M id A tlantic Real Estate Journal — Spring Preview —April 24 - May 14, 2020 — 9C
By Joe Latina, Patterson-Woods Commercial Properties/CORFAC International Lacking Crystal Ball, CRE Preps for Cloudy Retail Future
he global economy has been wracked by the COVID-19 pandemic,
uct. The inability of many retailers to reopen after the shutdown may create oppor- tunities for retailers to find stronger locations or expand into areas that would not have been previously avail- able to them. Essential retailers appear poised to take advantage of their spike in revenue and historically low inter- est rates and may be enter- ing a strategic expansion mode. For example, specialty grocer Trader Joe’s just an- nounced the development of a new store in the Christiana
Fashion Center in a Newark, Delaware market that has been long-clamoring for their arrival. We have already begun to witness a shift in the capital markets with lower cap rates favoring essential retailers over the traditional fast food and quick-service restaurants. Besides those opportunities, many questions remain for the retail sector. After years as a landlord’s or seller’s market, the tide may be turning to decreased rents and property values. Thriving college retail markets may take a hit if stu-
dents don't return to campus soon. And the entire industry is waiting to see what will happen with ICSC’s RECon, the signature annual global convention for the shopping center industry. Suspended for now, it’s unclear whether the pivotal gathering for deal- making and networking will be the next corona-cancelled event. Even as the federal govern- ment and many states begin to discuss what “reopening” the economy will entail, the long- term effects of this pandemic are yet to be determined on the
retail sector and on society as a whole. Because we’re deal- ing with a public health crisis unlike any in our lifetime, the questions about when and how we’ll be back eating in restau- rants and meeting at confer- ences will be answered by public health experts, and not from within our own ranks. Joe Latina is a princi- pal with Patterson-Woods Commercial Properties/ CORFAC International in Wilmington, Delaware, and has been working in the commercial real estate industry since 1989.
and no one ye t knows exactly what the recovery will look like – o r e v en when it will begin in ear- nest. In the meantime,
the commercial real estate industry has found a way to work in this new normal. After a very busy fourth quarter, during which it was difficult to keep up with all of the requests and showings, optimism and activity carried into the early months of 2020. We then hit a wall when the novel coronavirus began a community spread in the U.S. and states across the country enacted stay-at-home orders that closed nonessential re- tailers and office buildings, forced restaurants into take- out only mode, and halted public gatherings of any kind. Commercial Real Estate, a business built on face-to-face meetings and handshakes (which may be taboo perma- nently), has had to adapt to the new social-distancing recommendations. We have transitioned to online meet- ings, virtual tours, and social media marketing. Some of these changes will likely stick around as we gradually tran- sition back into reopening. The use of advanced technol- ogy –like virtual reality or drone videos – could become commonplace, which should bode well for younger bro- kers who are digital natives. Yet, regardless of age, we’re all becoming familiar with video conference calls and less group networking. Retail During and After the COVID-19 Crisis Over the last month, the effects on the retail sector have been devastating. Retail sales in March 2020 were down 9 percent, the largest single-month drop in history, led by apparel declining 50%, as well as restaurants and bars dropping 27%. Grocery stores, which remain open to provide necessities, are the lone bright spot, with sales up 27%. Looking back, the robust market leading up to this pause was marked by scarce availability of quality prod-
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