Cushman & Wakefield analysts are seeing “a strong rebound scenario” beginning to take shape for the retail sector after retail market conditions improved in the first quarter of 2021.
The double dip of broadening vaccine distribution and another federal stimulus helped motivate shoppers toward physical retailers during the year’s first three months, pushing total Q1 retail sales to a whopping 34.7% gain year over year, according to Cushman & Wakefield’s latest U.S. National Retail Market Beat report. The commercial real estate services firm expects that robust consumer spending pattern to maintain throughout 2021, citing almost $2.6 trillion in excess savings that Americans have built up, wary of spending during the earlier stages of the COVID-19 pandemic.
Middle- and higher-income households, particularly, have built large savings cushions over the last year, which bodes well for retail assets that sell goods and services that can’t be bought online. That includes high-end restaurants and grocery stores, electronics, entertainment and experiential concepts — all segments Cushman & Wakefield labeled as retail areas that could be “supercharged” as the pandemic finally dissipates.
Cushman & Wakefield’s optimistic projection was boosted by an encouraging first quarter for retail properties. The period saw net absorption of -740,000 square feet nationwide — still in the red, but by far the smallest negative absorption seen by the national market since the COVID crisis started. Leasing activity for the quarter was at 25 million square feet, a modest backtrack year over year but above the low set during last year’s Q2.
Meanwhile, the swell of e-commerce observed during last year’s lockdowns has already started to normalize, Cushman & Wakefield reported. Online sales as a percentage of core retail sales soared to almost 25.0% during the middle of 2020, bounding from 17.0% in 2019. While much of that improvement is likely here to stay considering the gains in e-retail even before the pandemic, the online sales share has begun to regress, receding below 22.0% in 2021’s first quarter.
And retailers, it appears, are angling to take advantage of any potential preference swing back toward brick and mortar. Cushman & Wakefield is tracking 11,700 new stores set to open in 2021, most in three years.
It bears observing that Cushman Wakefield’s outlook does note that, while there’s optimism for a retail sector recovery, such a rebound is likely to be uneven and will take time to complete. As we’ve seen throughout the COVID-19 crisis, the only certainty during the pandemic is uncertainty; any large spikes in coronavirus cases across the country, along with any correlated restrictions, would certainly dampen encouraging projections. Nevertheless, for the first time in a while, the beleaguered retail sector has logged a sustained period of improved performance, signaling more progress ahead and a light at the end of the COVID-19 tunnel.