Retail and Real Estate Industry Quarterly Report: 2020 Q2

Retail Real Estate Industry Report

Q2-2020

ICSC’s Quarter 2 Report details how COVID-19 has forced the retail and real estate industry to continue to adjust to a new normal. The start of the second quarter saw the height of the pandemic’s upheaval, causing economists to officially declare a recession. Despite the effect of the global pandemic, ICSC's latest research reveals an optimistic future for both the industry and the country. Scroll through ICSC’s 2020 Quarter 2 Report in full, or click to the individual sections using the navigation below:

Inventory | Retail and Food Services Sales Performance | U.S. Employment Situation U.S. Shopping Center Perform n |

Inventory

The shopping center landscape has grown increasingly more diverse in terms of center types, especially in neighborhood and community centers. This is a well-established trend that can be traced back over 40 years. Click below to see the difference in shopping center inventory between 2020 and 1980.

Shares of Total Shopping Center Count by Type

A Deeper Dive: The GLA for Open-Air Centers has nearly tripled since 1980

Retail and Food Services Sales Performance

Retail and Food Services Sales* Performance and Overview**

Non-Store Retailers

Food-and-Beverage Stores

General Merchandise Stores

Food Services and Drinking Places

2020

60.0%

(-4.5 pp.)

27.5%

(+1.4 pp.)

8.4%

(+1.6 pp.)

1980

64.5%

26.2%

6.9%

Gross Leasable Space in open-air centers grows from 2.3 billion square feet in 1980 to 6.5 billion square feet in Q1 2020.

Partly as a result, those centers’ share of GLA compared with all shopping centers increased from 78% in 1980 to 86% in 2020.

* Seasonally adjusted ** Excluding motor vehicle and gasoline

78%

81%

83%

85%

86%

1980

1990

2000

2010

2020

U.S. Dollars (Millions)

Sales

Month-to-Month Growth

April

May

June

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Q2-2020 Overall Sales

$1.1 Trillion

-6.4% Q-o-Q

Health and Personal Care Stores

Source: U.S. Census Bureau

U.S. Employment Situation

Following a loss of 2.3 million retail jobs in April, roughly 1.2 million retail jobs were collectively added in May and June. Similarly, the food services sector lost 5.4 million jobs in April, but gained 2.9 million during the following 2 months.

U.S. Employment (in Thousands)*

U.S. Shopping Center Performance Benchmark

* Seasonally adjusted

Source: Bureau of Labor Statistics

Store-Based Retail Non-Store Retail Food Services and

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April 12,780.90 May 13,152.10 June 13,966.70

Store-Based Retail

Non-Store Retail

April 506.70 May 521.40 June 533.70

Food Services and Drinking Places

April 6,227.10 May 7,688.30 June 9,164.80

April

May

June

Source: NCREIF

Consumer Engagement

Source: ICSC Research

Shares of Monthly Expenditures by Channel – Q2-2020

Share of Total Monthly Expenditures at Physical Establishments (Open-Air + Freestanding + Malls)

Source: ICSC Research

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Northeast

Midwest

South

West

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West

Million

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South

Million

125

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Midwest

Million

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Northeast

Million

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pp.=percentage point

Strip/Convenience Neighborhood Community Other

Malls, Lifestyle, Power Center, Theme/Festival, Outlet/Value Center

CONTENTS

Inventory

Retail and food services sales (excluding motor vehicles, parts and gasoline) dropped 6.4% in the second quarter from Q1. After a large monthly loss in April, however, sales rebounded in May and June.

Source: CoStar Realty Inc.

On a rolling 4-quarter basis ending Q2-2020 basis, base rents at shopping centers across the nation only increased 0.2% during the last 4 quarters compared with the 4 quarters before that, due to a 7.7% decline in Q2-2020. Net Operating Income at shopping centers across the nation decreased 4.2% during the past 4 quarters, largely due to a 23.0% drop in Q2.

Consumers shifted where they spent money in Q2 (June) compared to Q1 (March), likely a result of the pandemic. As the shares of total expenditures going to open-air centers and malls slightly decreased from March, the portion going to freestanding establishments and online increased.

3.3%

Online via brick-and-mortar retailer

2.7%

Online via Internet-focused retailer

15.8%

Malls

33.3%

Freestanding Establishments

44.9%

Open-Air Centers

Physical Stores

71%

Thematic Survey: Post-COVID-19 Trends

The largest share of consumers would feel comfortable visiting physical stores the soonest, followed by open-air centers and restaurants.

Consumer Economic Sentiments

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Q2 Sales by Tenant Category

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Inventory

Retail and Food Services Sales Performance

U.S. Employment Situation

U.S. Shopping Center Performance Benchmark

Consumer Engagement

Thematic Survey: Post-COVID-19 Trends

U.S. Shopping Center Performance Benchmark

Thematic Survey: Post-COVID-19 Trends

Consumer Engagement

Share of U.S. consumers who will be comfortable visiting establishments two months after the COVID-19 National Emergency lifts or sooner.

The trend is exemplified when looking at the growth of open-air centers over the past 4 decades.

Month-to-Month Percent Change

Building Materials and Garden Equipment/Supplies Dealers

Open-Air Centers

66%

Restaurants

61%

Personal Services

53%

Malls

51%

Hotels/Tourist Site

43%

Other Leisure/ Entertainment Venues

43%

Gyms/Fitness Centers

42%

Movie Theaters

40%

Stadium/Concert Venue

34%

(Average of 8 survey waves covering 16 weeks.)

Between April and early June, economic sentiments among consumers increased or remained the same. After that, economic sentiments began to decline as the spread of COVID-19 increased and more people tested positive in Southern and Western states. Most recently, consumer sentiments improved.

Percent of U.S. Adults

April 10-12 Survey

April 24-26 Survey

May 8-10 Survey

May 22-24 Survey

June 5-7 Survey

June 19-21 Survey

July 3-5 Survey

July 17-19 Survey

Economic situation will "IMPROVE" over the next 12 months

Current economic situation "BETTER" than 2 weeks before

3.9%

Online via brick-and-mortar retailer

3.3%

Online via Internet-focused retailer

13.5%

Malls

35.2%

Freestanding Establishments

44.0%

Open-Air Centers

Shares of Monthly Expenditures by Channel – Q1-2020

Consumers allocated a slightly smaller share of their total dollars to goods in June (Q2) compared to March (Q1) when they were stocking up on merchandise early in the pandemic. As a result, a greater share of monthly expenditures went to dining and other services.

Source: ICSC Research

Drinking Places

August 14-16 Survey