What Does A(nother) COVID Spike Mean for Retail Real Estate?

Winter is arriving early this year for the economy, no matter what the thermometer reads. With the coronavirus infection spreading wildly throughout the country, people are returning to their home bunkers and economic activity is again slowing—and the retail sector will bear the brunt of the impending damage.

You wouldn’t know it from the headline retail sales figures though. After plunging at record rates in the early weeks of the pandemic, retail sales (seasonally adjusted) have climbed back almost as fast and now sit more than 4% higher than before the recession. These gains are all the more remarkable in the middle of a recession when nearly twice as many people are unemployed now than at the beginning of the year, and millions more workers have dropped out of the labor force or otherwise experienced sharp income declines.

But look beneath the topline trends and conditions are not nearly so positive, particularly for physical retailers. Sales grew by less than 0.3% in October, after averaging 1.4% gains over the last three months. Meanwhile, sales at the nation’s shopping centers actually declined by 0.6%—their first monthly decline since April—once we exclude e-commerce and sales at other “nonstore retailers.”

With the uncontrolled spread of COVID infections, just as Americans face the expiration of unemployment benefits and other income support from the CARES Act, conditions are likely to deteriorate further in the coming weeks. Already credit card transactions and other high-frequency spending data show are consumers are pulling back and staying in. Another stimulus package from Washington would help, but likely will arrive too late to save the holiday shopping season—if a new aid package comes at all.

This article was published on Propmodo on November 28, 2020.