Industrial brick-and-mortar real estate could have had a nasty pandemic yr (or two) with lockdowns and consumers hunkering down across the globe. But now that so many individuals are coming out for quarantine, the demand for travel, in-person shopping and the possibility to explore the world IRL has never been stronger. 

Retailers and types are left competing — and sometimes paying a premium — for industrial real estate in all the large markets, and in some small markets, too. 

“It’s supply and demand. There’s absolute confidence that brands are very much in need of continued acceleration within the brick-and-mortar channel to assist them create that omnichannel strategy,” Amish Tolia, cofounder and co-chief executive officer of Leap, told WWD. His firm supports e-commerce brands as they make the leap from digital to physical storefronts. “Whether you’re in big cities, smaller cities, street-format, mall format, there’s numerous excitement for constructing and scaling the brick-and-mortar presence across the board.” 

That features all the foremost retail shopping markets where space stays challenged, resembling Recent York, South Florida, Los Angeles and Chicago’s South Loop.

Some brands are doubling down on their omnichannel strategy by expanding their fleets. Eyewear brand Warby Parker plans to expand its store count with roughly two dozen latest stores by the top of the fiscal yr, despite massive losses in probably the most recent quarter. 

“The largest barriers to buy from Warby Parker include not having a store nearby,” Neil Blumenthal, Warby cofounder and co-CEO, told analysts in August. 

Recent markets are also emerging. Luxury players are moving to Williamsburg, Brooklyn, including Hermes. Gucci recently arrange shop in Detroit. Sea Bags, a sailboat bag and accessories brand, has also opened stores in Michigan within the last yr.

“The wonder is that not every brand must be in SoHo,” Tolia said. “There’s plenty more opportunity on the market where brands don’t necessarily need to compete with three or 4 other retailers for a specific space. That’s what we’re starting to see, some brands starting to think a little bit bit more holistically and creatively about other markets and other locations where they’ll actually drive penetration and take share.” 

A few of those emerging markets may include places like Dallas, Houston and Austin, Texas, in addition to Arizona. Warm locations that saw a spike in migration through the pandemic. Lafayette 148, for instance, recently opened its twenty seventh freestanding store, a 1,454-square-foot boutique in Houston, surrounded by the likes of Celine, Chanel and Tom Ford.

“You’re also going to see more of that in places like Greenwich, Connecticut, or some parts of Long Island, or parts of Michigan, or parts of Columbus, Ohio,” Tolia said. “You’re going to see brands exploring those areas — areas that are usually not the tier-one markets. [But] they’ve population sizes of some 5 million folks and are residential in nature.”

He explained that the client profile in those markets is ripe for growth: high household incomes in residential areas. The suburban settings mean there are likely fewer distractions and more reasons to buy.  

“It will be an exploratory thing for a brand [to set up shop in one of those locations], but they’ll take share and construct their penetration in that market with a really strong consumer,” Tolia said.  

Retailers and landlords could also be betting big on these physical spaces. But many wonder if the momentum will last. The housing and rental markets are starting to point out signs of softening in August, thanks partially to the Fed’s continued rate of interest hikes. Inflation, meanwhile, stays at a four-decade high, which suggests many consumers are tightening their budgets and eliminating discretionary items — and retailers are feeling the pinch. And if consumers are spending less on fashion products for the foreseeable future, there could also be less need for stores within the months and years ahead. 

Thus far though, Tolia said his firm has not seen much of a slowdown. 

“If the pandemic taught us one thing, it’s that we’re human beings; we would like to be outdoors. We would like to be socializing in person with people, whether that’s through live events, live shows or doing commerce, doing business in person,” he explained. “Consumers are going to proceed to buy each online and offline. But e-commerce has to work in concert with [brick-and-mortar] retail for a brand to have the ability to win out over the long run. 

“This notion of a retail apocalypse is a little bit bit misleading, because the ability of retail has never left; it’s all the time been there,” Tolia continued. “We sort of give it some thought because the rebirth of retail — how consumer brands are readdressing the retail channel to satisfy their consumers where they’re. The best way we take into consideration this next iteration of the retail brick-and-mortar ecosystem is from a perspective of being a bit more asset light, not having to sign long-term leases, not having to stock stores with tens of 1000’s of units, more inventory light [and] doing design and constructing programs which are significantly less capex. So long as those component parts can exist, the thought of being on a street location in Recent York City or being in a mall location remains to be very viable and exciting for retailers across the board.”