Following one of the most eventful years in memory, I’d like to take a moment to reflect on just a few things that have worked–and a few that haven’t–to help retail real estate get through 2020.
However, I’m an optimist, and that’s why my ‘what worked’ list is longer!
- Accelerated innovation: The disruption retail has experienced during the pandemic would have been far worse if the industry wasn’t so innovative. For example, we saw restaurants roll out or enhance programs like curbside pickup, takeout, delivery, meal kits, family meals to go, and even grocery sales, all well establishing new safety protocols. We worked with retailers who pre-pandemic had zero online presence to enter the digital age with websites and social media pages. The socially distanced consumer makes shopping and dining decisions online, and the retail industry stepped up its game to meet them there.
- Conservative construction: The Dallas-Fort Worth retail market, along with the markets in Austin, Houston, and San Antonio, entered the pandemic following nearly a decade of new space deliveries at or near historic lows. Despite the high population, job, and housing growth, the retail market remained conservative in terms of new space. This limited construction meant we entered the pandemic with a tight space market. Every other downturn has emerged after a period of overbuilding, which resulted in high vacancy rates. This time around, even with several chain-store and small-shop failures, our market is still posting occupancy rates in the healthy range.
- National retailers that innovated and reacted to changing consumer demand: The list covers leading retailers that focused on the convergence of physical and digital retailing well before the pandemic hit. It includes national and regional stores, combo stores like Walmart and Target, plus home improvement stores like Lowe’s, Home Depot, and Floor & Décor. These concepts stepped up to meet the demand created by a work-from-home and learn-from-home population by offering myriad ways to shop smart and smart safe, from curbside to same-day delivery and more. Their customers rewarded them with strong sales.
- Landlords and lenders helping tenants: Many tenants, especially mom-and-pop businesses, are surviving the pandemic in part due to a combination of government assistance, such as PPP loans, and lease workouts from their landlords. Under a typical lease workout, the tenant’s rent is either reduced or deferred for a set period of time. Landlords, of course, have their own financial obligations, and they are often able to provide these workouts because of lenders’ forbearance.
- A sense of community: Those of us fortunate enough to be in the financial position to support local businesses are doing so with a passion during the pandemic. Everywhere I go, I talk to shops and restaurants whose owners tell me the community has really stepped up to patronize them to ensure they can stay in business.
What didn’t work:
- Entertainment retail based on crowding: Before the pandemic, the big buzzword in retail was ‘experiential’ – meaning retail that meets the need for an experience more than the need for goods or services. A lot of experiential retail was entertainment-focused, and no other area of retail has been as impacted as entertainment concepts. In December alone, we saw the announcement that Cinepolis would not open in Plano, despite its new 40,000-square-foot space recently completed. And Punch Bowl Social, with a Denver-based concept with a location in Deep Ellum, filed for Chapter 11 protection, although it had enjoyed seven consecutive years of growth heading into 2020. While we expect the widespread vaccine distribution to result in a resurgence in entertainment retail, the short-term outlook remains challenging.
- Digitally dark retail: At a time when shopper traffic is greatly reduced, businesses need to reach their customers digitally. Those that remain ‘dark’ are unlikely to emerge on the other side of the pandemic.
Marshall Mills is the president and CEO of Weitzman.