2021 Projections for Retail Real Estate

It’s no secret that retail has been one of the hardest hit sectors in the commercial real estate market due to the pandemic and ensuing recession. However, through all of the challenges, it is still weathering the storm and proving its resilience.

One of the keys to retail’s ability to push through the extreme challenges of 2020 and 2021 is the concept of daily needs retail. This is a term that was coined well before the pandemic, but its definition has changed significantly since. Originally, it referred to businesses such as hair salons, nail salons, coffee shops and other service-driven retail businesses.

However, since the dawn of the pandemic, that definition has shifted towards things that have proven to truly be daily necessities, such as grocery, daycare, fast food, gas stations and the like. These businesses have helped prop up the sector through the chaos.

The other key to the survival of retail up until this point is adaptation, and it will continue to be crucial going forward. The retail sector is no stranger to adaptation. Pre-Covid, retailers were forced to adjust their business models to face the challenge of online shopping trends. 

But the adaptation required to survive the pandemic’s economic destruction was and is something completely different. Landlords and tenants are working together to accommodate for things such as social distancing and hygiene requirements, as well as helping facilitate set up of things like curbside pickup, along with other measures to entice consumers to return. They must continue to work together through the continual changes in regulations. And, obviously, property owners and tenants will also need to continue to work together in regards to negotiating rent relief and setting the businesses up on a trajectory to rehabilitate.

Despite the trauma that retail real estate has endured, there is still a strong demand for retail. As we approach a hopeful end of the pandemic, pent up demand for retail and entertainment is likely to support a swift recovery. 

The pandemic has also had another unusual effect on the retail sector, and that is how it has highlighted the difference between essential and non-essential retail. It will be interesting to see in the months and years to come if that has a long-term effect on what investors view as a safe opportunity.  

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