Retail shows signs of renaissance
Retail shows signs of green shoots, as traffic, sales, and leasing activity improves
- Keisha Virtue
“Renaissance” is derived from the Old French word “renaistre”, meaning to be reborn
The original renaissance of the 14th and 15th centuries brought a flood of innovations in art, philosophy and architecture.
In 2021, we are witnessing a rebirth, of sorts, for the economy and for retail. Real GDP grew 6.5% in the second quarter, boosted by double-digit growth in consumers spending.
- Projected consumer spending of 8.8% - according to Oxford Economics – for all of 2021 will be the strongest growth since World War II.
- While retail foot traffic is still less than a percentage point below 2019 levels, it is 17% higher than it was during the same week last year.
- Retail sales are trending upward, as well, inching up 0.7% month-over-month in August and 15.1% year-over-year.
I, too, am experiencing my own tiny retail renaissance – moving from a small town in the south of Georgia to Boca Raton – a veritable Florence of retail and restaurants in South Florida. In the two weeks I’ve been here, I’ve shopped more retailers and patronized more restaurants than in the previous six months living in Georgia. Since this is a return home for me, having been a long-time Florida resident, I noted some interesting changes. Joseph’s Classic Market, a small, gourmet grocery store moved into my favorite mall – Town Center at Boca Raton last year. The mall has also added more home furnishings tenants like Casper, Arhaus and Boll & Branch. This is a clear response to the trend we’ve seen of consumers focusing on their homes. Warby Parker and a Lululemon pop-up have also moved in, underscoring the success of trendy bricks-to-clicks and athleisure. These trends are like a microcosm of what we’re seeing in the broader retail space: the strength and attractiveness of groceries, the outperformance of home-related goods and the move towards athleisure.
Store closures see slowest pace in years while openings accelerate
As retail reawakens from its COVID-related slumber, we are seeing far fewer closures than in 2020. In fact, the current pace of closures may impact the least amount of retail space since 2016. In comparison, many retailers are expanding, particularly discounters, grocery, home décor and beauty. Dollar stores, in particular, are aggressively expanding, as more consumers shop their aisles for everyday needs. Dollar General and Dollar Tree will open 1,650 new stores combined in the next year. As I saw in my own local market, athleisure continues to do well. Lululemon, Athleta and Fabletics have all announced new openings, ranging from 24 to 55 new stores.
Discount stores opening the most new locations
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Demand for retail space surges
With openings up, leasing activity has returned to levels seen before the pandemic. As of the first half of 2021, roughly 41,000 leases have been signed, representing 121 million square feet. Net absorption – or actual move-ins during the second quarter – totaled 20.1 million square feet – the highest level since the third quarter of 2018. New retail supply remains low, with the majority of retail space under development centered on mixed-use, experiential projects.
Supply chain issues prompt retailers to get creative
As we head into the holidays, we expect to see strong sales growth, despite headwinds from the Delta variant as well as labor and inventory shortages. Some retailers like Target are getting proactive by chartering their own container ships to sidestep hold-ups at the port. Supply chain uncertainties may function to drive consumers to shop more in-store where they can definitely get their hands on gifts in time for the holidays. BOPIS and curbside pickup should continue to play critical roles in fulfilment this holiday season.