Plentiful financing offered to retail chains stymied by the COVID-19 pandemic allowed many whose businesses had already been declining to hang on to life in 2020. But 2021 could be their downfall.
That’s the appraisal of Doug Greenspan, a managing director at A&G Real Estate Partners, which performs retail real estate dispositions and rent reductions.
"Those businesses that were struggling pre-pandemic are going to surface quickly," Greenspan said during a panel discussion hosted by the Turnaround Management Association. "Unless they can restructure out of court, the pandemic is likely to push them over the edge."
He noted that real estate property valuations had not seen any significant downturns in years due to the compression of cap rates, but that declining retail property values during the pandemic caused vacancies to rise. As a result, distress levels and bankruptcy filings in 2020 were lower than what financial analysts had expected. That will even out this year, Greenspan predicted.
"Those businesses that were struggling pre-pandemic are going to surface quickly. Unless they can restructure out of court, the pandemic is likely to push them over the edge," he said.