Retail 2025: What’s Winning, What’s Dead, and What’s Next

Aviva (00:00)
week's listener of the week is Tim Page 3. Tim, thank you so much for leaving us a five star review. And for those of you listening, if you leave us a five star or a four star or a three star review below, you might be next week's listener of the week. I just changed my intro to adding that you could add a four or a three or a two star or a one, if that's how you feel. And you might still be the listener of the week. Anyway.

This week on Commercial Real Estate Secrets, we have Brittany Megrath Brittany is the owner and principal broker at M Square Commercial. Brittany, thank you for being on the show today.

brittany (00:38)
Thank you for having me Aviva. I'm excited.

Aviva (00:41)
Yeah, so

for the listeners, tell me about your experience. I think it's really interesting the niche you work in. Tell everybody about your experience in commercial real estate.

brittany (00:53)
Sure. So we have, I guess, evolved to specialize in retail sites for ground up development, primarily in the single tenant space. So majority of our clients are developers, majority are looking for land, or homes that can be redeveloped into commercial. But essentially, are building or they are building ground up retail for development, majority single tenant.

some maybe two tenant pads or something along those lines.

Aviva (01:26)
So my first question has to be, is retail dead? And if it is dead, what are you doing?

brittany (01:33)
No, retail is not dead. I'm sure there are tons of people that are still going to quick service restaurants. So these types of retailers that are freestanding concepts are your service oriented retailers primarily. So these are your fast food restaurants, your car washes, your oil changes. These are sites and businesses that are not sold on Amazon. So not dead and pay good rents.

Hahaha

Aviva (02:03)
I find the overwhelming response of people when I ask them is retail dead. It's very similar to yours. In fact, retail seems to be alive and thriving.

brittany (02:05)
Mm-hmm.

Mm-hmm.

Mm-hmm.

Aviva (02:17)
I think, I kind of feel like the pad sites that you're referring to, the drive-ins or drive-throughs, right? This is like retail 2.0, elevating the retail experience and elevating rents along the way. But what are you seeing there in terms of trends?

brittany (02:38)
Yeah, so these are concepts, these concepts that like we're working on can cast a wide net. So you've got your C-stores, some of these could be gas stations that are expanding, you know, for development, all throw them into the retail category, although they're automotive or fuel C-store convenience. You know, you've also got your quick service restaurants, your car wash, your oil change. I mean, these businesses are

here to stay, essentially, and they are growing and rapidly expanding. And some of them, when they sign these development agreements with the franchisor, they are required to expand. So there are different trends happening between different tenants, and I'll say probably the operators behind the concepts. Some corporate

Locations are struggling, you'll see, with build-to-suit type deals. So they cannot execute on high rents that a developer would charge to build for them. And so therefore, they're taking a different approach and really building themselves so that they can control their own costs. They're buying their own land, they're doing their own development so that they can maintain lower rents.

Some of these other concepts that are able to source and expand through built-to-suits through third-party developers, they're going for rapid expansion. They're growing through a developer because it'll allow them to grow quicker. It'll also allow them to allocate capital differently. So instead of allocating capital to dirt, they can really allocate capital to the operations of their business. So that allows them to grow a little bit differently than if they were going to do everything themselves.

So it's kind of a case by case basis, if you will. But certain franchisees, mean, they're signing agreements, they're buying rights to units. And when they sign that document, it says, all right, you're going to have 10 stores open in the next three years or five years or whatever that is. And so they've got to get started and they've got to figure out a way to make the economics work, essentially.

Aviva (04:45)
That is fascinating. Let me ask you, is development dead? Because our debt markets are haywire right now. What in the world's going on?

brittany (04:52)
That's a good question.

Yeah, yeah.

It's interesting. mean, costs. Well, and now, you know, no one really knows what's happening because tariffs one day are something and tariffs one day, the next day are something different. And so I do feel like we're in a holding pattern where people don't really know what to do or how to address certain issues because they keep changing, essentially.

Aviva (05:11)
Right.

brittany (05:25)
But in general, I think it's going to change the way leases come together, essentially. mean, the way that we put costs together, the way that developers put costs together, and then the way that they pass it through to the tenant is going to come together a little bit differently because there are more unknown factors. So there's going to be more contingencies and budgets. It's going to start to look a little bit differently, especially if we can't figure out.

Aviva (05:31)
Hmm.

brittany (05:54)
you know, what costs what or what tariffs are on what products and so, you know, I mean, if we don't know how much things cost, it's going to keep the budget in sort of a unknown place. More so than usual.

Aviva (06:11)
was at a commercial real estate outlook CE conference. And my big takeaway was costs are going haywire, right? Interest rates, inflation, insurance, property taxes, construction, right? And then this like new revolving element of tariffs.

brittany (06:15)
⁓ uh-huh.

Mm-hmm.

Mm-hmm.

Aviva (06:33)
And they were like, the only thing that can reasonably adjust in this environment is the price of the dirt. And that just slapped me over my face. Not that I hadn't, not that, you know, as someone who operates in the market every single day, that wasn't clearly the case, right? Understanding the numbers that we're seeing transact right now, but.

brittany (06:46)
Yeah.

Mm-hmm.

Aviva (07:03)
That made me really think about, you know, the position as a person who owns dirt. And if you need to sell dirt, the reality of today. So it's, yeah.

brittany (07:15)
It's a land is

your biggest negotiating item. It's the first thing, right? Like, well, this is all hard to say right now, I feel like because of all the tariffs and construction costs and it's going to turn a lot of things. It's turning a lot of things into an unknown that previously you could probably say were it is what it is like the cost to build your building is what it is. Well, now if there is 25 % tariffs on your steel.

That might change. But in general, typically, your building costs what it costs to build, right? Your due diligence costs what it costs to perform. Your big negotiating item in any budget is your land. And so, and that makes a huge difference. If you can get a pad for a million dollars or if you can get a pad for $500, I mean, that is going to either set you up for success or set you up for failure as you travel through the rest of the process.

And you hope that you don't have to re-trade on the land later, which maybe more people will be doing as they... as costs, yeah. I know.

Aviva (08:19)
Oi! You have to say the R word. We don't say the R word. No, just kidding. We say the R word.

We don't have a choice.

brittany (08:30)
Yeah,

yeah, it's messy out there right now. And it's so funny because in the last two days, I've had a couple of conversations around this topic, one in regard to shop space lease. So leases that are in retail shopping centers and annual escalations. So, you know, back when COVID hit and inflation was, you know, 5 % north of 5%.

Aviva (08:34)
you

Hmm.

brittany (08:57)
everyone that was locked in at a 3 % escalation, the landlords were upset because they could have gotten more a little bit. And so then you saw in amendments and new leases, people adding CPI, you know, to some of those escalations so that they could maybe squeeze out a little bit more. In general, setting your annual escalations has always been a nice like, depending on how many properties you have,

It's not a lot of work. It's a little more plug and play. CPI, there's going to be someone that has to oversee the process a little bit more and make sure that they're, you know, sort of calculating those factors into every lease that has that language. And that could be a lot of leases for certain landlords. But now with all of this discussion coming into the construction space and the development space and rent and costs,

Aviva (09:40)
Hmm.

brittany (09:54)
Now it's, you know, for the build to suit deals, do you set rent when you're there's so much fluctuation in your costs or do you set your cap and kind of keep that rent adjustable depending on cost as long as your cap is set at a certain place. So it's kind of, I think there are a lot of active conversations happening right now and everyone's trying to protect themselves in the best way possible.

Aviva (10:24)
Ain't that the truth?

brittany (10:26)
Yeah, no one wants to lose their shirt. Yeah.

Aviva (10:28)
Or worse, their head. Okay,

well, now I think it's pertinent to bring up where you live, because I think the environment that is Las Vegas is a really interesting one, specifically from a retail and pad site. Like, it's so fascinating. Vegas is this microcosm of tourism within

brittany (10:44)
Hmm.

Aviva (10:56)
Right? I don't know how long the strip is. We'll say a couple square miles, but then you have a whole world past the strip and the people, you know, and the economy flourishes. Tell me what it's, what have you seen in Las Vegas, Nevada change with this explosion of Vegas?

brittany (11:17)
Yeah, Las Vegas has gone from a small mom and pop type town to a large market that now attracts like institutional level investment. So Vegas used to be a small playground. There were probably, you know, five to 10 guys that all played around in dirt. They were putting their working on the side.

putting little groups together, family and friends, and buying dirt for $5,000. know, I mean, just crazy low numbers that now you look back and you're like, wow, you bought that 30 years ago and it's on the corner of Maine and Maine, and now it's worth $3 million. I mean, it's just one of those markets that has seen exponential growth and exponential attraction from outside investors that it's really become like,

Aviva (11:48)
you

brittany (12:13)
very hard for new, like the barrier to entry is very high. So if you are a new player or a mom and pop player, it is extremely hard to get into now at the level that it is. And, you know, it's just hard to get into the investment game or commercial real estate game or even residential real estate game for the most part. mean, we've priced out all of our new home buyers, starter home buyers. I mean, it's, we're just, it's nuts.

Aviva (12:42)
The concept of it was a mom and pop and then mom and pop couldn't pay the taxes, no, or, you know, retired. And then big money came in is something I think it's a huge trend we're seeing right now. Another great example of where that's happening is Aspen. Aspen used to be a mountain town for millionaires. Then it became a corporate headquarters for billionaires.

brittany (12:57)
Mm-hmm.

Hmm, interesting.

Aviva (13:10)
Right? And mom and pops can't operate there. It's the same thing that happened to Vegas. And, you know, we see it in, it's just an interesting, in my opinion, like pendulum swing that we're seeing. And I hope it swings back because I believe small business is the heart of America. And I don't know, there has to be some type of balance.

brittany (13:31)
It is, yeah, it's been an interesting city to see grow. I'll say from the personal standpoint, now having a family here in Vegas, it has changed for the better in that aspect because there are more things to do. Like kids have more opportunities to do versus like I'm from Vegas, I was born here, growing up there was nothing to

Aviva (13:47)
Wow.

brittany (13:58)
You know, I mean, there was just wasn't it was the hospitality, the strip and, hopefully your kids didn't get in trouble as they like grew up, you know, but now like my kids, we've got, AAA baseball, we've got AAA hockey. There's the golden Knights. There's the Raiders. Like there is those kinds of family activities here. Like athletics has really been a big draw here and it's going to continue to be a big draw here.

Aviva (13:58)
Wow.

Yeah.

brittany (14:23)
and that is going to continue to drive a ton of growth. The downside to Vegas is that we still haven't really been able to diversify our workforce. And so if you are, I think a lot of people have a lot of success when they move to Vegas and they can hold their job in another market.

Aviva (14:34)
Hmm.

Interesting.

It reminds me I had a friend who had to live in the Luxor.

brittany (14:47)
Yeah

Yeah

Aviva (14:51)
And he was like, some days I just don't even see the sun.

brittany (14:57)
They don't want you to know what time it is.

Aviva (14:57)
you

He was doing

a residency for a show and living in the Luxor is hilarious. Anyway, I'm sorry. That was it was just.

brittany (15:08)
No, when I originally,

I moved to Nashville, I was with the ballet there and I used to get questions like, so there's the MGM and then your house is like right next to, like how does that work? And you're like, no, no. Once you get off the strip, it's really boring. It's shopping centers, it's mass suburban, big box, very low level.

Yeah, which is also trying to change. they're trying to go increase density. As you know, we're running out of land.

Aviva (15:44)
I'm sure they...

Just gotta hold on. The price will go up if you just don't sell it. But no, we're all, but if you need to sell, call us. Okay, Brittany, for your last question, on the Commercial Real Estate Secrets podcast, what is a commercial real estate secret you can share with the listeners?

brittany (15:54)
Yeah. Yeah, yeah, well that's true. Yeah.

Mm.

I would say my secret would be to hustle. I think that a lot of people maybe look at it as, oh, I've got lots of freedom. You know, I can make money and I can work when I want to and have this like laissez-faire approach to commercial real estate. And maybe you can have that. Sure. You know, no one is probably going to come after you because you didn't, you know, show up at the office at a certain time. But

Aviva (16:23)
Hmm.

brittany (16:46)
I think in order to have good success or great success as a commercial real estate broker, you are hustling. You are the first one into the office. You are making the calls. You are following up. You are persistent. And you are continuously talking to everyone. I mean, all the time. it's, I think it's, hustle is the secret.

Aviva (16:53)
Hmm.

Yes, no, I agree wholeheartedly. Some people just have it and some people don't, you know? No, no, yeah, just like man, you know, as you get older, you look at the people around you, you're like, yep, just very.

brittany (17:12)
Yeah. Mm-hmm. Yep. Yeah. It's the same hustle on the street, hustle in the commercial real estate.

Aviva (17:34)
defined area of the hustlers. And it's okay, not everybody has to be a hustler, but to be a great commercial real estate broker, urgency is big, big and so, we're like hiring brokers and talking about, are key, you know.

brittany (17:47)
Yeah. Yeah. Agree.

Aviva (18:00)
attributes that we need to see an urgency we keep talking about. So stay urgent. Keep hustling. Brittany, where can the listeners find you, follow you, contact you, etc.

brittany (18:12)
Yes, you can find me on Instagram. I've got a personal account and also a business account. Britt Megrath is my personal account and M Square Commercial is my business account. And we're also on LinkedIn, both personally and under the business as well, M Square Commercial. And you can...

find me all over the place really. Those two platforms are where I'm most active.

Aviva (18:41)
Brittany, thank you so much for being on the show and everybody listening. We'll see you next week.