Return-To-Office and Western Migration Gave Retail Reasons for Optimism in 2024

A recent virtual event titled “Shaping 2025: Key Retail and Real Estate Trends from 2024 and Holiday Forecasts,” hosted by Commercial Observer Partner Insights and presented by Placer.ai, took place several days after ICSC NY. 

Given that, it was unsurprising to find that the event began with something of a back-to-basics orientation for the retail sector.

“My biggest takeaway from ICSC was more emphasis than typical on, who is the consumer, and what do they want? Give them what they want and you’ll do well,” said Ben Witten, Head of Real Estate at Placer.ai, who hosted the event in conversation with Brandon Isner, head of research and retail capital markets at Newmark. 

With this overarching consideration in mind, Witten turned the conversation to the state of retail as affected by the return-to-office movement, which has picked up steam this year with a momentum unseen since before the pandemic.

“Retail space is unlike any other commercial real estate space because it’s the only space where we choose to spend our spare time,” said Isner. “We have to live somewhere and work somewhere, but we don’t have to go to this store. So you really have to pay attention to the consumer. It has to be on your mind all the time because you have to be offering something, whether it’s an amazing experience, the lowest prices, or the best product.”

Isner mentioned that both tourist and business districts in New York are bustling these days, a positive sign for retail recovery. Witten backed this up with a graph showing that in November 2024, New York office building visits were at 86.2 percent of those from November 2019, considerably higher than most major markets, including Miami, Atlanta, Dallas, Los Angeles, Chicago, and San Francisco.   

Comparing office visitation over the past four Novembers nationwide, Witten suggests we might even have reached a “new normal” as, after just 39.1 percent office visitations in November 2021, the next two years saw steep increases before leveling off, with even a slight downturn, this year.

Turning the discussion to covid-era migration throughout the U.S., the pair discussed how a mass influx of people into western states like Idaho, Nevada and Montana has been ongoing, and has led to a shift in regional retail trends. 

“Suburban retail assets have become tighter in availability than urban ones,” said Isner. “For years before that, urban was always tighter. But that changed about two years ago. It continues, and it shows not just the migration, but the quality of migration.”

This has also led to changes in how and where certain retailers are seeking to set up shop.

“We’ve seen a lot of retail and restaurant concepts try to follow those trends,” said Isner. “Ten years ago it might have been unheard of for a hot restaurant concept to locate in a strip center, but that happens now.”

That’s because, as Isner points out, given the rise in popularity of the western states, the risk for developers and investors is low.

“Idaho continues to be a place where people move, and it’s obviously going to be good for retail fundamentals. Eventually money will follow for investments,” said Isner. “There are few investments that are more solid than the grocery-anchored retail center, and the nice thing about that asset class is that they can be anywhere. You don’t have to look on the coasts. Every town with 50,000 people or more has a great grocery-anchored retail center, so you can spread risk across markets. It’s really an intriguing opportunity.”

Isner added that the growing economic and demographic strength of less-populated locales is making them a strong investment choice even over more conventionally-revered business regions.

“If you look at capital markets activity in prime markets versus secondary markets, or even smaller markets than that, generally the smaller markets have outperformed, whereas the prime markets might be down from activity last year,” said Isner. “There are a lot of smaller markets that are near or above where they were year-to-date last year. I think that the money will start to follow. Real estate investment is always looking for the best but also safe opportunities. There’s a lot to like about those northwest states, and I think that could eventually pull back to the Midwest as well.”

In these areas of the country, a blend of in-migration, new retail, and other factors has combined to create environments that are increasingly perceived as offering more prosperous and beneficial living and business situations for all — and this success is building on itself exponentially.

“As you have more people working there, you have more and more tech talent moving into markets like Boise,” said Witten, who pointed out that the city’s GDP growth over the past five years is more than double the national average. “Income growth is there, consumption is there, and I think ultimately, capital at some level will likely follow as that builds momentum.”

Witten noted that the impact can be felt at local Walmarts, which often serve as a sort of national barometer for the health of a region.

“If you look at Walmarts in Idaho, they’ve consistently outperformed Walmarts nationwide on year-over-year trends in visitation,” said Witten. 

Circling back to the beginning of the discussion, Isner notes that many of these changes have been partially driven by the recent data revolution, which provides retailers with infinitely more information on customers and their shopping and dining preferences than they ever had access to before.

“It’s not a time where retailers have to guess,” said Isner. “They can follow trends, and — not for restaurants, but for other retailers — they can look at their e-commerce businesses and see if they’ve had a rise in their sales somewhere and say, hey, maybe we should open a store there. So those openings can be more calculated.”