The Coronavirus Impression on Retail Industrial Markets as of June 2020

The Coronavirus Impact on Retail Commercial Markets as of June 2020

NAR's commercial market in July 2020 offers insights into the development of the commercial real estate market during the coronavirus pandemic. The retail property market is one of the commercial markets hardest hit by the coronavirus pandemic and the measures taken to contain it. The retail market is improving and should recover slowly over time, provided the recurrence of coronavirus cases is limited and the measures taken to contain a potential resurgence are not in line with the level of previous measures.

Retail sales fell 83% in May

Retail property sales of $ 2.5 million or more in May declined 83% year over year to $ 1 billion as transactions fell from 619 sale deals in May 2019 to 106 in May 2020. The average per square foot has increased 4% since February to $ 264 in May, up 4% year over year. The cap rates remained unchanged for the previous year at 6.6% and were largely unchanged year-on-year.

Transactions for stores fell more sharply than for centers in May. Shop transactions were down 48% on the previous month, while center transactions were down 25%. This may be the case because COVID-19 has accelerated the transition from shopping at stationary locations to online shopping.

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Retail rent payments are increasing compared to previous months

COVID-19 and measures to contain it have taken a drastic toll on retailers as it has resulted in shorter working hours, significant staff savings, less foot traffic, temporary closings and permanent closings of retail stores. The loss of income made it difficult for many companies to pay their rent on time, if at all.

According to Datex Property Solutions, a real estate business intelligence company, almost half of retail rents were unpaid in April and May 2020. Although retail rental totals are below March levels in mid-June, they rebound towards March as the economy continues to develop open with states allowing restaurants, retail stores and other businesses to reopen with various restrictions and at different stages.

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The retail labor market is improving

The commercial property sector has been dramatically impacted by the coronavirus pandemic, but the improving labor market is the silver lining. In May, retail employment increased sharply alongside leisure and hospitality, healthcare, construction and education. Retail employment rose 368,000, or 2.76%, from April, with April numbers representing a significant loss of 2.3 million jobs.

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Retail sales improve as the economy reopens

The US economy has reopened to a limited extent as states reopen their economies at various stages. The pedestrian traffic patterns of retail sales and food services grew from what looks, and were hopefully the low point in April. As of June 26, 2020, 5,007 retail stores were closed, according to Coresight Research. The sector has grown from USD 29 billion in April to USD 38 billion in May as catering services and drinking facilities are operated at reduced capacity according to various government criteria.

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