Prior to Covid-19, retail real estate was amid an evolution. Changing consumer habits, shifting demographics to urban centers, digital retail sales and supply chain enhancements all had an impact on brick-and-mortar retail. Covid-19 accelerated the pace of evolution bringing retailers to bankruptcy and store closures. It also accelerated the pace of retailers to adopt a more sophisticated digital platform and delivery protocol to survive. Going into the pandemic, some retailers like Target already had a seamless omnichannel sales platform and were better poised to endure lengthy government shutdowns and store closures during the pandemic. Target’s 2020 sales growth of more than $15 billion was greater than the Company’s total sales growth over the prior 11 years. Comparable sales grew 19.3 percent, reflecting a 7.2 percent growth in store comparable sales, and 145 percent growth in digital comparable sales. Target’s digital sales grew by nearly $10 billion in 2020, driven by 235 percent growth in the Company’s same-day services. Target gained approximately $9 billion in market share. Though Target’s successful performance throughout the pandemic was enjoyed by other retailers, many retailers suffered due to government mandated store closures and the lack of a good digital platform to capture market share. Some retailers were able to pivot and quickly elevate their digital sales platform to compete with other retailers.
2021 has brought noticeable changes in retail real estate activity giving property owners, retailers and brokers a sigh of relief. With a seeming end in sight to Covid-19 related restrictions as vaccination measures, tapering cases and declining deaths bring hope and optimism to the real estate community. In addition, there is a general sense of COVID-19-fatigue. People are just sick and tired of living in a bubble and yearn for life to get back to “normal”. Metro Commercial Real Estate represents over 450 retail properties totaling 30 million square feet in Pennsylvania, New Jersey, and Delaware. In general, we have seen an uptick in leasing and sale activity throughout our portfolio since mid-January 2021. Categorically, we are seeing more activity beyond the pandemic coined “essential uses” including, apparel, home/ home décor, furniture, children’s entertainment, fitness and restaurants, all categories that were hit hard by pandemic closures. In addition, we continue to see alternative use categories play an important role in absorbing retail property for repositioning or redeveloping into multifamily, medical, industrial/ distribution, senior living, and self-storage. Retail property owners are resolving loan delinquencies related to Covid-19 impacts.
2020 bankruptcies have resulted in many retailers either being sold or reorganizing their business plan and occupancy strategy to emerge re-capitalized and ready to write the next chapter of their story. Neiman Marcus, JC Penney, Tailored Brands, J. Crew, Brooks Bros., Lucky Brand, and GNC, among others have emerged from bankruptcy during the pandemic. Other companies such as Stein Mart, Lord & Taylor, Pier 1 and Stage Stores weren’t so lucky and have closed stores and liquidated assets.
From a real estate broker’s perspective, the pace of lease and sale transactions have accelerated, and deals are getting done at a faster pace than in 2020. Property owners have reported an increase in leases being signed in the past month than in the prior months during the pandemic. Today, retailers are looking at more properties for store expansion and many retailers have announced expansion plans to their shareholders. Chase Bank, Dollar Tree, Family Dollar, At Home, 7-11, Sonic, Starbucks, and Aldi, among others have recently announced significant store growth plans. On a personal note, Metro’s agents have reported more deal activity in the past eight weeks and more importantly, an accelerated pace of deals closing. This is all positive news for the retail real estate industry.