IPA Finds Optimism Amid Retail Weakness

Year-end retail sales could top 2019's, according to Institutional Property Advisors.
Image by Arturo Rey via unsplash.com

Despite the spotty return of shoppers to nonessential stores, brick-and-mortar retailers have several reasons to hope for strong holiday sales, according to a new fourth-quarter report from Institutional Property Advisors.

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Numerous store closings and the ongoing shift toward online shopping continue to reshape brick-and-mortar retail, according to IPA’s special report, Beyond the Global Health Crisis: Retail.

Malls have long been struggling to maintain occupancy levels, and the health crisis only accelerated the trend, according to the report, which also notes that older malls remain more vulnerable.

Nonstore retailers saw a 22 percent increase in retail sales from February to September, “and a significant portion of that shift could be retained after the pandemic is over,” according to IPA’s study.

The return of shoppers to nonessential retailers has been uneven, the report notes, and that has been driven in large part by variations in state-level restrictions. Apparel, fitness, leisure, spa/beauty and casual dining establishments in particular have been mostly closed, because of shelter-in-place orders. States with more severe restrictions, such as California and New York, are lagging at recouping retail foot traffic.

In contrast, IPA says, “Less densely populated areas tend to be further along, while the Sun Belt as a whole is outperforming.”

In some states, other factors too are in play. Though Florida has some of the most relaxed restrictions, “the state’s older population is shying away from nonessential retailers,” IPA observes.

Happier holidays?

Despite higher unemployment now than in 2019, IPA says, there’s reason to believe that upcoming holiday season retail sales could top last year’s.

One factor is that after the election, “a deal to inject a new round of stimulus could move forward without political entanglements … a new round of checks sent to all Americans could provide a boost for retailers.” Similarly, a bipartisan effort to resume unemployment benefits, perhaps retroactively, would also put cash into the hands of consumers who are looking for jobs or waiting for their former positions to return.

In addition, a paucity of travel and entertainment options could encourage people to shop more. “If these factors come together, holiday sales could outpace the 4 percent growth recorded last year,” IPA suggests.

Read the full report by Institutional Property Advisors.