How remote workers have increased traffic and new uses at neighborhood centers
COVID-19 brought forth many changes in American society. Some were temporary, like wearing face masks, and some look like they will remain embedded in our lives for decades to come.
A LinkedIn study found that, in April of 2022, 20% of job postings offered remote-work opportunities. That was twice the share posted in January 2021. Pre-pandemic, only 3% to 5% of employers offered work-at-home options.
The effect that this incredible social shift has had on neighborhood centers has been profound. Center visitation has been increasingly activated throughout the day, and the shift has caused operators like us at Phillips Edison & Company to re-merchandise centers with new uses.
One such use is medical retail--or medtail as we call it at PECO--a fast-growing use in PECO’s Neighbor mix (our tenants), and we continue to see strong demand from this category. Urgent care, veterinary clinics, physical therapy, and dentists are all vying for spaces in our centers. Also, we are seeing demand from spas, stretch studios, and cryotherapy. What we’re observing now is a suburban population that wants access to these services closer to home as hybrid work continues. PECO’s neighborhood shopping centers are optimally located to serve those needs.
Looking at Placer.ai traffic data, we find that households make 1.6 visits a week to the grocery stores that drive our merchandise mix. Today our food and dining visits are expanded throughout all dayparts at our restaurant Neighbors. National restaurants including Wingstop, Starbucks, Chipotle, and Dave’s Hot Chicken are getting ahead of the suburban market trend, taking greater advantage of the growth available in the suburbs and secondary markets.
PECO owns and operates more than 300 centers nationwide and is one of retail real estate’s leaders in occupancy with a portfolio-wide rate of 97.4% as of the end of 2023. For center operators, this has been the best operating environment that we have seen in 20 years.
One big reason for this is the dramatic increase in the dependence that work-at-home suburbanites have on our centers. We’re witnessing a population that wants access to all their necessities closer to home.
The other big reason is the historic decline in construction of new retail space in nearly all markets nationwide. We’re asked all the time about when new supply will be coming on stream. We think it could be as long as seven to 10 years before we see retail construction return to the level it was two decades ago.
PECO’s national accounts team has solid relationships with national chains, however, and they do whatever they can to help tenants gain access to new markets. We deal with many retailers that are looking to add 100 or more stores a year, and our national accounts associates work diligently to accommodate them. In turn, many of these retail brands have been willing to modify their standard store footprints in order to secure spots in PECO’s highly trafficked centers.
PECO is dedicated to helping national retail brands meet their expansion goals, so we are constantly on the lookout for well-located suburban centers to acquire. Last year we invested $279M in new center purchases, and we are looking to acquire approximately $250M in assets in 2024. We are focused on acquiring centers anchored by the No. 1 or No. 2 grocers in the nation’s top 100 markets for centers that fit within our grocery-anchored, neighborhood shopping center strategy.
Migration shifts since the start of the pandemic, along with the shift toward hybrid work, have led to a suburban resurgence, impacting everything from retail to dining and benefiting PECO’s suburban market locations. We are currently seeing strong demand for our spaces and are positioned to grow and excel as we look ahead to the next five to 10 years.