National commercial brokerage firm JLL recently issued a report on the prospects of 13 major retail sectors coming out of the COVID pandemic.
The report, authored by James Cook, Americas Director of Research, Retail JLL and Taylor Coyne Research Manager, U.S. Retail JLL, predicts growth for the grocery, home improvement and pharmacy sectors and continued struggles for dining, sporting goods and home décor/home furnishing sectors.
JLL began its report by stating, “What we do know is that COVID-19 will impact each of the retail sectors differently. Some retailers will exit the pandemic stronger than before, forced to adapt and evolve services and operations much faster than under normal circumstances. Grocery will have fast-tracked e-commerce operations to keep up with demand during COVID-19, and some dining operations will have successfully pivoted to takeout.”
However, Cook and Coyne add, “We will lose retailers as well. Retailers that struggled prior to the pandemic with sales, like mid-priced apparel and department stores, may not return or will emerge drastically different, unable to weather months of closures.”
They note that consumer behavior has changed during the COVID-mandated shutdowns, and are now more cautious and cost conscious, but at the same time eager to return to normal.
We will highlight JLL’s analysis of several of the high-growth retail sectors and a few others that are expected to continue to encounter significant tailwinds.
Grocery
JLL notes that the coronavirus pandemic has accelerated e-commerce growth for this sector.
“Grocery has seen unprecedented demand since stay-at-home orders were mandated. Demand has begun to return to pre-COVID levels, but sales and foot traffic will remain steady,” the report states.
Grocers saw sales increase 29.3% year-over-year in March as millions of consumers rushed to the stores to stock up. People also turned to online services for the first time: grocery delivery app downloads have soared during this period.
In 2019, online grocery sales accounted for only 4.3% of total grocery sales. According to a recent survey by CommerceHub, 68% of respondents are more willing to subscribe to a grocery delivery app after the pandemic and 59% said they are more likely to use curbside pickup.
“The push for delivery and in-store pickup will impact store layouts and traffic flows within grocery-anchored shopping centers and accelerate new store concepts. Expect to see a growing number of dedicated areas for click-and-collect and delivery outside of the grocery store, and in-store areas dedicated to orders waiting to get picked up,” the report states.
Home Improvement
Another sector, like grocery, that were considered essential and remained open with restrictions, was home improvement. JLL expects foot traffic and sales to remain positive post pandemic in this key sector.
Home improvement sales grew 7.6% in March, but retrenched downward by 10% in April as consumers settled at home. JLL expects sales to rebound in the summer months as stay-at-home orders are lifted throughout the nation.
While bullish on the home improvement sector, JLL in the report, notes, “Bigger projects will be delayed though as major renovations are more costly and often require outside help. During the last recession, DIY spending exceeded professional remodeling spending as less-costly projects were favored over hiring professional contractors to perform improvements.”
Dining
The lockdowns and COVID-restrictions severely limited operations in the dining sector. The restaurant industry nationwide lost 5.5 million jobs in April. The pandemic has put tremendous pressure on the dining sector, which operates during normal times with slim margins.
JLL predicts, “Quick-service restaurants and well-capitalized fast casual restaurants will succeed as they are more adept at takeout, delivery and drive-thru.”
However, other dining niches will struggle. “Coffee shops, cafes, casual and fine dining establishments will struggle to continue operations, especially as dine-in policies require restaurants to operate at minimum capacities,” the report states.
Fitness
While fitness facilities in some sections of the country have been allowed to reopen, at press time gyms are still shuttered in New York State.
JLL describes the period from 2010-2019 as the “golden age: for the fitness sector with the number of new facilities increasing 23.5% during that period.
Post pandemic, JLL predicts, “In the short-term, social distancing will significantly reduce gym and studio capacity, impacting the fitness sector’s ability to rebound quickly. When normal operations resume, we expect demand for this sector to return, but many smaller studios may not make it.”
To access the full report, go to: https://www.jll.ca/en/trends-and-insights/research/what-in-store-post-covid
