Re-Thinking Retail

Posted on September 2, 2020

RetailCommercial real estate developers and investors in the Golden State are dealing with the projection that nearly every sector will be negatively affected by the pandemic through 2023.

The current pandemic-driven recession has “tripled down on the struggles retail already faced,” one report read. The trend has been accelerated by the loss of household income and shelter-in-place orders reducing demand for brick and mortar retail; the creation of a new set of online shoppers; and more households saving money due to a recession.

This may sound terrible, but it is not all bad news. Retail sales actually increased for the third month in a row and some companies – from Amazon to local beer distributors – are reporting record profits. Similarly, industrial real estate demand has stayed steady, even increasing in some areas, and is expected to remain at this level.

Amazon sales blew the roof off Q2 expectations, as shoppers relied heavily on the online giant during the pandemic. Reports show Amazon’s net sales increased 40% to $88.9 billion in the second quarter, compared with $63.4 billion in the second quarter of 2019.

Ahold Delhaize – a large grocery chain with more than 600 locations – reported a 20.6% increase in comparable store sales among its U.S. stores in the second quarter, driven by online growth of more than 127%, the company noted in its earnings release. Net U.S. sales for the period increased 19% to $14 billion and income from U.S. stores increased 113% to $852 million.

While the short term outlook for the majority of rental properties is uncertain, there was one thing that the survey made clear. It is most definitely short term and is expected to bounce back to the pre-pandemic levels.

At CGI we are using this data to formulate long-term rental strategy with pandemic-proof retailers offering both in-person and online solutions.

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