Avison Young's commercial real estate blog
Retail in the New York metro area in the age of COVID-19April 20, 2020
This is what working from home looks like in the Glodowski household: I am working from my home office (bed), my wife set up a makeshift office in our family room and our assistant (2-year-old daughter) is “helping us.” By helping, I mean she’s playing with air pods and watching “Bubble Guppies” – anything to distract her is acceptable parenting in our book since we’re still trying to conduct business as usual. We have been socially distanced – our gym has closed, our daycare has closed, taking the subway seems like asking for trouble – we are home, getting outside just once a day, and well…it is not business as usual.
Public sentiment seems to be that we’re just in the infancy of the COVID-19 virus and its effects. While most of us haven’t been afflicted by the virus we’ve all been affected. As a broker, I spend most of my time selling retail properties, a sector that will undoubtedly face more changes, challenges and uncertainty piled on top of an already rocky landscape. We all can imagine what might be in store, and I don’t pen this article to add to the negativity, rather I believe there could be a silver lining once the dust settles. In fact, I see forces at play that will promote the retail market and make retail a strong asset class in which to invest, including trends already in motion before anyone had heard of COVID-19:
- $2 T Economic Stimulus – The government passed a $2 Trillion Stimulus Aid package and $350 million is earmarked specifically for keeping small businesses afloat. Any business with fewer than 500 employees can use these funds to pay rent, maintain payroll and keep their employees. While the money that will be injected into these businesses is not intended to sustain them in the long run, it is a critical band aid that will enable many of them to heal and remain viable into the future.
- Grocery Store Adaption – Fairway’s Chapter 11 Bankruptcy hit the newswires in January. It’s been reported that Amazon will take over two Fairway locations in New Jersey and one in Brooklyn and ShopRite will take over six stores in New York City. We’ve seen firsthand the importance and strength of our grocery stores over the past few weeks as staple items fly off the shelf. Amazon, ShopRite and Target, which is opening smaller format stores (15,000- 35,000 SF), continue to believe and expand in the New York Metro area. Their continued confidence and belief in the shopping “experience” will be a boon to neighborhoods and speaks to their belief that the New York Metro area remains viable over the long term
- Companies are Hiring! – Companies such as Walmart, CVS, 7-Eleven and Dollar General, among a host of others, announced recently that they’re hiring, in spite of what we’re facing. These shopping center anchors and urban retailers are some of the most prominent retailers in the industry – the backbone of the nation’s retail industry.
- Incentive to be empathetic – All of the lead actors– tenant, landlord and lender - have incentives to return to the way things were before the shutdown. A lender doesn’t want to take control of a property, a landlord doesn’t want their tenant to leave and the tenant wants to open doors and sell their products. This is unlike the financial crisis of 2008 where everyone pointed fingers, looking to place blame. This is a pandemic and we’ve all been impacted in one form or another. I believe we’ll see all parties working constructively with each other to return to normalcy.
- No Commercial Rent Control? – Proponents of commercial rent control should see how truly sensitive the retail landscape is to market forces as opposed to a symptom of landlord greed. Whether it’s the effects of e-commerce, natural attrition or changing neighborhoods the retail market is susceptible to change and simply capping the rents that a tenant would be required to pay would be a misguided “solution” and not address underlying issues as to why many of these small business are struggling.
- We’re a different breed – We’re New Yorkers, we’re resilient and I believe we’ll rally behind one another to promote the city, promote businesses and promote entrepreneurism, because it is in our DNA to do so.
Though I will likely be immersed in the newest “Bubble Guppies” episode tomorrow morning, I believe and hope sooner, rather than later I’ll be back touring properties, taking meetings, shaking hands and working to help New York City rebound.
Brent Glodowski is a Director in the Tri-State Investment Sales group of Avison Young’s New York City office, where he focuses on retail properties.
The content provided herein is not intended as investment, tax, financial or legal advice and should not be relied on as such. While information in the article is current as of the date written, the views expressed herein are subject to change and may not reflect the latest opinion of Avison Young. The spread of COVID-19 and the containment policies being introduced are changing rapidly. Like all of you, Avison Young relies on government and related sources for information on the COVID-19 outbreak, such as the World Health Organization, Government of Canada, U.S. Centers for Disease Control and Prevention, UK Government, and Johns Hopkins University COVID-19 Case Tracker.
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