Written by: David Lebovitz Over the past few years, real estate investors have constantly discussed the “death of retail” - put another way, as a greater share of consumer activity occurs online, the need for large, big-box retail properties has dwindled. Evidence of this dynamic is widespread, as 147 million square feet of U.S. retail property was closed in 2018. However, with core U.S. real estate sporting an above average valuation and vacancy rates in the industrial sector plumbing all-time lows, picking and choosing among sectors has become increasingly important. This dynamic has subsequently led some investors back to the retail space as they search for more robust returns.Although interest in the retail sector is coming back, it is important to acknowledge that the nature of these assets has changed quite a bit since the financial crisis. While once home to a plethora of shops and stores - and maybe the occasional food court - today’s most successful retail properties focus more on experiences than just the sale of goods. As shown in the chart below, leasing by general retail and apparel firms has declined, while on the other hand, activity has increased across health and fitness, food and beverage, and discount stores. There has also been increased interest in retail properties from co-working firms, which often times will establish co-working space in one part of the property, while simultaneously setting up a venue through which those who lease working space can sell their goods and services alongside other establishments. From a geographic standpoint, the most successful retail properties lie in close proximity to those areas characterized by robust rates of economic growth and tight labor markets.Given the changing nature of consumer preferences, value-add and opportunistic strategies are perhaps the best vehicles for accessing the turnaround in retail, as some sort of capital investment tends to be required to engineer a successful transition away from the old model. Furthermore, property selection is key, as it seems unlikely that the broader sector has found a bottom. At the end of the day, retail is not dead, but the sector is undergoing a massive shift. Invest accordingly. Related: What Do Potential Fed Cuts Mean for Emerging Markets?