Jimmy Johnson, former head coach of the Dallas Cowboys, was once asked why he always drafted the fastest runners available. His reply, “You can’t coach speed.”
2020 has changed the game for real estate investors. Due to the pandemic, retail shoppers have moved online at an accelerated rate – increasing the demand for warehouse space and decreasing the demand for brick-and-mortar storefronts. The retail industry and consequently the commercial real estate industry may be altered forever by the pandemic. Retailers are succumbing to the dominance of e-commerce and scrambling to salvage increasingly irrelevant physical shopping space (Maheshwari, Sapna. New York Times, “As Customers Move Online, Shopping Is Forever Changed”).
The forces propelling online shopping were set in motion long before the pandemic; however, the decline of many brick-and-mortar stores and the simultaneous growth of e-commerce in the past seven months is like watching the industry’s evolution, and its impact on the broader economy, in fast forward (Maheshwari, Sapna. New York Times, “As Customers Move Online, Shopping Is Forever Changed”). These changes are forcing commercial real estate professionals to reconsider long standing assumptions about human behavior built into the processes and financial models used to matriculate real estate investment.
What can we learn from these changes in real estate investment patterns? How do these new patterns change our current understanding of the typical real estate investor? How should we react in the face of the COVID-19 pandemic and should we assume that these changes are going to last after a vaccine is released?
“Covid has pulled forward five years of fallout into an 18-month period,” said Vince Tibone, a senior analyst covering retail for Green Street. These changes in real estate investment patterns have allowed us to better understand human behavior in all geographic locations.
Walmart reported 79% growth in ecommerce sales in Q’3 2020
Target reported 155% growth in ecommerce sales in Q’3 2020
Amazon reported 37% growth in sales in Q’3 2020 with profit up 200%
Retail executives said that staggering growth was not a fluke of the pandemic lockdowns, but the result of a permanent shift in how people shop (Maheshwari, Sapna. New York Times, “As Customers Move Online, Shopping Is Forever Changed”).
Many malls are teetering as tenants reduce the number of stores, fail to pay rent or exit through bankruptcies. Retailers that filed for bankruptcy this year include J.C. Penney, J.Crew, Brooks Brothers and Neiman Marcus (Maheshwari, Sapna. New York Times, “As Customers Move Online, Shopping Is Forever Changed”).
Similar to coach, Jimmy Johnson, companies need to be fast in their response to COVID-19. Those who can adjust their strategy must do so if they want to utilize this opportunity. Propertys has the technology to enable clients today to observe human behavior both online and offline, and pair this data with actual demographic & psychographic profiles at a household level. Propertys ‘location pixel’ and ‘BehaviorScape™’ products allow retail clients to capitalize on this transition online by giving them the data needed to make quick and informed decisions.
Does your current data and processes allow you to capture this moment? Propertys can help.