The spread of the novel coronavirus (COVID-19) across the United States has caused all but the most essential businesses to shut down temporarily. Although designations often vary from state to state, the life-sustaining businesses that are currently operating across the country include: supermarkets and grocers; farms and food manufacturers; restaurants (take-out and delivery only); hospitals; healthcare providers (like dentists, veterinarians and physician offices); pharmacies (including CVS); banks and post offices; gas stations and convenience stores; and automotive repair shops.
Many of the strategies being implemented by these retailers—like curb-side pick-up—will most likely continue as customers return to work in the coming weeks and months. Large national tenants are better positioned to weather the storm of COVID-19, but the same cannot be said for neighborhood retailers. Each sector of the commercial real estate market has been affected in different ways. Let’s take a look at how the pandemic is affecting three key sectors: convenience stores, dollar stores and shopping centers.
COVID-19 Impact: Convenience Stores
Due to “shelter in place” orders, many consumers are looking to their local convenience stores for fuel, food and grocery items. Convenience stores have become a go-to for shoppers who want to avoid crowded areas and understocked grocery stores. According to the National Association of Convenience Stores (NACS), 52 percent of convenience store grocery sales have increased during the pandemic, despite the fact that fewer people are leaving their homes.
Convenience stores are resilient assets during economic downturns. Additionally, convenience store retailers were quick to address changes related to COVID-19 in their stores. These retailers continue to pivot and adjust as needed, from offering more items that can be taken home (pre-assembled meals, bulk items and toiletries) to removing self-service stations.
COVID-19 Impact: Dollar Stores
Rural and suburban communities have long relied on retailers like Dollar General and Dollar Tree for affordable, convenient household essentials. Because of this, the discount retail market has proven resilient throughout the COVID-19 pandemic. Their unique real estate footprint, coupled with lower price points, put discount and dollar store retailers at a competitive advantage during times of economic downturn.
Because of COVID-19, many consumers are flocking to discount retailers due to strained finances. Dollar stores are a vital, consistent source for inexpensive staple items, and most accept SNAP benefits. While many retailers are struggling to combat the negative effects of “shelter in place” orders, dollar stores have seen a rise in sales. The market for these discount retailers is strong as tenants see continued demand from both new and existing consumers.
COVID-19 Impact: Shopping Centers
Shopping centers have seen a decrease in foot traffic and an increase in vacancies over the past decade due largely to a change in consumer spending habits. The COVID-19 pandemic has created a new set of challenges for both large and small shopping centers. “Shelter in place” orders mean that foot traffic has become virtually non-existent within shopping centers that do not feature essential businesses like grocery stores or pharmacies.
Open-air shopping centers anchored by grocers, drug stores or home improvement stores should expect gains during the pandemic as these tenants have all been deemed “essential.” Customers have begun to visit their local brick-and-mortar grocery stores because of disruptions to the supply chain for many online and warehouse club retailers. In contrast, regional indoor malls and unanchored strip centers will likely experience the most distress during this economic downturn.
How can Ground + Space help?
The team at Ground + Space are committed to providing up-to-date information and best-in-class services to clients during the COVID-19 pandemic and beyond. The market changes daily, so please contact one of our brokers for specialized guidance during this time.
Are you interested in maximizing your return on a commercial real estate investment? Ground + Space is a leading commercial real estate firm that specializes in single-tenant and retail NNN investments. Contact Michael Zimmerman or Brett Sheldon today to find out more about our current listings and our superior services.