While an anxious national media reports on the retail apocalypse, spiking vacancy rates and big-name bankruptcies, perhaps it’s time for cooler heads to shift their focus squarely to the winners in the present disruption. Doom and gloom sells newspapers, but the list of prospering brands is long, and growing, as consumers adapt their shopping habits both to e-commerce revolution, and the current COVID crisis. Big wins by clever and opportunistic brands is the most under-reported story in retail today.
Indeed, the current state of affairs in the economy has created a new set of darlings in retail, as select retail and dining brands have demonstrated themselves to be both essential and internet-resistant. Expect that savvy commercial owners will be re-positioning their tenant mixes going forward to maximize the stability and success of their assets around these winning brands.
Grocery stores have clearly re-established themselves as the most essential and implacable of anchor tenants, posting soaring sales and record profits as consumers pare back travel and dine at home. Look for a broader and deeper array of grocery store offerings, in smaller sizes and unconventional locations to play out in retail in the 2020’s.
The classic grocery store co-anchor, the pharmacy, has demonstrated itself to be equally internet resistant, while the elevated safety and security that their frequent drive thrus offer have made pharmacies an easy winner in the COVID era. Prescription and over the counter medicines, as well as paper products and cleaning products all represent regular visits to the local pharmacy.
Hardware stores, home improvement big boxes and large format general merchandisers have all qualified as essential, while also benefitting from consumers staying at home, working from home, and consequently working on an array of home improvements, home office set ups, etc.
Drive-thru restaurants, coffee shops and QSRs have proven themselves able to generate as much, or in some cases even more revenues, than they were achieving in the pre-COVID paradigm. As traditional dine-in establishments have closed or reduced capacity with outdoor dining only, drive thrus have filled the void with hungry consumers and kept their cash registers ringing.
Likewise, brands that have adopted mobile ordering and smartphone apps, or marshalled proximate parking space for the mobile customers and delivery drivers have been able to differentiate themselves and align with the needs of consumers in the changing market environment. Dunkin’, Sweetgreen, Chipotle and Chick-fil-A are among the long and growing list of brands that have nimbly met changing consumer habits.
Other winners in retail? Garden centers and outdoor furniture retailers have benefitted as consumers spend money on their homes, instead of flying to Hawaii or Europe this summer. With less flying comes more driving, and gas stations and their C-stores and car washes have kept on humming. Add to these other crisis-resistant concepts including banks and credit unions, urgent care clinics and collision repair, and a picture starts to form on how tomorrow’s landlords will curate the internet-resistant, crisis-resistant tenant mix.
Dramatic and fast changing market conditions are quickly serving to sort out the new winners in retail. Look for savvy REITs, investors and owners to re-position their assets around these new winners to collect a bigger slice of tomorrow’s commercial rent stream.
About John Cumbelich & Associates
John Cumbelich & Associates is a San Francisco Bay Area based firm that provides commercial real estate services to Fortune 500 retailers and select owners and developers of retail commercial properties. The firm’s expertise is in developing store networks for retailers seeking to penetrate the Northern California marketplace and the representation of premier Power Center and Lifestyle developments.