Now Trending: As The Crystal Ball Drops

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It might not feel like it to the large swath of the country that’s been enjoying some very un-winter-like mild temperatures, but December is drawing to a close, and it’s just about time to close the book on 2015. While there’s understandably a great deal of interest and close attention being paid to what the final 2015 holiday shopping season numbers look like, it’s also time to flip our mental calendars over and take a thoughtful look at what might be in store for the year ahead. Will 2016 turn out to be a boom, a bust, or something in between for brick-and-mortar retailers?



Any 2016 projections need to start with 2015, which has been a tepid year at best for the industry. It hasn’t been horrible, but it hasn’t been great, either. And while that might not sound like the most inspiring outcome, it’s worth paying attention to, because it looks like that the same general trend will continue into 2016.



To get a better sense about why that might be the case, and what is on tap for brick-and-mortar retail in 2016, let’s break it down and take a closer look at what I see as next year’s likely positives, negatives and unknowns.



First, the good news. There are plenty of reasons for optimism, both in terms of the industry itself and with respect to the overall economic outlook. Employment has been improving and will likely still maintain or trend up, and it looks like consumers will continue to see favorable numbers at the pumps, as there’s little reason to believe that gas prices will be going up anytime soon. I like the fact that we are starting to see more online retailers moving into brick and mortar, and I’m encouraged by the continuing trend for larger numbers of international retailers opening up shop in the U.S. There are a number of prominent international names that are either already here, or will continue to keep a close eye on the U.S. marketplace.



Another trend to watch in 2016 is one that I view as extremely beneficial: continuing efforts on the part of owners and developers to integrate more diverse and appealing dining and entertainment options into malls and larger centers. From diverse restaurant offerings and high-end theaters to less conventional diversions such as bowling alleys and go-kart facilities, entertainment looms larger. And that’s important, particularly at a time when shoppers have more options than ever before, and online and mobile sales continue to creep up. The more that regional malls can up the ante on the experiential quotient, the better they will be able to carve out a defining space for themselves in an increasingly diverse retail landscape. In fact, it is not just dining and entertainment that are showing up in more significant ways in larger centers: nontraditional mall tenants in the commodity and convenience space are more common, with post offices, grocery stores and big names like Target and Costco adding new offerings for mall visitors. Gyms and fitness facilities (which really qualify as both entertainment and commodity/convenience) are a particularly popular new addition to many malls as well.



That seems like a substantive list of positives–and it is. In contrast there are really only a couple of significant negative factors on the other side of the scale for 2016. The problem is, they carry a lot of weight. Perhaps the biggest concern for brick and mortar in 2016 is the continuing competition from the popularity of online and mobile shopping and the rise of “omnichannel” retailing. The consumer’s dollar is being distributed over multiple distribution channels, and even those retailers that are able to skillfully navigate this brave new retail world will find their brick-and-mortar sales inevitably watered down. The other big issue is the fact that, despite an economy that has been slowly trending in a positive direction for some time now, consumer confidence is still lagging. This is likely a reflection of the stagnant-to-slow wage growth that has lagged behind other economic metrics – and perhaps attributable to the fact that larger amounts of people don’t feel like they have the job security they used to.



The big question mark remains the unknowns–those unpredictable wild cards that can throw even the most thoughtful predictions for a loop. Perhaps the biggest of those is security, with the threat of terrorism and other high-profile violence always a concern for an industry that relies on people being comfortable and enthusiastic about getting out and spending time in public places. Even a minor terrorist incident in a mall or public place could have dramatic and perhaps catastrophic consequences for both the industry and the economy. Another unknown is the uncertainty that comes with an increasingly interconnected and fragile global economy. At a time when a political or economic crisis half a world away can have a significant impact on the U.S. economy, it’s difficult to ever feel wholly secure. 2016 is also a presidential election year, something that tends to leave not only consumers feeling unsure, but Wall Street nervous, as well. Wall Street doesn’t like uncertainty, and the next election looks to have more than its share. Ironically, it’s the unknowns that might end up playing the most important role of all in 2016. And for an industry that prides itself on knowing what’s around the next bend in the road that might be the most worrisome prediction of all.

Jeff Green, president and CEO of Jeff Green Partners, combines more than 30 years of retail industry experience to provide comprehensive consulting services to national retailers, developers, shopping centers and health care facilities. The firm specializes in shopping center feasibility, distressed center repositioning, retail real estate planning and investing, medical retail consulting, retail expansion planning, location analysis, commercial land use and urban redevelopment. To learn more, visit www.jeffgreenpartners.com or connect with Jeff at [email protected].