Bold? Maybe. Right? We Will See!

My 5 Bold Predictions for 2025

I may be right...I may be wrong, but here is what I see as possibilities for #CRE, #Retail, and the #Consumer in 2025.

Social Selling will be huge until it isn't

The impact that social selling has on retail is immense and growing, but so is the backlash around social media. With state regulations, the U.S. push against TikTok, the attempts to limit cellphones in classrooms, and more, #GenZ (the largest consumer of social selling, will start seeing headwinds against this trendy way to find and buy products. Retail Media Networks will combat some of this, but social selling may be in for a rougher 2025 than expected.

Debt will FINALLY catch up to some of the Consumer Segments

GenZ & younger #Millennials have been continuing to use debt to absorb their lifestyle spending. With student debt, BNPL (buy now, pay later), and the somewhat lasting impact of inflation, this spending simply cannot continue.

A steady job market and salaries rising faster than inflation help, but debt loads will reach a tipping point eventually...or will it? I think so, but not dramatically and to the point that spending takes a nose dive. Keep an eye on #GenX and #Boomers who have more financial security and will be needed to keep the economy going.

Retail supply will remain constrained and retailers will look to continue consolidating locations and shrinking footprints

Maybe not a bold statement, but it seems that continued optimism from retail real estate pundits doesn't fully "jive" with how and where retailers are going to expand (very limited supply and pipeline) and the consumer's evolving preferences to online convenience and easy returns and pickups also is having an impact.

Grocery anchored and strip centers will see increased demand as retailers focus on meeting evolving consumer patterns (plus grocery-anchored seems to be resistant to just about anything these days!). Look for several mall retailers to continue the trend to look outside the malls as well...for both relocation and new stores.

Current valuation divergence will end

The large bid-ask spread in CRE will narrow substantially in 2025. Since mid-2022, the bid-ask spread has been W-I-D-E. Closing the public-private cap rate divergence has started to happen and will continue in 2025. Combine this with cap rate declines and lower cost of debt capital (let's go Fed!) and we have ourselves the perfect formula for noticeably higher transaction volumes in 2025.

AI will continue to impact retail and #CRE, but not as a "Silver Bullet"

AI will definitely help retail as personalized experiences will continue to be holistically defined with AI as the centerpiece. This, along with the obvious and continuous impacts on supply chain, last-mile, construction and data-based decision making, 2025 should see AI continue to mainstream in the retail landscape. HOWEVER, I continue to think omnichannel is overrated and its more important to be where your customer wants to transact. Thus AI's impact on consumer seamlessness of transaction will be a wild card and separate the haves and the have-nots.

From a CRE perspective, nothing replaces local market knowledge. AI will impact CRE but from a continued drive towards efficiency, both in processing and obtaining information. It will not be the key driver for site selection, optimization, and transactions...only an aid. Other impacts for CRE will be more AI driven targeted marketing, lease extraction, LOI creation, etc where repetition and personalization efficiencies will become noticable.

IN THE NEWS

Physical Stores Become Part of Reverse Logistics for Retail

"The stores as return locations are convenient for customers. The retail chains save on return costs and see greater foot traffic and even in-store sales."

Whole Foods Tries Out a Small-Format Concept Again Called the Daily Shop. Here’s Why It Will Work This Time

"The Daily Shop locations are part of a broader initiative by supermarkets to relocate their operations into smaller facilities in an attempt to attract “fill-in shoppers,” or customers who visit the store frequently but buy fewer things."

Why grocery stores are starting to look like quick-service restaurants

"The lines between grocery stores, convenience stores, and QSRs are blurring, driven by changing consumer preferences and industry competition. This is not just a passing trend—it's a seismic shift in how we eat and shop."

Almost 30% of U.S. drugstores were shuttered within a decade. Here’s why

"The study found that more than 29% of the nearly 89,000 retail U.S. pharmacies that operated between 2010 and 2020 had closed by 2021. That amounts to more than 26,000 stores."

Retail real estate's map of the future

"Class A retail space has never been harder to get. Fast-expanding brands are shrinking their standard footprints to fit into second-generation space and are venturing into secondary markets. New construction is at a standstill. Rents are rising."

NOSTALGIC RETAILER SPOTLIGHT: FOTOMAT

I created a whole series on nostalgic retail in previous LinkedIn posts. Want to see the entire series, or any you missed, click HERE.

This is a sneak preview of Part 3 of my Nostalgic Retail Series. The first up will be Fotomat.

Fotomat was a retail chain of drive-thru kiosks that handled photo development and sold a limited supply of flim and photo accessories.

Founded by Preston Fleet, the first location opened in Point Loma, California in the early 1960's. At its peak, over 4,000 Fotomats filled shopping center parking lots around the country to provide a convenient, overnight way to have your photos developed (at least convenient at the time!).

Fotomat had both franchise and company-owned locations and constant disputes over territories created a very litigious relationship between the company and its franchisees.

The company was sold to Konica in 1986 and again to Viewpoint (a computer graphics software company) in 2002.

"In addition to photo developing, Fotomat was one of the first companies to offer movies for rent on videocassette—a new concept then—starting in December 1979. Customers would browse through a small catalog, call a number and order the movie or movies of their choice. The following day, the customer would pick up the cassette at the Fotomat kiosk of their choice. The rental cost was $12 per title (equivalent to $50 in 2023) and the customer could keep it for five days. The price was later reduced to $9.95 for a five-day rental. The service was called "Fotomat Drive-Thru Movies."" [Wikipedia]

As most know, overnight photo development became obsolete in the 1980s with the launch of one-hour photo locations and eventually digital cameras. To meet this changing landscape, Fotomat tries its hand at digital image processing at Fotomat.com until it ceased operations in late 2009.

Some of the Fotomat kiosks were converted to drive-thru coffee kiosks and other uses. This 2017 post on the Messy Nessy website shows great photos of "What became of America's Drive-Thru Fotomat?"