How tough has the COVID-19 pandemic been on the retail sector? A new report from Cushman & Wakefield says that nearly 15,000 stores in the United States closed in 2020. Those closures left 51.8 million square feet of shopping center retail space empty.
Despite these grim numbers, there is hope for the retail sector in the second half of 2021 and beyond. Cushman & Wakefield in its U.S. Retail Outlook said that as the pandemic shows signs of winding down, consumers are ready to leave their homes to shop, travel and eat out at restaurants.
That’s good news for those retailers that have survived the pandemic so far. Combine this urge to spend with the fact that many consumers have built up wealth during the pandemic. According to Cushman’s report, there is now nearly $2 trillion of excess savings in the hands of consumer.
As Cushman’s report says, this pent-up demand is real, will soon be unleashed and will be big.
But the coming boom times won’t erase the damage felt by retailers during the COVID-19 pandemic. The Cushman & Wakefield report included a list of retailers who closed stores in 2020. That list includes Pier 1, which closed 991 stores; Ascena Retail Group, which closed 1,000; GNC, 726; and GameStop, which shut down 450.
Then there was the devastating impact that the pandemic had on U.S. retail employment. The U.S. economy cut 8.3 million retail and restaurant jobs in March and April of 2020. But in a sliver of good news, businesses had hired back 6 million of those jobs as of February of 2021.
This means that retail employment is still down 2.4 million jobs from the start of the pandemic but does appear to be in recovery mode.
Few retail sectors were hit as hard as the restaurant industry. As the Cushman report says, there were 12.2 million people employed in the food and beverage industry before COVID-19 hit. By April of 2020, though, there were just 6.3 million.
The good news here is that as vaccines get rolled out, restaurant reservations are rising. In fact, restaurant bookings are up 40 percent since December of 2020.
It’s little surprise that retail vacancy rates soared last year, with the overall rate settling in at 10.5 percent in the fourth quarter of 2004. Class-C retail centers were hit the hardest, with Cushman & Wakefield reporting that these centers had a vacancy rate of 11.3 percent in the fourth quarter of last year.
Grocery stores remained essential during the pandemic. That helped vacancy rates in retail centers anchored by these stores. Cushman & Wakefield reported that the vacancy rate in grocery-anchored retail centers was a fairly low 5 percent in the fourth quarter of last year.
And while retailers continue to struggle even this year, many have announced expansion plans. Cushman lists these retailers in its report, and it’s inspiring to read. For instance, 7-Eleven plans to open 6,300 stores in 2020-2021. Dollar General and Sonic Drive-in both plan to add 1,000 new stores during this same time, while Dollar Tree and Bank of America are planning for 500 new stores each.
Other retailers with big expansion plans in 2020 and 2021 include Aldi, with 450 planned new stores; Chase Bank, 400; Casey’s General Stores, 350; and O’Reilly Auto Parts, 180.
And what about the future for retail? Cushman & Wakefield says that it looks bright. That’s largely because the COVID-19 pandemic is the biggest drag on the sector, not the rise of e-commerce or other factors.
Once the pandemic is over, then, the odds are high that consumers will return to their favorite retailers, both in-person and online. As researchers predict that the United States will reaAs ch herd immunity this summer — thanks in large part to an ever-increasing rate of vaccinations — normalcy should steadily return.
As of now, consumer confidence remains low. Again, this is largely because of the pandemic and the economic impact it has had. Cushman & Wakefield reports that consumer confidence plunged in the second quarter of 2020 and remains 30 points below pre-pandemic levels.
There is evidence, though, that U.S. consumers are ready to spend big. The first federal stimulus package, released in April of 2020, increased inflation-adjusted after-tax income a record 15 percent. The second stimulus package pushed income up 11.4 percent. Then Pres. Biden signed a third stimulus worth $1.9 trillion on March 11 of this year.
As Cushman says, this is the strongest income growth ever recorded in the United States, and much of it remains unspent.
At the same time, many consumers who have been stuck at home for more than a year have saved plenty of money. According to the U.S. Bureau of Economic Analysis, personal savings stood at $3.9 trillion in January of 2021. That’s a big jump from the $1.3 trillion of personal savings the United States saw in January of 2020.
The Federal Reserve says that household wealth in the United States rose to a record high of $116.5 trillion in the third quarter of 2020. This is largely because of increasing home values and income and the strong performance of the stock market.
This, Cushman & Wakefield says, shows that consumers will be ready to spend once the pandemic is over.
In its report, Cushman & Wakefield says that during the next five years, retail sales are forecast to grow at an average annual rate of 3.7 percent. And post-pandemic, the company says, consumers will be spending more than ever at bricks-and-mortar stores.
Cushman & Wakefield predicts that brick-and-mortar retailers will account for 78 percent of all retail sales in 2025, with e-commerce retailers accounting for 22 percent. In 2019, physical stores accounted for 83 percent of all retail sales, with e-commerce retailers nabbing 17 percent of sales.
But which retail sectors will thrive and which will struggle post-pandemic? Cushman & Wakefield, citing data from Moody’s Analytics, predicts that thrift stores, grocery stores, fast food, discounters, dollar stores and pet supply stores will all see growth in the coming years. The company also predicts strong business for sporting goods stores, bank branches and legal cannabis providers.
It might be difficult to imagine today, what with many retailers still struggling with pandemic restrictions and nervous consumers, but if Cushman & Wakefield’s report proves true, the second half of 2021 and beyond might become boom times for the retail sector.