The on-going covid-19 health crisis deflated many sectors, vacancies spiked across the board, and the real estate industry as a whole was rattled. Well, experts at Marcus & Millichap feel as if the impact wasn’t as severe as once thought—at least not for retail.
So much so, Senior Vice President and Director of Research Services at Marcus, John Chang, feels that retail sales are the “strongest on record.” And it’s not purely due to the boom in e-commerce, but core retail sales (excluding auto & gas) were up 14.49% from last year, and 20.9% from pre-pandemic levels according to the latest figures.
The figures provide a “sustained positive economic momentum” for the retail sector which has had to revolutionize business models in order to adjust to consumer demand during the pandemic. At first, retailers were hard hit due to lockdowns, and the scarcity in business after people hunkered down during the initial chaos of the pandemic, and if applicable, were even forced to close. Essential retailers adjusted quickly offering curb-side services, and those that never provided delivery had to in order to stay afloat. Savvy investors looked to a new strategy during the pandemic, but a strategy that would also outlast any recession or health crisis.
In particular, retail shopping centers anchored by grocery or medtail properties performed decently, that investors are now looking toward those property types for long-term risk management investments. Despite fears of inflation, and supply chain fiascos this year, retail demand continues to trend upward after remaining strong in October.
Yes, many retailers did end up going out of business when the crisis hit, but Chang strongly believes there are more tailwinds than headwinds for the sector. Store-based retail sales are up 13.8% over pre-pandemic levels on an inflation-adjusted basis, and foot traffic to retail centers is swelling as well. Pedestrian traffic in downtowns improved to -38.1% below the 2019 level, from -44.7% in Aug. Largely due to a slow return of the workforce to the office.
“As of Q3, the multi-tenant retail vacancy rate for the US was back down to 6.3% after peaking at 6.5% in Q1. The average asking rents for the asset type was also up over 3% over pre-pandemic levels.”GlobeSt.com
Chang asserts that we are seeing a bounce-back that will carry positive results into next year.