The COVID-19 crisis accelerated many trends in the commercial real estate industry that were impacting the ways in which we use physical space even before the world turned upside down in March 2020.
Throughout this last economic cycle (2010-2019), businesses were discussing remote work and how a hyper-connected world may change the way we use office space. Distributors were grappling with last mile logistics and warehouse space was proliferating at a breakneck pace to keep up with shifting consumer demands. In the retail sector, where the impacts of the internet age were already being felt disproportionately relative to other property types, the acceleration of these trends hit abruptly and with more force than anywhere else.
The mandatory shutdowns beginning in March sent a shockwave through the retail world. As we all hunkered down in our homes, businesses suffered. However, the Paycheck Protection Program provided a lifeline to many, and as restrictions on businesses lifted later in the spring, we witnessed a remarkable wave of adaptation and resilience in the face of 2020’s challenges.
Retailers were not blind-sided by customer demands for convenience and seamless synergies between their online and physical platforms; retailers have been adapting to these demands for the past decade. Many of the ones that saw success this year are the ones who were proactive in building the infrastructure needed to be responsive to these trends.
Throughout the year, headlines warned of catastrophic damage within the retail sector. “Retail rent collection plunges to 58%,” and “Countless retailers sink into pandemic bankruptcy,” are just a few examples. However, many of these news stories failed to differentiate between the neighborhood and convenience-based retail properties where tenants have mostly held strong, and other property types like power centers and enclosed malls, which were struggling to find their footing even before COVID-19.
Properties and retailers that were already adapting to changing consumer demands fared decently, if not well, after a period of transition. Those catastrophic headlines were, in many cases, accelerated by COVID-19’s effects, but not caused by them.