Commercial Investment Real Estate Summer 2020 | Page 25

There will likely be
opportunities to reposition
properties, and landlords
will be able to strengthen
their tenant mix with retail
concepts that are more
viable in today’s world.
— Lauren Tabeek, CCIM, managing
director, Newmark Knight Frank.
social distancing guidelines. Views are mixed
on what the future holds for those tenants.
On the positive side, some see huge pent-up
demand for people to return to experiential
retail that could fuel traffic and sales. “Once
things open back up again, people are going
to be champing at the bit to go out and have
some fun,” says Cook. “So, all those trends that
we had been talking about before COVID-19
will all come back — and I think they will
come back with a vengeance.”
LINGERING EFFECTS ON CONSUMERS
The first orders of business for retailers and
landlords are damage control, reopening,
and restoring traffic and cash flow. Moving
forward, the challenge will be sorting out
short- and long-term impacts of the pandemic
on consumer behavior and business
strategies. “When the effects of this pandemic
wear off, I think we are going to go
back to the same preferences for social gathering
as we did before, with more heightened
awareness of how germs travel,” says
Clements. Businesses across the board are
already implementing new protocols and
systems that prioritize safety for employees
and customers, including better air filtration
systems and touchless payment systems. In
the past, landlords were focused on promoting
sustainability; going forward, the focus
will be on making buildings safe and green,
he adds.
Another significant change is that
people have gotten more comfortable in their
own homes. Family and personal connections
are as important as ever, and in-person
interaction will never be fully replaced. But
people are becoming accustomed to doing
everyday things remotely from home, whether
that is shopping, banking, telemedicine, or
attending church service, notes Gullia. According
to information provided by Forrester,
RETAIL FACES A
MIXED HEADLINE PROGNOSIS ???
e-commerce represented 17 percent of U.S.
retail sales in 2019, with an expected rise to
19 percent by the end of 2020.
COVID also may accentuate bigger
geographical differences. Some regions will
rebound faster than others. Potentially, it also
could spark a shift in location preferences
and strategies. One view is that contagion
hot spots that have emerged in high-density
areas are going to create some outmigration
and push people back to suburban and rural
areas, especially among millennials who are
starting families. “I do think there is going
to be a big change in intracountry migration
away from some of the densities on the coast,
and these secondary and tertiary markets are
going to flourish,” says Gullia.
Additionally, the pandemic has highlighted
the need for omnichannel platforms
and the ability to provide alternative delivery
options that have allowed for business continuity.
Such operations may increase consumers’
appetite for convenience in the future.
COVID-19 has spurred the use of drive-thrus,
delivery services, and curbside pickup options
for restaurants, as well as a variety of
other product types, notes Luther.
“On the bright side, retail is an extremely
resilient asset class, and I tend to believe
that people have a short-term memory.
Spending habits and patterns will change as
a result of this, but the majority of businesses
will come back,” says Luther. In addition,
innovation among new and old retailers will
continue to drive activity and change within
the market. “Yes, you will see some retailers
close, but right behind them will be new,
stronger concepts to take their place,” he
adds. “Innovation and cannibalization have
been the keys to retail’s past performance as
well as its future.”
Beth Mattson-Teig
Business writer in Minneapolis
SURGE IN ONLINE SALES PUTS SPOTLIGHT ON SUPPLY CHAINS
Weeks of quarantine pushed consumers
online to shop for a wide variety of products,
ranging from grocery and household
staples to electronics, sporting goods, and
home improvement supplies — all of which
has further accelerated the growth trajectory
for e-commerce.
“Because consumers don’t have a
choice, we’re seeing historic highs in penetration
is a prolonged economic slump, the sector
had been a strong performer in recent
years with an active development pipeline
and steady absorption. For brokers who are
looking to add value to retail clients, they
will have to have a greater understanding
of supply chain needs and how they fit
with the omnichannel model of brick-andmortar
stores.
of online retail sales,” says James In particular, one thing that
Cook, director of retail research, Americas,
at JLL. That shift in consumer shopping
is providing a further tailwind for online
sales, even in sectors such as grocery that
had traditionally lagged the broader market.
According to research provided by
Forrester, e-commerce accounted for 17
percent of all U.S. retail sales in 2019. That
number is expected to rise to 19 percent in
2020 and to 24 percent by 2024.
Amazon is still a powerhouse, but
it can’t take credit for all the gains. Retailers
and restaurants were continuing
to advance online and mobile sales before
COVID-19 hit. “The pandemic has put retailers’
omnichannel platforms to the test in
a way that they never expected,” adds Cook.
“The retailers that had been investing in
ship-from-store and curbside pickup are
glad they did because they are seeing record
growth in online sales.”
Broadly speaking, the rise in e-commerce
sales has been a boon to the industrial
market. Although industrial will
certainly be negatively impacted if there
COVID-19 has done is forced a lot of people
to the internet for shopping for basic
supplies and food, which is going to put
increased demand on third-party logistics
to get food from manufacturers to the consumer,
notes Walter S. Clements, CCIM,
president and CEO at Dean Realty Co. in
Kansas City. For example, Dean Realty is
developing a 266,000-sf cold storage 3PL
facility in Kansas City with 90-foot clear
height and state-of-the-art robotics.
Retail strategies will need to focus
even more heavily on 3PL logistics and
efficient use of supply chains that can
get goods in the hands of customers very
quickly, whether they were choosing to
buy online and have it delivered to stores,
buy online and pick up in stores, or shop
in stores. “Once this pandemic ends, we’re
going to have more people than ever that
are familiar with the internet and delivery
to home and how easy and convenient that
is,” says Clements. “So, I think you will see
more people shopping online, and we’re
building into that demand.”
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