The only constant in life is change, and no truer words better define the constant evolution of retail. Prior to the pandemic the buzz word was “internet resistant” as many retailers were reinventing themselves by finding the ideal balance between strong online and physical presence. By doing this, they were able to successfully reduce their store size while still expanding their brick and mortar locations, giving them the ability to be nimbler and ultimately, prosper.
Retail loves to reinvent itself and at no other time has this statement been more evident than during the devastating events of 2020. The coronavirus pandemic, along with the civil and political unrest that led to riots and the destruction of storefronts across the nation, forced many businesses to close. Some temporarily, others like JCPenney, Pier 1 Imports, Chuck E Cheese, and Men’s Warehouse are among more than 12,000 stores that closed permanently in 2020 due in part to the ongoing presence of e-commerce and the sudden shut down caused by the pandemic.
However, there’s no denying it, many of these same retailers who filed bankruptcy and shuttered their stores in 2020 and 2021 were on life support long before the pandemic swept through the world. The pandemic sped up what was an inevitable situation for many retailers, which for many Landlords who went on record stating that these events ultimately forced them make better overall decisions for their assets. They are no longer saddled with the constant battle of “will my Tenant pay rent this month?”
Vacant big box retail has always been a concern for Landlords and anchor tenants alike, however, due to the presence of online shopping and experiential retail blowing up the sector over the past few years, we are seeing a reinvention of “the big box.” Developers across the nation are scooping up this prized asset for redevelopment into multi-family, self-storage, creative co-working spaces as more people are now permanently working remotely, and mixed-use development. Home Depot, Lowes, Dick’s Sporting Goods, Staples, CVS, and Target, just to name a few, have emerged as “pandemic winners,” according to GlobeSt.com and many of these retailers have backfilled many of the vacant big boxes across the Country.
There are yet others who not only survived, but thrived in the past year. Grocery and smaller format convenience stores are arguable doing better during these unprecedented times, as are pharmacies, drive thru fast casual food and banking institutions, specialty liquor stores, cannabis and sporting goods retailers. The wellness boom is certainly booming, with no signs of slowing down, leading to a vast array of medical retail office users absorbing traditional retail spaces. Urgent care, physical therapy, chiropractic, MedSpa, are a few examples of emerging leaders in this sector that sees no signs of slowing down.
While the restaurant industry has been one of the most devastated and among the hardest hit, those who had a thriving fast casual business that relied heavily on carry out and delivery prior to the pandemic have done exceptionally well. Second generation restaurant space is being absorbed at a record pace.
Those who were not considered “essential” during the pandemic took the hardest hit. Salons/spas, movie theaters, fitness, and clothing retailers as just a few of the many retailers slowly returning to pre-pandemic numbers, with movie theaters and entertainment venues seeing the slowest recovery.
According to The Real Deal, rent collections for national chains were at 93 percent in April 2021, the highest they’ve been since the beginning of the pandemic, as reported by Datex Property Solutions. Compare that to the 96 percent National retailers paid in April of 2019 vs the 63 percent of rents that were collected in April 2020 and its obvious retail is steadily inching towards recovery and reinvention, once again.
Resilient. Reinventing. Revitalizing. Retail encompasses all of these traits, and as consumer confidence picks up and more States continue to open up, we will continue to witness the evolution of this exciting sector in commercial real estate.
Deena Zimmerman is an award-winning commercial real estate broker and Vice President at SVN Chicago Commercial. She specializes in finding high quality retail and mixed use sites throughout Chicagoland and the Country for developers, investors, national operators, franchisees, and first-time entrepreneurs.