What are the averages? Retail availability remains is currently sitting near 10-year lows, as per CBRE’s Q3 2021 Retail Figures report. The turbulence of COVID-19 was nowhere near what we saw during the Great Financial Crisis. That was an extremely difficult combination, a boom of retail development followed by a two-year recession. In comparison, our current situation is much more manageable.
Rent growth tells a similar story. According to CBRE’s Econometrics Advisors, retail rent growth went negative in 2008 and stayed there until 2012. Since then, rent growth has been modest, but steady. Post-pandemic rent growth has accelerated and is expected to continue. Rent growth for open-air retail centers is expected to average 2.3% annually from 2022 through 2025.
All in all, brick-and-mortar retail spaces are elevating their productivity. The boom within retail supply early in the century did a number on the sales per sq. ft. of existing assets. However, the recession in 2008 almost immediately cut off the retail development pipeline, which never again has risen above long-term completion averages. This allowed retail sales to catch up with supply. On an indexed basis, sales per sq. ft. in retail have almost completely recovered to those early 2000’s levels, and I believe they could be surpassed in 2025.
From 2010 until 2020, retail sales grew by 42%, while retail supply grew just 4%, as per a recent study by CBRE Research. Online sellers fueled much of that growth, but brick-and-mortar is now rapidly benefitting from omnichannel activity. M-commerce—buying on mobile phones—has accelerated buy-online-pick-up-in-store and eMarketer predicts an increase of 19% in m-commerce for the 2021 holiday season, totaling upwards of $97 billion.
Retailers still face challenges this holiday season. They’re forced to offer inflated hourly wages and signing bonuses to entice seasonal workers. Supply chain issues abound. Retailers are attempting to negotiate the obstacle by inflating inventory or are attempting to spread the shopping season over a longer period of time. Some large retailers are even hiring their own cargo vessels in hopes of bypassing port congestion.
Concerns aside, the 2021 holiday season is shaping up to be an exciting one. It is expected to generate record levels of sales volume and go a long way toward restoring retail confidence for 2022 and beyond. This December returns us all to the gift-giving, coffee dates, dinners, reunions, and camaraderie robbed from us in 2020. But, for this holiday season and beyond, retail is back and open for business.