Written by: Harrison LaHaie
Harrison LaHaie is a student at The Ohio State University studying Economics and History. He is currently interning with Colliers | Columbus on the research team. Keep reading to get Harrison’s take on the retail industry’s comeback.
COVID-19 has had widespread economic consequences, but few sectors felt these consequences more than brick and mortar retail. In the months following the pandemic, retailers are making a comeback that many did not expect. For commercial real estate, this means that retail properties offer an increasing number of opportunities in the coming months.
The Positives
E-commerce, while bigger than pre-pandemic, has not made brick and mortar obsolete
The difficulty of pandemic conditions for retailers means that those which remain can weather adversity
Now smaller retail properties are becoming more desirable than big boxes
Ohio retail sales are strong and continue to keep pace with inflation
Investment in retail remains strong in the Columbus area
New supply in Columbus continues to increase
Vacancy continues to decrease nationwide
The Challenges
Inflation hurts retailers’ margins, i.e., Target and Walmart
Input prices are cutting into profit margins, i.e., fuel costs, transportation
Consumers are swapping out more expensive items for cheaper substitutes
Net absorption decreased in Columbus in Q1 2022
Supply chain issues continue to be cited by struggling retailers
Smaller retailers nationwide are struggling to pay rent as it increases
Retail commercial real estate should continue to recover in the coming months. With retail sales remaining above pre-pandemic levels, vacancy will likely continue its downward trend for the time being. With vacancy decreasing, modest rent increases will be expected. In Columbus, despite negative net absorption in Q1 2022, decreasing vacancy and increasing retail sales will continue to keep the retail market strong moving forward.
Sources: WSJ, Globe St, FRED