In its report focusing on 2020’s historic first quarter, JLL observed that retail and real estate were among the industries hardest hit by COVID-19. Sales at clothing and accessories stores were down more than 50% and net absorption of space in malls plummeted 500% in comparison to last year’s first quarter. We asked Greg Maloney, president of JLL’s Retail Americas division, to go beyond the numbers and give us an indication of how this year might pan out.
Malls are going through a terrible time, Greg, yet when we looked at your report we noticed that neighborhood centers—where supermarkets have been posting huge numbers during the pandemic—had a vacancy rate two points higher than malls in Q1 at 7.2%. Why is that?
This is a situation we deal with all the time. When people talk about vacancy rates, they always like to refer to malls. But the truth is that malls are generally the most leased retail properties. They’re bigger properties, but there’s fewer of them. So it’s generally true that neighborhood, power, and strip centers have higher vacancy rates.
The report predicts that, across the entire retail real estate sector, the vacancy rate will continue to rise through 2021 to almost 6%. States are beginning to let more businesses re-open, but is it JLL’s position that the rebound is going to be a slow one?
I’m based in Atlanta where we’re in the fourth week of phased re-openings, but the marketplace is still very cautious. There are still requirements about social distancing, and until the state lifts everything and people can think they can do what they want, I don’t think a lot of people are going to go back to restaurants.
The Boston Globe surveyed readers about that, and they were split into four large but distinct groups, with one saying they’d be back as soon as possible, another wanting to wait for a month after the official re-opening, another waiting three to six months, and 22% of them saying they’d hold out from six months to a year.
Yes, the attitudes are spread across the board. It reminds me of the baseball strike and a survey like that one that was broken into four quarters. A lot of fans were ready to go right back to games, a lot would wait a few months or maybe a year, and some said they’d never go back. But what’s not reported is that the 25% that said they’d never go back never liked baseball anyway.
So there’s a lot of uncertainty about the timing of a recovery?
The majority of people in the industry are shocked. They can’t believe what happened and don’t want it to happen again. If the customer doesn’t feel safe, the customer is not coming back. We’ve told our clients to look forward to what’s going to happen in the fall. We’re so much more educated now, so much more adaptive. If this should happen again, there’s not going to be these mass closings.
Do states and municipalities need to be more involved in helping retail centers during a crisis like this?
They can provide help where needed, but when it comes to solving the big problems of getting people back out to the marketplace, we need to do that. As landlords, we need to look at what we need to do to avoid this happening again.