The New Retail Renaissance

The New Retail Renaissance

hey everyone i’m back i missed making my last video since i was gone on vacation i spent a week on the big island of hawaii with my family and had a great time but for those of you who have upcoming trips planned hawaii be aware covert is spreading there quickly the luau that we had planned to attend got cancelled because one of the performers got coveted we called another low across town and theirs was also cancelled for the same reason and the local shaved ice shop that we wanted to go to also had to close because one of their employees tested positive and to top things off while we were there there were wildfires and we almost had to get evacuated from a hotel i thought we left the wildfires behind when we went on vacation it did result in some pretty crazy looking skies though in the end we didn’t have to get evacuated we did get to enjoy the beaches the hotel pool and did lots of activities that everyone enjoyed we all had fun and we were definitely glad to be able to go on a vacation for the first time in a year and a half hello investors and welcome back i’m mike lin and i’m a commercial real estate broker based in southern california i help owners of retail properties determine the value of their real estate and help them sell for top dollar and i make these youtube videos to help keep you updated on what’s happening in commercial real estate the retail industry the overall economy and the state of california today i’m going to make a different video where i’ll be taking a deeper look at a single topic and i’ll be talking about the state of chain retailers after covid in september 2019 i made a video summarizing a detailed study produced by ihl group a research firm specializing in the retail industry in their study they stated that the retail apocalypse was greatly exaggerated and we were actually in a retail renaissance where there were a lot more retail stores opening than closing ihl group repeated that study this year the research encompasses 945 publicly traded retail and restaurant chains with 50 or more locations they gathered information from a variety of sources including sec filings company websites press releases and interviews and they concluded that retail is doing very well in 2021 and is strongly bouncing back from the effects of the pandemic let’s go over the key takeaways from the report but first it’s important to remember that their study focused on retail chains not independent mom and pop businesses before we dive into the details about chains let’s recognize the devastating effects that coveted shutdowns had on small businesses it’s estimated that over 250 billion dollars of retail spending in north america switched from being paid to small retailers to larger retailers the government forced small businesses to close while allowing larger retailers many of them deemed essential to stay open over 445 000 small retailers shut down in the us and canada i’m sure that many of you who own shopping centers with mom and pop businesses had to deal with these challenges not all small businesses were able to survive even with the help of the ppp loans and other government aid but looking at retail change shows a different more optimistic view of the industry let’s take a look at the trend of store openings over the past five years here we see a trend of net openings and closings over the past five years and you can see that 2021 is shaping up to be the strongest year since 2017 with a net positive of 4 361 stores opening it’s no surprise that 2020 was the most challenging year with a net change of 6573 stores closing even before kovitt for many years we heard a lot in the news about the death of retail and the retail apocalypse it’s important to remember that news websites try to sell clicks with attention grabbing doomsday headlines and people are 10 times more likely to click on a bad news headline than on a good news headline but when you look at the overall statistics for store openings the numbers really tell a different story from the what the news headlines say and retail is really holding its own the strongest performing segment of the retail industry is restaurants which are expected to have a very strong year with a net positive of over 1500 stores opening starbucks dominoes and dunkin are the chains with the most store openings over the past five years one of the biggest challenges for all of retail and particularly restaurants right now is finding labor restaurant workers are quitting in droves thinking that they’re being underpaid and no longer want to stand on their feet all day or deal with poor working conditions recently an entire 11 person staff of a burger king in lincoln nebraska just quit all at once and they let their managers know by changing the sign outside the restaurant so while the demand is there for more restaurants to open there are certainly issues with getting enough workers so restaurants need to pay more in order to hire and keep workers and those costs are passed on to you which is why your fast food combo meal now costs over ten dollars but i digress let’s get back to the report let’s take a look at how retail is doing by segment you can see that all categories have a net positive of stores opening in 2021 with the exception of department stores which is no surprise in specialty soft goods which includes clothing stores that are often found in malls think like children’s place the gap or men’s warehouse but overall there is a net opening of 4 361 stores so which retailers are opening the most stores the dollar stores lead the way with dollar general and dollar tree as number one and number two on the list on the restaurant side of things pizza chains lead the way with dominoes and papa john’s opening the most locations both did excellent during covet last year so in summary retail growth is accelerating again and we’re back in retail renaissance mode after a difficult 2020. we’re still not out of the woods the industry is dealing with labor and material supply issues as well as the global shortage of microchips which is affecting the automotive industry many experts believe that the chip shortage won’t be resolved until the beginning or middle of next year and of course the delta variant of covit is a concern as well as it could affect foot traffic in many retail locations keeping people at home for safety even if the government doesn’t mandate shutdowns again overall i enjoyed ihl’s report and it’s great to see this research being done that gives a fair look at what’s going on in the industry and has an optimistic outlook on the future if you’d like to see the slides from their study or to buy their complete report see the link in the description below thanks for watching and i’ll see you in the next video you
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The New Retail Renaissance

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