What’s Ahead for Retail in 2026?

Good afternoon, and welcome to the Retail Strategies webinar. We are so excited to see all of you in here, and it’s a lot of fun to see all of you typing in where you’re from. I see a lot of client communities and a lot of communities that our team has met across the country at the different conferences and events that we’ve attended. So really appreciate you tuning in live today to hear a little bit more about the twenty twenty five retail trends and some of our expectations or predictions for twenty twenty six. I always say this, I’ll say it again, thank you for making the commitment of time today to invest in lifelong learning. We believe in it, We know rising tides float all boats. And the more you can learn about best practices in economic development, community development, and retail recruitment, the more you can bring that knowledge back and serve your community. So we really applaud you for showing up today. There’s a lot going on today, so we’re excited to go ahead and kick this off. I will tell you this webinar is going to be recorded and we are going to send out an email afterwards with the full deck. So my colleague Elliot Cook, and I will be doing this webinar. I am Lay Beasley. I’m the president of Retail Strategies. And Elliot Cook is the director of real estate. I know most of you know him already. He speaks at conferences across the country, both state and national conferences, has over a decade of experience in retail real estate, and is very plugged in with all of the trends. Love having all of you with us today. So without further ado, let’s go ahead and kick it off. Again, I see so many familiar cities in the chat that you are going through and writing where you’re from. I’m from all over the country, a lot of client communities and a lot of communities that we’ve met at different conferences. And so we’re really encouraged that you showed up today and are committed to lifelong learning. The more you can know about everything that’s happening in economic development, community development, and in retail recruitment, the better you can serve your communities. So today’s webinar, we’re gonna be talking about some big picture trends that we saw for twenty twenty five and also looking at some predictions for twenty twenty six. I’m Lacy Beasley, I’m the President of Retail Strategies, and I’m with my colleague, Elliot Cook, who is the Director of Real Estate. We’ve met a lot of you already. Elliot speaks at conferences across the country, the state and national conferences and has about a decade of experience in this space. He’s consulted over three hundred communities. So very plugged in on the trends that we’re seeing. And then myself, I have about twenty years of experience in commercial real estate with a focus in retail. So we’re gonna share with you high level some of what we’re seeing. And I think it’s always important to break down where we focused on these trends and how they all kind of bounce back and forth between influences. So there’s trends that are really consumer focused and at the end of the day, retailers are always looking for how can they capture the wallet share with the consumer. So first we’re gonna look at all across America and all across the world, what are our purchasing patterns today? Because once the retailers understand the purchasing patterns, then they’re gonna come back and look at their operations. What are they doing with the brand experience and the product that’s going to match up with the consumer purchasing patterns, right, so that they can capture that wallet share? And then ultimately, that’s gonna lead down to the real estate. In the real estate side, that’s where Retail Strategies believes that communities, economic development agencies, city managers, city planners, and community leaders can have the most influence is because you understand your real estate, and that’s a great area to focus when you’re looking at retail recruitment. We can’t always influence the operations of the retailers and it’s challenging to operate the consumer shopping patterns. But what we can influence for effective retail recruitment is the real estate. And that’s what we do at Retail Strategies for all of our client communities is look at how we’re pairing together those retail brands with the real estate. So it’s important for us to know the trends and you’re gonna see us throughout this webinar weave in and out of these three concepts. So first, the big picture trend we saw for twenty twenty five was just limited supply, right? This is real estate supply. We didn’t see a lot of new construction and this is something that’s been happening over the last three years. Cost of construction has increased about twenty to thirty percent. We are starting to see those slightly drop finally, but also the cost of financing has gone up as interest rates have increased. And the rate of increase of those costs has not matched the rate of increase that the retailers were willing to pay in rent. And so that caused a big challenge across the board with the pro formas. So we saw very limited new construction, which ultimately led to backfilling a lot of vacancy space that came out of bankruptcies, which Elliot’s gonna take a deeper dive on. But that was a big part of what we saw in twenty twenty five that kept our attention and focus. We also saw that the consumer was really trading down and that can mean a variety of different things. If the consumer used to shop at Target, now they’re shopping at Walmart. If they used to shop at Walmart, maybe now they’re shopping at one of the dollar store concepts. If they used to shop at Whole Foods, maybe they’re trading to ALDI for instance. And so what we’ve seen is just this shift of people really trading down and finding those retail brands which has really driven the rise of the value oriented retailers, they continue to thrive in this economy. A lot of consumers are really barbelling their spending patterns. So if they have one thing they really want, like something they value and it might be eating out, an experience of eating out, They might spend a substantial amount on that category and then go back and save on whether it’s gonna be clothes or groceries or another category of spending. So people find what they really want, they spend all their money there and then all the other categories, they’re gonna find the least expensive option they can so that they can manage their budget. And there’s definitely been a lot more pressures on all of us as consumers, as we have seen some inflation pressures that have come on us and as student loan debts are really putting a lot of pressure on the younger generation and as cost of housing has increased, right? All those things are causing us to be a lot more cautious and trading down. So we’re seeing that, which is driving a lot of patterns with the real estate expansion and how those consumers are spending. So then we’re gonna go for an investment in online sales. That narrative was the retail apocalypse. Online sales are gonna kill brick and mortar and we fought real hard against that. So I think people now know that brick and mortar is here alive and well to stay. What’s changing in that space? Every retailer that’s out there is looking at new pathways to reach the consumer and so that’s really starting to go into social media and even AI trends. And then finally, we’re gonna get into the strategic portfolio optimization. So every retailer really looked at their footprint, the stores that they currently have, they wanted to grow and expand because of the lack of real estate supply. They looked at options to either remodel their existing stores or really look at ways to value engineer their existing space so that they could find a less costly way to build their current prototype. And again, just really driving in on as the consumer wanted more convenience, how are they changing their store prototype and the number of stores and the size of their store to really plug into that convenience that the customer has said that they really want. Those are a few big picture trends that we saw. Now with this, there are certainly some, there’s some positive indicators we saw and some challenges. And so we’re looking at these moving forward. So interest rates did fall and that’s very positive. We did see the most recent announcement from Chairman Powell that interest rates are remaining right now. There are predictions that those will drop again. Inflation’s still running a little bit hot. We’d like to see a two percent inflation. We’re at about two point seven percent. And so that’s why the interest rate did not drop again despite some political pressures that may have been discussed, right? So it’s really kind of interesting when you look at that balance between what the Federal Reserve is doing and the political pressure that’s coming down on them. You really want the Federal Reserve to remain isolated from any political pressure so they can make predictions on the economy. It’s politically popular for interest rates to drop because that drives up the economy, But that’s nice in the short term, but could be very bad in the long term because it would drive up inflation and you really have to look at the unemployment rates. So that’s what right now, unemployment’s stable, but there’s been some recent layoffs with Amazon and with UPS that really created some concern, and inflation running a little bit hot is why the Chairman Powell decided to keep the rates where they are right now. Now, his term will be up in May, and there’s a lot of volatility in the administration right now, especially with midterms coming up. So, you’re gonna continue to see this battle play out over the next year. So, let’s get over into the positive indicators. We saw GDP is really on track. You typically want that right at three percent, so we’re good there. Consumer sentiment is positive and so people are getting out and spending their money. That’s something we really track. But the consumer is feeling that what used to buy them one hundred dollars it now feels like one hundred and three dollars So consumers are being a little more cautious about their money. They still wanna go out, they still wanna spend, but they’re just being strategic in where and how they spend it. Maybe less products is what they’re looking for or better value. So ICSC is an organization that has about fifty seven thousand members. It’s a not for profit and it’s really everybody that’s involved in our industry. They have events across the country and I’m on the board of trustees with ICSC. And just last week, we were in Florida together and talking about what’s happening in the industry. So, these slides are from ICSC, hot off the press of what they’re seeing with trends. I think it’s always important to show this slide because this is really a larger indicator from two thousand and nine to today why we have some challenges with limited supply in retail. It really debunks that retail apocalypse narrative that we were hearing. So where retail sales grew by about eighty two percent, GDP grew by about forty percent, we saw the US population grow almost thirteen percent, we only saw the shopping center GLA, which means gross leasable area, grow by about seven percent. So this would suggest we still have a lot of capacity for new construction. Once we get the economic indicators right with cost of construction and with the cost of financing. And then what can retailers bear with paying more rent? How does that cut into their profits? So, we believe that retail is around here, it’s alive and well and around to stay. ICSC believes that, we know that from the boots on the ground, so if anybody tells you retail is struggling, that is not what we are experiencing for an overturned views, that is fake news. That retail is doing really well right now. I think it’s looking at these holiday sales, one of the things that really stood out is that on average, people spend about a thousand dollars in the holiday, but you see where there’s really a bifurcation of wealth across America. Households with two hundred and fifty thousand income and above actually spent three times those that did not have that income level. So what you’re seeing is the wealthy is really getting out there and spending quite a bit. Fifty percent of all consumer shopping within retail is made up of the top ten percent of wealth in America. So that can be a little bit of a create some concerns, and retailers really have to look at that about who are they targeting and how are they gonna capture that wallet share as there is a bifurcation of wealth. The middle class is really being squeezed out right now and we’re seeing that in shopping patterns. So, overall, spending was up for the holidays, and what we saw was overall retail sales were up about four percent year over year, which is what ICSC predicted. Now, I will say with all these stats I’m sharing with you, there was a government shutdown. So, there’s a bit of a delay on us having all the updated information. Some of the majority of these stats are from surveys that ICSC sent out and some predictions that are available. So where we see unemployment at about four point four percent and remaining stable, the more concerning aspect of employment is going to be among younger workers aged twenty two to twenty seven, that’s where we really have to focus right now. And that’s concerning. So that’s what some of the Federal Reserves and others and retailers are looking at. What I think is good to look at is the inflation where it’s still running a little bit hot. It is still underneath what the median earning growth was. And so long as wages are outpacing inflation, that’s positive. Retail sales are outpacing inflation and GDP is outpacing inflation. So we still have a strong, economy. I know some people, I’ve heard them on the street say, Oh, we’re already in a recession. We actually have to have two quarters of negative GDP growth to be in a recession and we’re not there. Predictions are that we’re gonna stabilize on that GDP growth. So you’re seeing it slow down a little bit, but really the consumer feels like inflation is running closer to about three point five percent even though that’s not a reality. One of the things to point out here is this four percent personal savings rate. During the pandemic, the savings rate was actually about fifteen percent. It’s quite a bit. So that is a little bit concerning because what we’re seeing is that people burn through all their pandemic savings and you’re starting to see credit card delinquencies really increase. So are people gonna be able to continue to shop? That’s what we’re studying right now. So let’s look at retailers and how they’re growing. There were more openings than closings, almost twelve thousand new openings where there are about eight thousand closings. And Elliot was gonna focus on this and what happened with these. But I think that’s always important to look at who is driving that growth. As you want retail brands in your community, you have to look at who’s expanding, are they active right now? How many new stores are they doing? And so let’s take a look at some of the closures and openings. Elliot, I’ll go ahead and turn it over to you to take this slide. Yeah, thank you, Lacy. So really, I know a lot of you are here because you wanna hear who is opening stores and if you’ve had some closures over the last year, what do I do with a lot of those closures? Or how do I backfill some of those vacancies? And really, when we talk about some of these brands, I know this isn’t surprising to many of you, but you’ve probably seen over the last year that there was a liquidation of all Jo Ann stores, Party City stores as well. And going back to Lacy’s point about there being really a lack of good quality space, if there’s only really limited vacancy in the retail space, a lot of your lifestyle centers and your power centers that had these these tenants in them, This is a real opportunity for a lot of those those shopping centers. Likewise, on a lot of your best corners in town, you may have seen Walgreens or CVS or depending on where you are in the country, those remaining Rite Aid stores that are closing over the last couple of years, as well as Big Lots. And if you’ve seen those, we’re going to talk about who’s opening here in a little bit. This isn’t always a bad thing. That churn in real estate is sometimes good for our industry. And certainly we don’t want to lose these brands, Joanne, Party City, probably brands that you went to. But when we think about the economy, and we think about discretionary spending, or we think about that relationship between online shopping and actually brick and mortar shopping, this is where we saw a lot of that. I think in discretionary spending, some of those arts and crafts that maybe did better during the pandemic or previous to the pandemic, we saw less of that spending or people leaning more on Amazon to buy some of those goods or leaning on online shopping. And the same goes for Party City. I don’t know how many of you had a holiday party or a child’s birthday party or Halloween costume that you bought for yourself or or for your children, but a lot of you are now doing buying those items online. You’re not buying those things nearly as much in brick and mortar locations. Those are all presenting opportunities. I can tell you we’re gonna talk about here in just a second who is opening in a lot of those stores, and Party City and Joann stores are almost immediately getting backfilled. Sometimes less than six months depending on, you know, how they’re able to, to get out of those leases and how the those landlords are able to backfill them. But if you’re seeing Walgreens and CVS or Rite Aid locations or Big Lots locations close in your communities, I want you to take heart that it may take time for some of those spaces to close or for for them to be backfilled because there’s terms still on those leases. But you are now getting back one of the best corners, if not both two of the four best corners in your community. And certainly, we don’t wanna see pharmacies go away. But what’s in reality, what’s happening with a lot of these brands is these brands don’t need those ten thousand square foot stores that they once had. And when you talk about where a lot of that shopping is happening, but Walgreens and CVS, they’re going in to larger retailers like Target and some of your grocery stores and things like that. And then also they’re kind of shrinking their square footage. They don’t need ten thousand square feet, an acre of land, or more than an acre of land. They’re leaning more on like two twenty five hundred square feet or two thousand square feet stores. Standalone developments, as well as in caps of shopping centers where they can enter, as long as they can get that drive through for that drive through pharmacy. So something certainly to experience and to look forward as well. And then also we talk about Big Lots. Big Lots, as you can see, close over three hundred and forty stores. There’s some opportunity in a lot of those those vacancies as well and who has been backfilling those. So Lacy, if you wanna advance to who’s kind of opening in a lot of those stores where we’ve seen some of those closures. Who’s opening in those stores? Dollar General, Dollar Tree. Dollar Tree is one of the number one tenants to backfill those old Party City locations. I know they of those seven hundred and twenty five stores that they opened in twenty twenty five, a lot of them were in former Party City locations. And, you know, people were buying balloons maybe more at Dollar Tree than they were at actually Party City. Dollar General is another one. I know a lot of you probably would like to hear more information around some of those dollar brands, those discount retailers. I mean, is where a lot of the growth is in our industry. And we’ll see that in going slides going forward. But really who are the winners when we talk about kind of in line space or, you know, anchor tenants and things like that? Grocery stores are a big one, as well as discount and value retailers. Dollar General, like you can see, five hundred and seventy five new locations. I mean, that is substantially less than they’ve had in years previously. But certainly, they continue to grow. Dollar Tree, is another tenant that you’re going to see continue to open a new stores. Like I said, they’re trying to take second and third generation space that formerly was a Joanne or formerly was a a a party city. TJ Maxx and Burlington continue to grow. If you are more of a tertiary market, this is a great opportunity for you. They continue to expand out into rural and tertiary markets, and they’re doing very well. And you’re gonna see some of their sister brands as well. TJX obviously also owns Marshalls. They also own Sierra Trading Post and HomeGoods. And I’m sure a lot of you would like to see more of those HomeGoods locations open in your market as well. And then finally, Ollie’s. Ollie’s you can see continues plans to open more than fifty stores. When we think about other types of discounters, Boot Barn is a great one. Shoes are doing quite well. And I think shoes have given the opportunity when we talk about the relationship between brick and mortar retail and online shopping. Shoes are a great example of something that people want to try on in person if given the option. So you’re gonna see Shoe Show and Hibbett and Boot Barn. A lot of those brands continue to open in new markets. And Nordstrom Rack is another great version of that. Nordstrom Rack, while a great retailer, is a discount retailer and is the discount brand of Nordstrom. And you’re gonna see they are aggressively growing and certainly going to be looking to go into more of those lifestyle centers as well as opportunities where they can, you know, really find those kind of suburban and tertiary markets that have been untapped for them in the past. Lacy, do you wanna continue? There you go. Talking about consumer behavior. I know Lacy touched on this earlier, but we really need to look at who is winning and what our economy looks like here in 2026. Now holiday spending, like Lacy mentioned, was really successful and continued to grow. We as consumers by and large continue to spend dollars for our loved ones during the holiday season, continue to rise year over year. But there is a bit of a contradiction when we look at the economy in twenty twenty six. We have a shrinking middle class as we all know, and really that is showing itself in the way we are as consumers. Seventy five percent of consumers are trading down to cheaper brands, and yet sixty five percent are willing to pay extra for two hour delivery. So a lot of it is experience or value based or what we’re needing in our life and how we’re willing to kind of spread our dollars out. And certainly, know you probably wanna hear more about food and beverage brands, and we’ll talk about that here in a little bit, dining and going out to eat and things along those lines. We’ll talk about that here in a minute. But that can be reflected in this as well. What’s interesting is really as consumers, there’s because there is a shrinking middle class, you’ve got, upper middle class and upper class that are really spending money as if the economy is great, as you might be not surprised to see. But then the lower class middle you know, on the lower end of the spectrum, really a tightening of the belt and really a lot less spending and why a lot of that value based and that discount type of shopping really can send you know, continues to be so strong. That’s why you’re seeing more of the thrift stores. Certainly, Gen Z loves to go to thrift stores as well, But off price retailers like those Ollie’s, like Dollar Tree continue to be really, really successful. Talk about experiential retail. Experiential retail is so strong and is a great tenant for our shopping centers Because we’re trying as shopping center landlords to get people to visit our shopping centers for more than thirty minutes and for more than just one use. So an experiential type use, whether that’s pickleball or a movie theater or something for our our children to do, this is a great way to get people to go to more than one retailer within a shopping destination. Right? This is a great opportunity for in something certainly we should continue to look at. And then talking about that value seeking. People are looking for not only a discount, but they’re also looking for uniqueness in that experience. And that certainly reflects itself, in the in the food and beverage sector and the dining sector as well. And then talking about ecommerce, certainly this is one everyone asked me about. When we when we think about ecommerce, we have to talk about online sales. Online sales currently are at about sixteen percent. Who is to say, obviously there’s a projection that it’ll never cap over twenty two percent. Who’s to say what that’s gonna look like going forward? It’s gonna continue to rise. But really, we think about in all retail sales, only sixteen percent of retail sales here at the beginning of twenty twenty six reflect themselves, you know, as online sales. Online sales completely dominated and Amazon completely dominated the catalog. The catalog has had a resurgence, but we’re gonna continue to see more of online sales, but it just being a factor of what we do. It’s not everything. And brick and mortar stores are absolutely really, really resilient. I’ve seen this statistic before, the quote before that retail that solves everyday day problems is always going to be resilient. So we think about dining, grocery stores, service based retailers as well, hair salons, nail salons, gyms, medical uses and things like that. Those are very likely not going anywhere in our communities because they serve that everyday, you know, need that we have of a place we need to go to get that that that service taken care of for us. Very important to lean into that. Another thing we need to lean into and if you’ve ever seen me speak before, you’ve probably heard me talk about omnichannel. Omnichannel is so important with our local businesses all the way up to our the national chains. We talk about Walmart, we talk about Target, a lot of those retailers. The ones that are thriving as the big behemoths all the way down to the local brands are the ones that have really leveraged omnichannel strategies. And we’re gonna talk about this a little bit later, The winners in the retail sector oftentimes are your small businesses and your entrepreneurs because they’re really resilient and they’re able to evolve their brands in a lot of different ways where private equity backed brands or national chains aren’t as quick to move in a lot of those respects. Local brands are the ones that have really captured and can really thrive in the omnichannel space, and national brands will continue to do the same. Omnichannel meaning having a brick and mortar location, but also having a robust presence on social media, on your online what formats, and having business that’s sometimes coming from the brick and mortar location, but actually is being serviced via an online transaction of some sort. So certainly something we need to always consider. Physical retail continues to be dominant, but it is always evolving. And certainly you need to be thinking about each of your retail corridors, your downtown, your neighborhoods, and your national retail corridors, and how they’re leveraging that omnichannel component going forward. And then finally, really, are those winning strategies? I mean, the real thing I wanna talk about are the smaller footprints. We have heard for years now, labor costs continue to be high, construction costs continue to be high. We look at consumer sentiment and consumer confidence. Consumer confidence is at the lowest it’s been since twenty fourteen. But consumer sentiment, strangely enough, has risen a little bit. It collapsed in middle of twenty twenty five, but has slowly crept up. You know, so we’re spending money as if we think that we’re going to retain our jobs, we’re gonna be able to pay our mortgages and our rents and whatnot. But it’s important that we look at what new development looks like in our industry. As Lacy mentioned, there is a lack of quality property. There is a lack of vacancy in most of our markets. So smaller footprints are winning because they’re able to turn a profit without paying extreme amounts of overhead. And that’s why you see the Dutch brothers of the world really thrive, as well as your local brands. Right? Those local businesses are really doing well because they’re leaning in on the smaller footprint and really turning a profit on every dollar per square foot of their investment, whether that’s the acquisition of a property, development, or leasing of a space. You’re gonna continue to see retailers downsize. Obviously, they need less labor in smaller spaces like that as well. So you’ve probably seen, like we mentioned, Seven Brew, Dutch Brothers, Scooters Coffee. You’re seeing Chick fil A’s that only have a walk up. They don’t have the ball pit in the play place anymore like you used to see years ago. And then you’re seeing grocery stores as well. The grocery stores that you’re seeing, developed across the United States, and we’ll talk about some of them here in a little bit, are the ones that are like thirty thousand square feet, forty thousand square feet. You’re not seeing these massive Kroger’s or these massive, grocery stores that you may have seen previous to two thousand eight or previous to twenty twenty. That’s gonna continue to be a category where there’s more frequent trips, but less in the actual transaction of that one visit to those stores. So look for that going forward. And when you’re looking at your vacancies or your raw developable land, think about that, going forward as well. The rural and tertiary markets continue for about the third year in a row to be the darling of a lot of retail development because there is the opportunity for land, because of the resilience of the last couple years of each of your communities. And also this is where a lot of new homes are being built. It’s very, once again, very hard to build homes in more of your urban formats or more of your urban markets. Right? You’re seeing a push to more suburban, tertiary and out into the rural markets as well. Suburban you can see is eighty seven percent of growth, which continues to trickle its way out into more of those rural markets as well. We talk about bankruptcy optimism, acquiring leases from those failed competitors. Exactly like I mentioned, right? The Walgreens, the CVS, the Joanne Fabrics, Bed Bath and Beyond, whether we’re talking about Trader Joe’s or we’re talking about Aldi, those are two retailers that are looking for those opportunities. They’re looking for the vacant Bed Bath and Beyonds, big lots, party cities of the world to assume those leases. Dollar Tree being another one of those examples as well. And you’re gonna continue to see that. Most of those vacancies, depending on term, do not sit vacant for very long once there is an opportunity for someone to come in and take over that lease. Experience driven retail, like I mentioned, continues to be the absolute darling of a lot of what our retail industry is. When we think about dining, this is so so key. Right? Every retailer wants an experience, whether they live in a community of two thousand people or two million people. They want an experience when they go out. You know, seventy eight percent of diners said that they needed some it did be somewhat Instagrammable when they go to a restaurant. And they also talked about that they want like things like the bathroom to be Instagrammable. They want to have you know, this complete experience when they go out to eat, especially as food costs continue to rise. Certainly something we need to consider when we think about that well as well. And that’s not just Gen Z. Millennials are that way. Gen X is that way. And the baby boomers, you know, well, or maybe putting it more on their Facebook and things like that as well. But dining is that primary third space. And most consumers now actually consider dining the place where they’re doing the most socialization in their united when they’re actually leaving their homes and leaving their work their workspaces as well. We talk about the urban markets, You gotta talk about flexibility. Once again, a lot of those retailers that are going into the urban markets, it’s a grocery store, a department store, or even food and beverage, they’re testing more of those small format stores. So small continues to win in our industry as well. And then really value positioning. You’ve got to emphasize value. You’ve got to emphasize getting that loyal customer, and you’ve got to emphasize out positioning your competition without cheapening your brand to be successful going forward. Lacy, do you wanna move forward? And with that, I’ll turn it over to you. Okay. Great. And I’m off mute this time. Thank you all for that patience in the beginning. I love seeing all your comments. It’s a lot of fun. And Elliot, thank you for that highlight. It’s always fun to see specifically the brands and who’s expanding and who’s backfilling those vacancies and what are those trends. So I know with each one of these things, the question’s always, how do we bring that back home? And looking at our past to twenty twenty five, what are some predictions for twenty twenty six? Some of the economists out there are saying that this is one of the hardest years to make any predictions for the future because there’s just volatility. There’s just no way to know some of the key indicators. So what’s interesting is on a real estate side, then there’s kind of a lot more of the same we’re seeing, but I think on the consumer side is where things will really change and in that technology area. So let’s look ahead, what are our predictions for twenty twenty six? One, GDP growth isn’t going to be quite as strong as it was this past year. And that gets back to some of what I was saying about it’s not a recession, but we’re not going to have quite as aggressive of GDP growth. And really all this is in a goal to get that inflation back down. So estimates are it’ll be around two percent most likely. Retail growth year over year sales, last year we saw it four percent. We’re predicting around three percent this year. Now I want you to think about your own store sales within or your retail sales tax collection within your community. I see our clients in Tullahoma are on this call for instance, and they’ve been able to track where they have tripled the average annual retail sales every year because of their success and their retail growth. And so think about that as you’re making your predictions for next year’s budget. If your retail sales are to increase by about three percent year over year, that helps with budgeting, but also if you are far exceeding that on a local level, that is a great story to brag about. As Elliot highlighted, people are really moving to secondary and tertiary markets and the retailers will follow that movement. So, the more you can make a case to retailers that people are there, that they are spending, then the more likely you will be to land those new brands. So that’s what we’re seeing on consumer spending. A lot of the analysts for this space are really looking at what’s gonna drive that consumer spending. It’s gonna be a lot more of the same, that concentration of those core brands that you all know, which is gonna be Amazon, Walmart, Target, and then even really a lot of the dollar stores. So you’re familiar with that, but they have had very consistent year over year growth and you’re gonna keep seeing that. And really, they’re gonna be able to make their investors happy with an increased profit. So there’s just gonna collapse of the middle, much like Elliot talked about with the middle class being really squeezed. Then we’re also going to see that in brands. If you offer me an average product and an average price point, you’re dismissed. It’s going to be really luxury and value is where we’re going to see that growth. So those core brands are going to be a lot of it. Now, I think it’s important to point out that Amazon, I’m going to kind of skip around on my bullet points here because I just referenced Amazon and I wanna go to that last bullet point about tariff risk. Amazon, just recently came out, their CEO, and said that they are starting to feel the impact of the tariffs. So this is new news. As I’ve been on the ICSC Board of Trustees, the retailers go around the room and they say what they’re seeing. And I was actually quite surprised over the last six months or so of meetings that we’ve had, they’ve said it hasn’t really impacted them unless they were heavily dependent on China for their products. So it did vary by retailers, but the majority of them said, overarchingly, it didn’t have big impacts, but that sentiment is starting to change now where we are seeing some impacts of tariffs. Initially the announcement in the summer was ninety countries that would go through it. We really saw that concentration fall down to China and Vietnam and really around aluminum and steel, which impacted more of the automotive side of things. That’s really having a ripple effect now that is coming out on the larger economy. But what I continue to hear from all of the representatives of the different brands that I’ve visited with is that they’re going to try to bear that cost and not pass that on to the consumer. Although the consumer’s perception is that it’s being passed on to them. There are some rising costs, but those are more due to inflation and then specifically the tariffs. So I think that’s important to point out. So for twenty twenty six, we’re gonna continue to monitor this. I think you are going to start to see tariff related prices rise towards the end of the year. We haven’t seen that yet. Retailers are trying to hold the line, but as they get pressure from Wall Street to maintain their profits, this might be the area where that cost gets passed on to you. Let’s look, so there’s, oh, resell. Let’s talk about a trend that Elliot hit on when we’re looking at the consumer spending around three percent. Resell is so popular right now and that you’re gonna see that really grow and it’s growing enough that it’s not just the thrift stores, these brands are actually coming in and trying to recapture their own product and resell their own product and control that second or third user for their luxury goods really is where their main focus is within that. But, originally, there was a thought around the Gen Z and the Alpha generation that they were buying resell because it was an aspect of sustainability that they were really leaning in on. But when we saw the store sales for Shein and some of those discounted brands, TEMU even, then that kind of breaks that theory, right? And so they’re saving money at some of those areas. And then like Xian and T Moo and those discounted overseas areas so that they can go and then buy reused product or resell because they can get a higher quality brand name that they desire without paying the full price. So we’re gonna see more and more of that in stores. So, I put it at a two percent target. This is depending on how the Federal Reserve handles the interest rates, but that is the goal. And I think we will hit it because as you can see, the predictions are that retail sales will slow, GDP will slow, which will also slow inflation. And then ultimately the interest rates, those will have to come down as the other items slow. And so that’s gonna unlock some capital. And right now, everything is just kind of stalled out. There’s a lot of money on the sidelines waiting to be deployed. At the trustee meeting as we go around and talk with the REIT owners and the mall owners, they want to invest, they want to buy real estate, they want to help, you know, really continue to grow their portfolio, but everything’s just locked because right now that value proposition is not there. What makes it desirable to buy a shopping center for a REIT would be if they can go in and they can increase the NOI, the net operating income, and drive down their cost, and then that creates that squeeze. But right now, there’s not a lot of NOI to squeeze because we’re still at historically low vacancy rates, and Elliot’s going to talk about that. So, this is base case of what we’re seeing as moderate growth. So let’s talk about some of those vacancy rates, Elliot, and how that’s impacting our industry. Yeah, when we talk about kind of this cautious recovery, I just want to reiterate that I think the retail sector is one of the strongest. I would say industrial is number one. I would say retail is number two in the real estate sector. Retail is strong in all of your markets, even though it may not feel that way. Retail is a strong sector in the industry, in your regions, and hopefully in your individual markets as well. That being said, capital markets, there is a lot of investment, a lot of investment funds, public funds, private groups, they are looking to invest in retail, as well as private equity is looking to acquire brands, not only for the quality of those brands, and their share of their individual markets, but also for their real estate. I mean, you’re seeing that over and over again, where private equity groups come in, they buy a brand basically because they want to acquire it their real estate for another brand that they own. So that’s something you need to be looking at. The investment, people are looking to buy single tenant uses with a strong tenant in it. So a single tenant building, let’s call it, you know, a Starbucks or something like that that they think are gonna be open for a while, as well as value add shopping centers. I know y’all know this. That’s been a something that a lot of investment groups are trying to seek are the shopping centers that are maybe undervalued that they can come in, get it a good price, a good cap rate, they can put some new capital into it, a new parking lot, a new facade, drive up rents, obviously, and either turn that profit or invest in that for a long term hold. Then and then grocery anchored retail. Obviously, if I’m looking to buy a shopping center, I always try to say I’m looking twenty years downstream. I’ve got a ten year lease, probably two five year options with most of my tenants. So I need this thing to be profitable for the next twenty years. Grocery anchored shopping centers, very likely are going to have their tenant, their anchor tenant over the next twenty years. And for that reason, they’re very, very valuable from an investment grade standpoint. That, you know, that said, retail is strong. Retail vacancy, like we mentioned, is at four point one percent nationally. I think people are really surprised to see that. But there is only four point one percent vacancy in existing retail in the United States. That there is not a retail apocalypse that we joked about a decade ago. Average rent in the United States, and I know most of you have heard me say this, but if you’ve never heard me say this, do you know what rent comps are in your market? Do you know what a acre of land costs or a dollar per square foot costs in your community? And then also, do you know what rent is? And that way you can kind of target maybe why some of your vacancies stay vacant or haven’t had someone backfill that space or because or the reason there hasn’t been interest in it. Because rent could be way too low or it could be way too high. Knowing that’s important, rent has gone up two point three percent year over year. The reason being basic economics. There is a lot of demand for these retail spaces. If they’re in quality, you know, quality condition to this top, you know, you see the quality spaces at a premium, top tier buildings are nearly full. But, you know, there’s a lot of demand, but very little vacancy, very little space. So that’s why rent continues to go up. Talking about net absorption, I mean, we saw this time last year, there are actually more closings than openings that has reversed itself. You can see that’s positive, you know, from q three and continues on that way. We can expect more businesses to open and close in the retail sector here in this next quarter. And certainly, as we continue to get from these publicly traded companies, to hear about their, you know, q four earnings reports and things like that, we’ll know more about what it’s gonna look like in twenty twenty six with new openings as well. From a deal activity standpoint, like I mentioned, grocery anchored shopping centers, value add developments, value add shopping centers and and properties that they can acquire. And then finally, single tenant type development or unanchored, you know, one to two acre developments without an you know, with three tenant strip, two tenant strip, things like that. That is what you’re gonna see more of, in especially in the first half of twenty twenty six, and should be something to be on the lookout for and something you should be thinking about with each of your retail vacancies going forward. And then finally, like I mentioned, one of the reasons that the secondary market markets and tertiary markets are thriving is because they’ve been really resilient and because there still is developable land. Right? They’re not over retail like you may see in some other areas. So quality space is at a premium and where that new development exists is pushing out into the tertiary and secondary markets. And I know a lot of you are on this call, to, you know, wondering that and and would fit into that bucket. That’s absolutely right. And those are good high level trends on the real estate. And so let’s look at what we’re seeing from really the consumer sentiment and then down to the operations and how retailers are looking at that. It’s all about the technology evolution. I know that doesn’t surprise anybody on this call. I would be curious in the audience chat how many of you use AI on a daily basis and plug in who you’re using. Is it Claude? Is it Grok? Is it ChatGPT? Is it Copilot? Who are you using in the AI front? And this is true for retailers as well. They’re diving in and saying, okay, how can we really look at AI to streamline our operations, save costs, drive profitability, and knowing that it’s not if, it’s when that AI will absolutely change this industry, and it’s really going at a net breaking pace. When I think back about the concept of e commerce being kind of new, online sales being fairly new, a lot of retailers were very slow to adopt that because there was a sentiment on Wall Street of, We don’t want you to invest in online sales because it doesn’t have a direct return. The return was too far out in the future to make investors happy for those quarterly returns. So a lot of retailers were very slow to make this substantial investment in online sales they needed to make. Then there was a shift and they started investing in online sales. I thought the same might be true for AI, not the case. AI has a very quick aggressive investment in it and I think it’s because it’s so relatable to every investor who’s using it where online sales wasn’t as relatable at that time. So what we’re seeing and even let’s go back to some of those holiday sales, the stats I received from ICSC, we saw about forty seven percent of holiday shoppers used AI to help them make their purchase and twenty nine percent actually purchased product through AI. So that’s another channel that retailers really have to immediately dive in on so that they can make sure that they’re maximizing their store sales. Elliott covered boxes, buy online, pick up in store, popular kind of phrase that retailers know that they need and about half of the holiday shoppers did that as well. They bought online and they went and picked up in the store, but they have to give you a reason to come into the store. So that’s where you’re gonna see a lot of remodels right now with different retailers is what differentiates them. We as a consumer, we’re ruthless, we’re hard to please. And if we’re gonna take the time to get in our car and drive somewhere and go in that store, you better offer me something different than what I can get online. And so for instance, in apparel, this is what can they do with the changing rooms and dressing rooms, right? So they really need to make that more of a luxury experience when you’re trying on clothes and they’re delivering things to you that you wouldn’t find online. Dick’s House of Sports is a phenomenal concept that is growing. So Dick’s Sporting Goods acquired Foot Locker and they’re constantly looking at different ways to evolve their brand. And what I love about Dick’s House of Sports is they claim community. We started with the community. We decided to lean in on that. And when they looked at their model, they went community first. What does this community need to encourage athletes? And they don’t call them customers, they call them athletes. So Dick’s House of Sports has things like a rock climbing wall, they have golf simulators, you can get your tennis racket and have it restrung, same with your bikes. And so it’s very interactive where you bring your equipment in and they fix that or you can test their equipment there on the spot. The one I went in Minneapolis was, excuse me, the one I went to in Minneapolis actually had a skating rink in the back of it. It took a former Sears store in a dying mall, completely revitalized it, took over one hundred thousand square feet, and then the back had a skating rink for the winter and it’s a jogging track for the summer. And they invite the local parks and rec to bring people in and interact with them. So that’s a great concept that people are coming into. So I don’t wanna run out of time. I could talk about them all day. But one other thing you’re gonna see is this investment in subscription based technology as well. So DICK’S has invested in the Game changer app and they’re seeing year over year about forty percent growth. This app allows you to watch and track stats of youth sports. And what they found is that their athletes also have this game changer. So you’re gonna see more and more of that, these retailers who are also going to invest in anything that’s a subscription based model. But you’ve already seen it with a lot of the membership clubs with Costco, for instance, you’re going to see a rise in that trend so that they can personalize items for you, that they can use AI to do that. And that’s also going to come into delivery, which is really important. The retailers, when they look at their profit, the reason they tell me they can’t pay a higher rent for their real estate is because they have such a substantial cost in delivery. And Amazon set this up and now everybody else is competing. So, look at Walmart for instance. I don’t know about you, but I’ve changed the way I shop at Walmart. I personally, historically, did not like going into Walmart. The whole user experience was not, or consumer experience was not pleasant for me, but I loved their prices. Now I can buy everything online, it’s delivered to me, in some cases same day. And they’re even getting their same day delivery down to by the hour, which I find really fascinating and technology is really helping drive a lot of these trends. So let’s look at some winners and losers, Elliot. What are you seeing here? Yeah, thanks, Lacy. Obviously, when we talk about who is winning, know we’ve kind of touched on this, that off price, I mean, this has been this way for a couple of years now. There’s off price retailers, there’s value retailers. And that doesn’t always mean the Dollar Generals of the world. Mean, TJX, like we mentioned, HomeGoods, TJ Maxx, Marshalls, Burlington, Ross, those are brands that fall Five Below being another one. Those fall into that off brand value type retail. They’re very, very strong brands and great fits for your communities, especially in existing vacancy or some of those junior box developments where you see a Hobby Lobby, a Five Below and Aldi, TJ Maxx, something like that all go kind of in a lineup together. Experiential retail, like I mentioned, entertainment type venues, things that our kids can do. I know a lot of you have heard have said that over the years, you’re looking for more things to take your kids or allow your kids to go do to get them off their phones or off their video games and things like that. Entertainment type venues continue to grow, experiential type retail continues to grow, whether that’s pickleball or whatever the case may be. You’re gonna continue to see that. It’s a great amenity to a shopping center. And then food and beverage. Saw open open tables dining report of twenty twenty six said that the average American plans to dine out ten times a month. I don’t know where you fall. If you’re more than that, less than that. But certainly that means more brick and mortar retail is going to look like food and beverage and dining. Obviously, if it’s as a drive through, it’s gonna be very resilient, and certainly more sit down dining as well. And your local and your entrepreneurial businesses are the ones that are really winning in this space more than a lot of those national chains. The omnichannel leaders like we mentioned, Walmart, Target, you’ve probably seen that Amazon has abandoned Amazon Fresh and Amazon Go. You’re gonna see more Walmart type brands. Walmart, obviously, I’m about to talk about Aldi here in a second. Walmart is going to be opening more neighborhood market stores as well. So certainly be looking for that. Those specialty places, Ulta, Sephora, like I mentioned, there was what I mean mentioned that they’re another great fit for the junior box centers. And then certainly dollar stores that have not already gone into. If you’re a rural market that does not have some of those brands, or maybe saw some exits from Family Dollar over a year ago or a year ago, be looking to see some of these other brands come into those spaces. Who’s at risk? Those convenience stores like I mentioned, the Walmart, I mean the Walgreens, the CVS’s of the world, it’s just smaller footprint. Doesn’t mean they’re going away, but certainly they don’t need that ten thousand square feet. You’re going and buying a lot of your band aids and your sodas and chips and things like that at your grocery stores or at Walmart. You’re not spending those dollars nearly as much your day cool at a Walgreens, you’re buying at those places and that’s the reason that they’re shrinking their footprints. Those apparel stores, fashion is doing very well, clothing is doing very well, shoes are doing very well, but fast fashion is impacting some of those brands. And some brands are gonna continue to do very well and some are obviously going to fall by the wayside, which is just part of that retail churn. Tariff dependent brands, like was mentioned earlier with at home, if a lot of the product is coming from overseas, it’s something we need to see, or it’s probably going to have an impact and certainly something that we need to continue to monitor in the food and beverage space as well. Coffee is something we don’t grow in the United States. So we may see more of that going forward. So who is growing? What are the brands growing? I know this is what a lot of you wanted to see. Who are we expect to open one into fifty stores? Lacy mentioned Dick’s House of Sport, Walmart like I mentioned, and Walmart Neighborhood Market. I mentioned a lot of those junior box centers. Grocery is gonna continue to grow. Just look for smaller format grocers. Specialty grocer and discount grocer are the big growth categories. So the Aldi’s of the world, Walmart Neighborhood Markets of the world, and then the Sprouts, the Whole Foods, the Trader Joe’s. Those brands are doing very very well on opposite ends of the spectrum. But that’s where a lot of grocery is. We don’t go to the grocery store once. You know even if grocery store is buy online, pick up in store, or delivery from an actual brick and mortar location in your markets. Grocery continues to thrive. We talk about food and beverage. Know some of you have heard me say this last year and it kinda remains going into twenty twenty six. Chicken, pizza, and coffee are the big growth categories. Dutch Brothers is a huge one. Dutch Brothers, said at the end of in q four that their goal is to open two thousand and twenty nine stores by twenty twenty nine. And a lot of their competitors are similar numbers. They’re opening, I think, one and a half Dutch Brothers for every Starbucks. Right now, Starbucks is still opening stores though. Their CEO, Brian Nickel, is really trying to focus on the interior of Starbucks. Make them places where you wanna spend more time, where you wanna hang out, where younger people wanna hang out, kind of what your original experience with Starbucks was maybe twenty, fifteen years ago. Going back to that type of experience and trying to get the market in that way as well. Beverages, the Swig brands, if you haven’t heard of Swig, look them up, kind of what we call dirty soda. The margins on beverages are excellent. And then a lot of these brands like Tractor Supply, Rural King, you’re gonna continue to see experiential driven convenience stores like Wawa and Sheetz and Buc ee’s and a lot of those brands continue to grow as well. And then we’re seeing brands like McDonald’s, Starbucks, some of the classic players, they’re back to opening new locations. Aldi, if you haven’t seen Aldi, I mean, they’re a great example of everything we’ve talked about today. Their goal has been open eight hundred stores over the next five years. You know, they’re continuing to do that. They opened about two hundred stores last year. They’re certainly probably gonna be opening over another hundred stores this year. Last year, you probably saw they bought Southeastern Grocers, assumed a lot of those Harvey’s and Winn Dixie leases. They’re expanding into Colorado this year. They’re continuing to open West. They are a big growth category. They do new development build, but you’ve also seen them take some of these old Bed Bath and Beyonds. You’ve seen them take old Big Lots locations as well. So they’re acquiring brands, taking second gen space where it’s in a good location, and then finally, also assuming, you know, new developments as well. But really a big growth category. Target, you’ll continue to see have selective growth, Costco selective growth like we mentioned earlier. And this is a great snapshot of more of those brands. And certainly, as the months go on and as the weeks go on, we’re gonna know more about this, especially with the privately or the publicly traded companies as they come out and promote what their goals over the next six to eighteen months looks like going forward. Yeah, and we have a couple of questions that have been submitted here specific to Target, I know we’re going right up on time right now, but I will answer that real quickly and then anybody that asked a question we didn’t get to will follow-up with you directly afterwards. Target is in growth mode, which is great because they grew quite a bit last year, but prior to that, it was the great recession. Two thousand seven, two thousand eight, two thousand nine were their last stores and then they stopped, so they’re back. But the big part of Target is taking thirty thousand square feet, part of the center and making it a fulfillment center so you can do same day pickup on your groceries. And they’re also looking at how they can take the entrances and whether they need two entrances or one, how they’re gonna do rideshare drop off. They’re completely reconfiguring their parking lot. Another thing to hit on with Target is there was kind of this idea of a store within a store for a little while. So you see Sephora is currently in Kohl’s, so Ulta went into Target and Ulta has just recently announced that they’re actually pulling out of that strategy. So that’ll be interesting. If you’ve seen the Ulta inside the Target, that is going to go away. So it’s just a few things on Target, but we are seeing them continue to grow and they are going in secondary markets at this point, which is very, very positive. We love it when we see Walmart, Target, Costco, some of these big anchors that are growing. And I know we’re right up on time, so let’s wrap it up with a few final thoughts for each of you if you’re willing to hang with us for another minute or so. We hit on a lot of these things, it’s just really more of a recap. So number one, we’re gonna do rapid fire recap here. If you see a bankruptcy, that isn’t necessarily a bad thing, right? So figure out if it’s a liquidation or a restructuring within that bankruptcy and find out as much as you can, it’s a great property to market to new retailers really desiring to backfill those. Really lean in on the fact that the US population is moving more to secondary and tertiary markets and make that a part of your sales pitch. When you are marketing your community, what is your growth rate? Is it accurate? How many people are coming in from out of state because they can find a better quality of life in your community than their previous location that they were in. Everything is about experience. I know we’ve said that a million times, but think about collaboration you can have with your shopping center owners and anything you can do to incorporate activities that interact with the shopping centers. Don’t need to take all your activities to a separate isolated municipal facility if you can coordinate with your shopping center owners and do something with them so you can drive that traffic. On the food and beverage, really everything’s leaning into health and wellness across the board, so we’re seeing that with Ulta and Sephora. We’re also seeing that with the food side, and as we are really influenced by social media, then we’re buying a lot of products that these social media influencers are telling us to buy that are around health, wellness, anti aging. And also the GLP-1s have really changed the restaurant scene, believe it or not. So, there’s finally enough Americans on the GLP-1s that restaurants are reconsidering their portion size and they might start taking that to a smaller size. Then knowing that they need to offer things that are high protein going into health and wellness, see things like the weighted vest that’s so popular right now. And you’re gonna see people really start doing more staying at home and getting delivery because that’s also about a focus on sleep that is happening. So a lot of changes in the health and wellness space. So at the end of the day, what can you do is be retail ready, have your demographics, know your market, know your shopping centers. That’s certainly something we help with at Retail Strategies. We would love to help you get retail ready if you’re not already. For all of you that are clients that engaged with us today, thank you so much for your partnership and your loyalty. If you’re not a part of the Retail Strategies Network, we would love to bring you on board. Again, we always believe in just lifelong learning. We’re here to be a resource to you in whatever capacity that we can serve. So that’s a few recaps here. You will get the recording of this. You will get the slide deck. Thank you, Elliot, for always your excellent insights, and thank you to each of you as you go and serve your communities. And stay tuned. We have more webinars coming up. You can find those on our websites. If you’re on our email list, you will receive that. If you’re not on our email list and want to be, then please just let us know. I’m Lacy Beasley at Retail Strategies. Just shoot me an email and share that with our marketing team and we’ll make sure you’re on our distribution list in the future. Thank you so much. Yeah. I’ll just close, Dennis. I thought you had a great question about market share and really, you know, I really wanted to touch on that. How do you kind of tell your story? Basically Dennis’s question, if you can see it in the Q and A is talking about how there’s a lot of opportunity for his community. Retailers and food and beverage are looking for market share. Are they there if they don’t feel like they have it or that someone else is taking it, that it’s hard to get a new retailer to come to your community. Coming back to to Lacy’s point, lean in on data, lean in on your real estate, tell your story. If you’re not telling your story, leveraging data, leveraging real estate opportunity and leveraging also where dollars are leaving your market, not only with the dollars that are being captured within your market, but where those dollars are being spent elsewhere, I think that’s a great way to overcome that story. Because a lot of you, whether it’s because you’re in rural or in a low income area, you have a lot of consumer spending happening. It’s just being forced to be done elsewhere. I’m happy to expound further with you on a call or something like that. But if you don’t know who is telling your story, you’re leaving it up a chance that the wrong story is being told about your market or that no story at all is being told about your market. So know your landlords, know your tenant reps, know your brokers, know your real estate directors in your market and go out, build those relationships and leverage data and leverage opportunity to get those wins going forward. So I thought that was a great question and that can of wrap up I’m so glad that you took the time to answer that, Elliot. You’re absolutely right. Excellent. Any closing thoughts? No, thanks everybody. And I know some of you all had some other questions that we’ve run a little late. Feel free to reach out to us inforetelstrategies dot com. I’m Elliot. You can see two L’s, two T’s at retailstrategies dot com. And Lacy, we’d love to answer your questions as well. So feel free to connect with us and we’d love to talk further about your individual markets. All right. Thanks. You all have a great day. Thanks,