5 Takeaways From JLL's Retail Recovery Report
What a difference 18 months make. Retail fundamentals are steadily improving after the body blow Covid delivered in March 2020.
LAS VEGAS—GlobeSt.com was in attendance at the ICSC Here, We Go–2021 national conference where JLL hosted a happy hour and also released its retail recovery 2021 report. Not surprisingly, the report found that March 2020 brought the greatest upheaval to the retail industry with many non-essential retailers losing significant revenue. More than a year-and-a-half later, with vaccines and a greater understanding of COVID transmission, the firm takes a look at how retail fundamentals have been steadily improving. Here is what it found.
Retailers Eye the Sunbelt and the Suburbs
The pandemic brought forth a migration to less-crowded markets with lower costs of living, a shift from urban metros into suburban neighborhoods, which can be seen through rent and vacancy performance, the report says.
Open Air Centers are Retail’s Strongest Asset
Open-air centers, particularly those with essential tenants like grocery and drug stores, have performed consistently better since 2020, the JLL report says. All retail property types are seeing higher rents than at the onset of the pandemic, and strip center rent growth is the highest at 3.1%, with neighborhood centers following at 3%.
Good Malls Are Here to Stay
Class A malls—properties with the best locations and most attractive mix of tenants—are performing much better than B and C malls, the report says. “They have lost fewer inline and anchor tenants and have significantly lower vacancy. At the onset of COVID in Q1 2020, Class A mall vacancy rose 10 basis points while Class C mall vacancy spiked 80 basis points in just one quarter. As of Q3 2021, the vacancy difference between these mall classes has grown to 760 basis points, up from 490 basis points at the end of 2019.”
E-commerce Found a New Plateau
According to data from eMarketer, only 6.9% of retailers offered pickup in December 2019. By August 2020, it had shot up to 43.6%. Prior to the pandemic, grocery was relatively untouched by e-commerce. As consumers head back to stores, online grocery sales growth has slowed, but the share of online sales is still elevated. However, brick-and-mortar stores play an integral role in the success of online grocery sales since more than half of online grocery sales come from curbside pickup orders, according to the Brick Meets Click/Mercatus Grocery Shopping Survey.
Urban Retail will Return with Office Workers and Tourists…Eventually
Urban shopping centers and malls are still seeing foot traffic 16% under pre-pandemic levels, the report says. Gateway markets like New York have long relied on international visitors to boost retail sales. In fact, global visitors fueled more than $43.4 billion of shopping sales in 2019, according to the report. “When travel restrictions hit in 2020, retail traffic and sales in these strong urban markets sank.”
Naveen Jaggi, president of Retail Advisory Services at JLL, says that “Retail has shown a strong year-over-year rebound with suburban retail leading the recovery. As the foot traffic from tourism and the workforce returns to full capacity, we anticipate a strong rebound for quality retail space in key urban markets.”
The new report also found the number of retailers filing for bankruptcy has declined to a five-year low, and openings are on pace to exceed closures for the first time since 2016. Leasing activity for 2021 is set to be the best year since 2018 and year-to-date net absorption totaled 54.6 million square feet.
Check back with GlobeSt.com for more retail coverage from the ICSC national event and click below for stories you might have missed.
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