Episode 9
In this edition of the Simon SumUp, Joshua discusses healthcare’s retail convergence, the changing role of the retail worker, and the outlook on interest rates.
THREE TAKEAWAYS
1) Healthcare’s Retail Convergence
The evolving healthcare sector is becoming ever more evident, particularly after CVS announced plans to convert 1,500 stores to focus on more health care services and less on retail.
Higher acuity care, traditionally provided in hospital settings, is a growing opportunity in the retail environment, particularly as baby boomers age.
Retail-based healthcare clinics have grown 47% in the past three years, according to new research from JLL. Additionally, the $3.5 trillion healthcare industry is estimated to increase by over 70 percent by 2027, according to the Centers for Medicare and Medicaid Services.
2) The Role of the Retail Worker
The retail industry is being radically reshaped by technology, and nobody feels that disruption more starkly than 16 million American shelf stockers, salespeople, cashiers, and other workers.
But while it’s a concern. It’s also an opportunity. As automation and consumer preferences change, so will the roles of the retail workforce.
Walmart, for example, has added 35,000 new roles that didn’t exist 2 years ago, including personal shoppers for online grocery pickup and delivery. These new roles involve three weeks of intensive training to learn how to pick the best product and make smart substitutions where needed.
How fast roles will evolve is likely to depend on factors such as the pace of online shopping, the speed of technological progress, and shifts in the minimum wage. But either way, researchers believe up to 60% of retail jobs will involve new roles in the next 10 years.
3) Interest Rates and CRE Sales Volume
After originally planning to raise interest rates two to three times in 2019, the Fed has tapered that outlook to a more neutral position.
The June 19th meeting resulted in no change to the current interest rate and presented some mixed opinions about whether we may even see rates cut because of an economic slowdown and growing pressure from the White House. Nearly half the Fed officials contributing to the dot plot last week expect to see rates cut later this year.
In addition, the Fed decision resulted in the yield on the benchmark 10-year U.S. Treasury note to slide to 2.023 percent, its lowest close since November 8, 2016.
So, despite signs of a slight economic slowdown, underlying property fundamentals remain strong, the cost of capital remains low, and investors still have a lot of capital that needs to be deployed in the commercial real estate sector.
