RETAIL IN THE "OPENING" ECONOMY
Written by: Grant Chaney
Grant Chaney’s primary role at Colliers is assisting and consulting commercial real estate owners with the valuation of properties, performing in-depth analysis on investment scenarios, and representation in the sale of commercial investment properties. Prior to his current position, Grant was the analyst for Colliers Columbus. Having a background in research and analysis enables him to bring a unique skill set to his team and clients’ portfolio. Keep reading for Grant’s take on the current state of the retail market and the future of investment sales.
The Current State of Retail in the U.S.
The shutdown has certainly been a struggle for businesses of all types and sizes. This wasn’t something anyone predicted and, as such, there has been some irreparable damage. Fortunately, government stimulus coupled with many businesses’ ability to operate on a limited basis has made a modest recovery possible.
As states begin to open this week across the U.S., the country waits to see what medical impact the reopening may create. In the world of commercial real estate, the country waits to see if the customers will return and how quickly.
Initial reports show that results vary by market but the population, at least in part, is ready to resume some level of normalcy. States that have reopened experienced traffic at businesses ranging from restaurants to hair salons, with some reporting patrons lining up outside, especially where restrictions have been put in place to maintain social distancing. While it’s still too early to tell what percentage of the population will embrace the reopening, it’s clear that there is a demand for it.
The Biggest Change to the Retail Industry
While e-commerce has been influencing retail for a decade, tenants’ implementation of curbside pickup struggled to take off until now. Some retailers, especially those with strong millennial bases, adopted these strategies with varying degrees of success for the last few years but it never became a principal driver of revenue. However, over the last two months, there’s been a massive surge in demand for this option from customers who don’t want to wait for shipping but can’t safely or effectively shop in stores. It’s too soon to tell but I wonder if it’s not e-commerce or brick and mortar that take over the retail sector, but rather the combination of both.
The Future Landscape of Investment Sales
I think we will see sales volume drop substantially for the next six months as investors wait for fundamentals to return and pricing to be reset. We will see some transactions move forward this year but overall, we anticipate volume to be a small fraction of what we saw in 2019. That being said, there is still a lot of liquidity in the market and investors need to invest it somewhere to make a return. Billions of dollars in cash that couldn’t find deals last year will be redeployed from investors seeking cash flow. It will be a much more favorable buyers’ market than they’ve been accustomed to for the last few years and many investors will be looking to take advantage. For that reason, I anticipate a strong rebound in 2021 as the economy starts growing again.