deliver; a need for social interaction and a sense of community. Businesses that prioritize community before selling their product will be successful.

Businesses like Sephora, a beauty store that offers free makeovers to customers, and Bosley’s, a pet store that encourages pet owners to bring their pets in to interact with other pet owners, both create and encourage community, as well as offer a social environment for their customers. People want to enter these stores just based on the community vibe they exude. Think of the greater success these companies could have if they began to collaborate with other businesses, like Starbucks, to create a food/drink, social, and retail experience!

Over the last twelve months, I have had many of my investment clients asking about the opportunities in commercial, retail, or office space. This is quite a significant shift as many of the investors have been trying to secure multi-family properties. However, this market has become increasingly competitive to secure and the cap rates continue to slide to all-time lows. Great commercial opportunities do exist and generally cap rates are typically much higher. However, with higher cap rates the risk is often greater too. As noted, the landscape is rapidly changing with the “Amazons” of the world. Although it may sound like a broken record, the key for real estate success always starts with “location, location, location.” However, there has been a bit of a shift. In today’s society, finding the right tenant to create a sense of community and a social experience is just as important as the location. Businesses that can do both, finding the right location and create a sense of community, will find greater success and be around for a longer time.

The investor’s formula for commercial property is finding the right location coupled with creating the perfect social/community business. This will be the key in bringing the mall rat back from the dead and creating a new social trend.

After what seemed like the longest winter ever, it appears that spring has finally sprung! The real estate market for all areas and types in Greater Vancouver and Fraser Valley has decided to get into the spirit of things and has also sprung. The STR (Sell Through Rates) numbers are up across the board. Condominium and townhomes continue to lead the pack with some areas selling through at more than 50%. These kind of numbers are generating multiple offers and increased prices throughout the region.

If you would like to receive a copy of the statistical market report contact us here or if you would like to be on our next Investment Bus Tour contact us here.

Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com

STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales

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