Weekly Retail Replace: February 12, 2021

0
482
Weekly Retail Update: February 12, 2021

While retail was already transforming before the pandemic, COVID-19 accelerated consumer demand, habits, and preferences as retail was tossed into the future. Unfortunately, malls, particularly traditionally closed class C and D malls that make up the majority of all US malls, have significant retail vacant space.

With rising vacancy rates in retail and crater formation in rents, the expression "adjust or go under as always" applies not only to retail in general, but especially to shopping centers. With decades of high vacancy rates, consider all malls, including some true Class A malls, where a lot of the by-product is likely to be avoided by declining department stores and clothing retailers. But not all shopping centers suffer equally. Similar to retail in general, there are some clear winners and clear losers.

With every bankruptcy filing or announcement of store closure, especially department store anchors, the decline in prices and rents in shopping malls accelerates. Before the pandemic, retail store closings hit 5,524 in 2018. In 2019, retailers closed 9,350 stores. This corresponds to an increase of 70% compared to the 5,524 branches that were closed in 2018. According to Coresight Research, there were more than 8,736 permanent store closures in 2020 as the ways consumers buy send a message of safety and convenience.

Consumer purchase options such as delivery, click-and-collect, or roadside collection are vital for retailers in our current environment and beyond, as consumer preference for convenience is not expected to wane. Shopping malls have the opportunity to enhance the consumer shopping experience as the focus continues to be on convenience throughout the retail sector. While improving the shopping experience is a good start, the majority of malls need to do more. Now, shopping center owners and operators alike have a tremendous opportunity to redesign their tenant composition to suit the businesses in the community and the needs of the neighborhood. Mall attributes, e.g. Layout, location, parking lot, and space can prove attractive to a variety of options with some restrictions:

  • Office: corporate offices (future is uncertain)
  • Housing: apartments and hotels (housing shortage)
  • Industry: Distribution and fulfillment (last mile delivery / booming e-commerce)
  • Medicine: armories, hospitals and acute care facilities
  • Education: Satellite campuses, business schools, and community colleges

Whether it's a full demolition / construction or a remodeling, comprehensive advice on population demographics and community buy-in is crucial in both scenarios.

Over the past few years, decisions about where to locate the store have centered on where not to operate a business, resulting in a series of closures only hastened by the pandemic. Now, unusual landlord flexibility and falling rents could lead to more stores opening, sometimes in unexpected locations.

LEAVE A REPLY

Please enter your comment!
Please enter your name here