Retail Crisis Hits Small Shops the Hardest
- Sep 02, 2020
The retail sector continues to struggle as ongoing public health restrictions stifle operations of shops and restaurants in many states —even as total retail sales rebounded in June. California’s latest stay-at-home order, for example, mandates that bars, wineries and movie theaters must remain shuttered. In New York State and Connecticut, restaurants can resume dine-in service at 50 percent capacity—except in New York City, where indoor dining is banned.
READ ALSO: US Retail Sales Rose Again in July
Property trades have remained sluggish amid the uncertainty. A survey by NAIOP, the Commercial Real Estate Development Association, found that 79.6 percent of U.S. members surveyed had witnessed no new retail acquisitions or development in July. Moreover, 51 percent of respondents said that at least one-quarter of their retail tenants had not paid rent in full and on time by midmonth.
While large chains—including Dunkin’, IHOP and Starbucks—are downsizing their store portfolios, the one-store companies will likely pay the highest price for the turbulence. Retail consultancy IHL Group projects that more than 443,000 store locations will close in the U.S. due to the effects of COVID-19, with the vast majority of them being small retailers from restaurants to hair salons. The figure includes nearly 338,000 one-store companies and just over 50,000 chains with two to nine stores.
But pent-up demand could give mom-and-pop retailers and their landlords a new lease on life once the crisis passes. “There’s never been a worse time to be a small retail business or a small restaurant in America than right now, but in six months there’ll never be a better time to start one,” said IHL Group Founder & President Greg Buzek during a recent webinar.
Sector Insights rotates among office/medical office, industrial, retail, multifamily, self storage and hotel/hospitality.