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Retail Takes First Steps to Recovery as Economy Reopens

May 19, 2020

If retailers could just go to sleep for the next year or so they would wake up to a world that is far more accommodating. Of course, that is not possible and it is without a doubt that the next 12-to-24 months will be a hard slog. But at the end awaits an environment in which certain retailers can expect to flourish. That is the message panelists on a Marcus & Millichap webinar delivered as they talked about the industry’s future.

There will be a rebirth for retail after the current crisis plays out, said Hessam Nadji, president and CEO of Marcus & Millichap.

Some of the seeds of that rebirth are being planted now, he continued, noting that trends that maybe would have taken three to four years to materialize before the pandemic are now accelerating. “Many people who hadn’t shopped online are now shopping online. This will have implications that are maybe negative in the short term but will be positive in the long term.”

Also, retail entered into this crisis from a relatively strong base. The conditions in January, while they seem so far away and distant, do matter now, Nadji said. “The underlying strength of retail sales and household balance sheets had all been strong compared to the last time we went through a shock. This will come into play at some point. Also, the stimulus will play a role in retail’s recovery.”

More reason to hope: an oversupply of retail has not been an issue compared to the last crisis, Nadji said. “If anything supply will be even more constrained. And the industry has not overleveraged.”

That said, it is important to not paint the entire industry with the same brush, he continued. “You don’t want to generalize, but instead assess every situation for what it is.”

Right now occupancies and other fundamentals are uncertain and must play out, Nadji said. The stronger tenants have been able to pay rent but many retailers in the lower tiers have not.

Indeed, another factor that will determine the post-pandemic shape of retail are the actions landlords are taking now to work with their tenants.

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