Starbucks Chairman Says Retail Rents Will Fall, Plans To Continue Expanding Footprint

15 Mar

As landlords struggle to fill vacant storefronts and keep traffic and tenant morale high, Starbucks Executive Chairman Howard Schultz said the industry is about to enter a new normal when it comes to rental rates.

“We are at a major inflection point as landlords across the country will be forced, sooner than later, to permanently lower rent rates to adjust to the ‘new norm’ as a result of the acute shift [in consumer behavior] away from brick-and-mortar retailing to e-commerce,” Schultz wrote in a company memo, according to Yahoo.

After noticing the increasing number of empty storefronts in major metros across the U.S., Schultz recently predicted that landlords will soon be forced to lower rents in order to account for the shift to e-commerce, or risk holding on to vacant storefronts for undetermined periods of time, according to Yahoo Finance.

Foot traffic at regional malls and shopping centers has declined in recent years due to an excess of retail real estate and a shift in consumer buying habits in favor of the digital shopping experience. Yet, in many cases, rents have not been adjusted to account for the headwinds retailers are facing, Yahoo reports.

As an early adopter of this prediction, Starbucks has gotten a head start on expanding its brick-and-mortar stores with a particular focus on its premium Reserve brand. The coffee giant has opened 1,000 Reserve brand stores and plans to open between 20 and 30 Roasteries, which features an experiential, marketplace-style design. The first concept opened in Seattle Tuesday with stores in Milan and New York to follow shortly. Roasteries in Tokyo and Chicago will open by 2019.

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