06 Jan 2021

WESTERN REAL ESTATE BUSINESS: Optimism, New Habits Abound in 2021

By Nellie Day

Western Real Estate Business, Publish Date: December 2021

News that a coronavirus vaccine should be available to the general public by mid-2021 has given many in the commercial real estate industry new hope that we’ll begin to return to business as usual…whatever business as usual looks like post-pandemic. As operations and commerce begin to get back to normal, there will likely be some changes in store for each of the four main product types.

Whether these changes are welcomed or not isn’t necessarily relevant (though one would imagine anything that allows businesses to operate at full capacity would be a welcome addition), but what is relevant is whether these businesses and industries can weather the storm, make adjustments and make it to the finish line in one piece.

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Retail Waits to Reopen, Recover

Right now, retail is a tale of two markets: the essential and the nonessential. Or the “haves” and “have nots.” This is particularly true in California where current stay-at-home orders limit retail capacity to 25 percent, while dining — whether indoors or outdoors — is not allowed in most regions. This has forced many retailers and restaurants to embrace ecommerce, omnichannel and third-party delivery apps.

“COVID-19 has been an accelerant of the trends — good and bad — that were already underway,” explains Mark Sigal, CEO of Datex Property Solutions in Woodland Hills, Calif. “As that pertains to retail, this is a segment that is in a permanent state of disruption and reinvention. On the positive front, necessity is the mother of invention, especially in retail — a technology-laggard industry — and more retailers are innovating and experimenting because they must. One clear area of accelerant is supporting omnichannel for ordering, pickup and/or delivery.”

… This leaves retailers who haven’t embraced the ecommerce and omnichannel models in a precarious spot, especially as restrictions linger.

“The retailers that over the years have been slow to adjust to omnichannel retailing have not survived,” says Vicky Hammond, a principal at Coreland Companies in Tustin, Calif. “Both national and local alike, these stores were behind from the start — caught by surprise and unable catch up in the midst of rolling lockdowns. Sadly, this included a number of small businesses without market share or extra cash flow to have made so many significant changes in such little time.”

Those that are hanging on, waiting for restrictions to lift and life to resume, may not have to wait much longer, though each day that passes can feel like a lifetime for a struggling retailer.

…Though no one can predict the future, current sales can give some indication of what may lie ahead, especially if restrictions loosen. Hammond notes that shopping center rent collections within Coreland’s portfolio were below 75 percent in May, but increased to 90 percent by December. Sandy Sigal states that restaurants that introduced delivery mechanisms during the pandemic were able to recover between 60 percent and 75 percent of their sales.

Industry aside, the second stimulus bill, multiple vaccines and a desire to return to the outside world has built up demand for more services, experiences and “normality” across the U.S. Just where any one industry may fall on that demand spectrum remains to be seen, though it’s a safe bet that the future will look brighter for many Americans and business owners in the 12 months ahead.

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