Market Update: The Current State of Retail

Market Update: The Current State of Retail

Despite the impacts that the Covid-19 pandemic has left on the retail sector, signs are showing that most operators are currently stable and resilient. Keep reading below to learn about key takeaways on the current state of retail:

  • Not all tenants are created equal. Private equity saw the pandemic as an opportunity to not pay rent, lay employees off, etc. Small businesses, however, had to rely more on personal cash reserves and changes in the business plan to adapt. The Paycheck Protection Program (PPP) was offered but on average only about 20% of regional tenants received it as most smaller tenants lacked a lending bank relationship they could rely on to service their PPP application.
  • At the start of the Covid-19 shut down in March, rent collection exceeded expectations and averaged in the mid-60% range according to industry surveys. During April and May, we generally saw an uptick into the 70% range. By June-July up to mid-80%, and by August 90%.
  • Essential service providers (grocers, dollar stores, drugstores, etc.) saw an average of 30% increase in year-over-year sales, pushing for additional locations to be opened only two months after the start of the Covid-19 quarantine.
  • The will of the entrepreneur is so strong as shown by the desire of the mom and pop tenants to not give up during this time as a retailer. There has been a strong sign of resiliency from these tenants. There was a much stronger economy than many anticipated, meaning many regional tenants had reserves and are doing better than expected.
  • Cities are evaluating lifting rules that restricted not having a dining room at fast-food restaurants as they adapt to the changing environment that may require changes to existing zoning.

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