United States Retail Outlook
As the fears of the COVID-19 pandemic spread, closed stores and layoffs drag all but essential sales downward.
COVID-19’s effect on retail amplified at the start of the second quarter as the lockdown continued, but as restrictions began to ease and government stimulus checks were issued, both traffic and sales saw clear gains. Nonetheless, the virus has left its mark on consumers, changing how they shop and what they buy. Here are some key takeaways for retail and real estate performance:
- During lockdown in March and April, a significant portion of sales shifted online because most stores selling discretionary goods were not open. Even essential retailers saw an uptick in online orders where consumers opted to have goods delivered or picked up curbside rather than entering stores.
- Back-to-school shopping budgets rose as parents, scrambling to respond to new and varied school attendance methods, invest in electronics, home office equipment and personal safety gear.
- Retail traffic has improved since COVID lockdowns ended, but only essential retailers like grocery and home improvement show positive year-over-year growth in visits. Discretionary retailers, especially those mid-priced, like apparel and department stores have continued to struggle, with some declaring bankruptcy to restructure their finances.
- US net absorption totaled -10.9 million, dragged down by poor performance in smaller shopping centers, particularly strip centers.
- Malls face a crisis as department store and apparel retailer bankruptcies surged this year. The need to reinvent and find new uses for vacant anchor space is vital. Landlords have already begun opening micro-distribution hubs in their centers to respond to the demand for omnichannel fulfillment.
- Power centers, anchored by strong big box tenants, were the most insulated against COVID’s effect with only moderate negative net absorption.