The Retail Sector Has Emerged From The Pandemic Altered But Ready For Reinvention

While the coronavirus pandemic reshaped the retail landscape — perhaps permanently — retail leasing specialists in the CORFAC International network of independent commercial real estate brokers still see plenty of opportunity as new trends emerge in markets across the country. 

E-commerce was gaining shares in the retail landscape prior to the pandemic, but in 2020, even more people shopped online for everyday items amid temporary local shutdowns and capacity restrictions. According to a report from Forrester Research, e-commerce in the U.S. grew 30% in 2020, its fastest growth rate in two decades. 

Yet even with this leap, Forrester still sees a bright future for brick-and-mortar retail. In fact, the research firm projects that 72% of retail will take place offline by 2024. 

“Local bricks-and-mortar retail plays an important role in the identity and connectivity of communities,” said 2021 CORFAC President Joseph Latina, a principal at Patterson-Woods Commercial Properties/CORFAC International in Wilmington, Delaware. “Yes, retailers have faced some challenges in recent years, with the pandemic being the greatest in our lifetime. But now, retailers can reinvent themselves, and part of that is how and where they use space.” 

Driving Traffic In Shopping Centers

It has been a long time since regional department stores carried the anchor spot in shopping centers and malls and were the main draw for shoppers. Today, most larger centers are developed around big-box chains, major hardware stores and wholesale club stores. The majority of these types of retailers were deemed essential and fared well during the pandemic, boosting the likelihood that they will continue to anchor shopping centers. Along with these stable go-to anchors, specialty and gourmet grocery stores and other more experiential tenants are also shaping up to be a new kind of anchor. 

“The disruption in development caused by the pandemic slowed the expansion of many soft goods retailers, but grocery stores have seen strong sales throughout and are continuing with their expansion plans,” said Trent Rustan, vice president of retail sales and leasing for Commercial Properties Inc./CORFAC International in Tempe, Arizona.

Hillary Steinberg, senior adviser for MDL Group/CORFAC International in Las Vegas, said she sees a new shift toward popular restaurants, experiential tenants and gathering places such as barbershops that can all boost traffic to their co-tenants. 

“For instance, Grays Banana Pudding, Keys to the City and The Bléu Kitchen are all retailers based in California that recently opened expansion spaces in Las Vegas and have rejuvenated shopping plazas because of the customer mix they bring by way of Instagram,” she said. 

Health And Wellness Has An Opportunity To Reclaim Stronghold

Prior to the pandemic, boutique fitness studios such as cycling, barre and CrossFit were filling up retail spaces across the country, including mall vacancies, and even clustering together so consumers had a mix of fitness choices in a concentrated area. Other spaces that catered to holistic wellness, such as chiropractors and specialty health spas, were also growing. During the pandemic, as people shifted to at-home fitness offerings and self-care, gyms and personal care studios took a temporary hit.  

Today, with widespread vaccine availability and fewer Covid-19 cases in many cities, fitness and personal care are seeing a resurgence. 

“People are returning. In fact, personal trainers are a big segment seeking to lease space at the moment,” Steinberg said. “People seem to be craving individualized approaches to fitness. Specialized fitness, such as mixed martial arts, is also growing.”

In addition to consumer wellness retail, medical retail is another subsector that is heating up. Jessica Jarosz of Century Realty/CORFAC International in Pittsburgh recently completed a retail redevelopment lease anchored by an ophthalmology group. Coming out of the pandemic, specialized and elective care providers may have a greater need to have their own safe and appealing spaces in hospitals or other larger healthcare buildings.

New Trends And Surprises 

Leasing may be less volatile in 2021, but the retail sector still has some surprises. For example, restaurant leasing has picked up despite the challenges restaurant owners faced last year.

“I am seeing a strong surge from virtual brands that were previously only operating via delivery from ghost kitchens,” Rustan said. ”The hardest thing in any business is to build up a recognized brand. These restaurants have cultivated a strong following and are now looking to take those brands — and customers — into traditional brick-and-mortar locations."

Some trends are more location-specific. 

“In Las Vegas, casino retailers are offering pop-ups and short-term leasing more regularly,” Steinberg said. “I’m also seeing traditional office users like law firms and insurance moving to retail spaces for increased visibility.” 

After a difficult year, the country is fully open for business, and people are eager to get out of their homes and return to restaurants, stores and personal care spaces. With some creativity, market research and observation, brokers can identify the gaps in their communities and entice retailers to be part of the rebound. 

This article was produced in collaboration between CORFAC International and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].