In May, the retail industry received hard evidence of the ill-effects of COVID-19 when Datex, a supply chain software company, tracked more than 1,000 shopping centers and tens of thousands of retail stores and found that just 42% had paid rent at the beginning of the month.
Ever since then, Datex CEO Mark Sigal has kept close tabs on the pandemic’s battering of brick and mortar. We called upon him to hear his analysis of one of the toughest years in retail.
Mark, the sectors of retail real estate have been the same for some time: enclosed malls, power centers, grocery-anchored neighborhood centers and, more recently, town centers. Will we see new retail center models emerge due to COVID-19?
"COVID-19 made lifestyles difficult, but I think it underscored how important physical retail is for people. So I think that what you’re going to see in all centers are a lot more open-air benefits created for visitors. During the pandemic, we’ve see every kind of center add outdoor seating for restaurants, and that’s something that will remain. I think we’ll see components in lots of centers that recall the outdoor cafés of Paris or London. We will also see outdoor settings appear that will allow centers to incorporate community events."
Will center designs change entirely to better accommodate things like curbside pick-up, car traffic flow, and gathering spaces?
"I think this will play out a couple of different ways. The DoorDashes and Instacarts have grown because of the flu, but we’re going to see retail centers doing a lot more things to make people order online and get delivery or pick up at a store curbside. There will be hybrid areas in centers where parking will be dedicated to people who are just coming in to pick something up. It’s a better experience for the consumer if you make this seamless."
You’ve remarked that the pandemic has separated the haves from the have-nots. In what ways?
"As we know, retail has always been cyclical. There are always ascendant and descendant categories. Fitness and beauty centers are ascendant. And then you have long-popular retail chains like the Gap that had been struggling going into the pandemic and are now closing more stores or pulling out of malls.
"But the difference between normal business cycles and what happened during COVID-19 is like the difference between hurricanes and tornados. Hurricanes are largely predictable; tornados are not. Where they touch down is random. What happened during the pandemic was like a tornado. Movie theaters, salons, restaurants were hit in bad way. It’s not something we’ve seen before. Ninety days after COVID-19 kicks in, companies are filing for bankruptcy. Or they’re renegotiating with landlords for worse terms than they had before, like paying percentages of sales."
The pandemic has forced all physical retail chains to get more serious about becoming omni-channel. In what ways will retail centers help them adapt?
"One path is physical retail making a more formal linkage with operators like Shopify, which has lot of customers that are pure play e-com. Secondly, shared lockers. Amazon has pick-up lockers at many retail locations. Why shouldn’t centers set up the same thing? Mediocre retail is dead."
Do you think we’ll see more direct-to-consumer retailers establishing physical presences?
"The one huge advantage that the pure play folks have is that they know where their best consumers are at the ZIP code level. If I know I do well in certain in certain geos, my opportunity to establish hybrid retail businesses in them is good. Zara is a great example. Runway to retail in three weeks. Fresh. Small lots. Event associated with it. Don’t have to discount it. I think we’re going to see a lot of e-coms going into centers to build a direct physical relationship with their local consumers."