This past year, we have seen business operations turn on their head to accommodate the many restrictions set forth by the pandemic. Perhaps the most challenging market was the retail sector.
Owners scrambled to reimagine their day-to-day operations, shrink staff size and reposition their offerings just to keep their businesses afloat. As a nation, we watched month after month as businesses closed up shop, some for good and some temporarily as they waited out the harsh restrictions set forth.
Retail has been on a steady decline for the past decade, but with the pandemic, their weaknesses were fully exposed, setting the stage for the future of physical retail shops. In New York City alone, over 1,000 chain stores closed permanently in 2020, the largest loss they have seen in over a decade.
But while we did see the market suffer great loss, we have seen some success in those who repositioned their assets to meet the current needs of consumers. E-commerce was a major determining factor for those who succeeded. For example, those already set up with online sales options expanded their offerings to find success. Dine-in restaurants pivoted to prepared meals and “cook-at-home” options to move product and produce income. Ghost kitchens enabled multiple restaurant concepts to function under one roof, saving on the cost of overhead and offering delivery-only options. Curbside pickup has become a beloved new feature for consumers and retailers that are embracing this trend have seen great success.
How Does This Impact Market Values?
The commercial real estate market has traditionally been viewed as a safe, stable market and today’s activity proves that many investors still feel that way. But the way we value real estate has changed.
Let’s look at the restaurant industry as an example. Interest in traditional sit-down restaurants has diminished and been replaced by investments in quick-service restaurants. Establishments with drive-thru access or end caps in shopping centers for curbside pickup have increased in value. Investors are betting that new trends in consumer services will continue to reshape the retail industry.
Commercial properties are also seeing many changes in the types of users seeking space. Demand for industrial space is driving the demand for traditional retail and office space, especially in areas of the country that lack sufficient industrial space.
How Can Owners Better Position Themselves For The Future?
With significant changes to the market, now is the time to take a look at your assets’ performance. Take a fresh look at the value of your property and have a professional perform both property and tax evaluations based on current market conditions. Perform a thorough analysis of your operating expenses and look for areas to save, particularly in the areas of maintenance costs.
This is also a great time to look at your customer base and determine how you can better meet the needs of those living in close proximity to your business. What is the average homeowner’s salary in your area? What are the spending capabilities of those homeowners? What are the top needs of those households?
Learning more about your consumer will give you the tools to better market your business and position you for success in the coming year.
