Colliers Report: Changes to retail operations are anticipated amid COVID-19

May 4, 2020

Research & Forecast Report

Key Takeaways

  • During the COVID-19 temporary closures, many retailers used the time for deep cleaning and revamping business structures.
  • The onset of the Coronavirus will have immediate short term and long term impact affecting both the U.S. and Columbia retail markets.

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Retailers will operate under a “new normal” due to COVID-19

At the end of the first quarter of 2020, the Coronavirus pandemic forced retailers to change the way they conduct business. Retail businesses were ordered to close their doors to onsite customers only allowing for carry-out or curbside service, unless deemed essential. While some retailers have asked for rent restructuring and governmental funding to offer monetary relief, others have used the temporary closings as a time for deep cleaning and revamping business structures. Retailers have: altered spacing between dining tables so they are further apart from each other upon reopening; added areas for inside pick-up kiosks affording less one-on-one interaction with employees and other customers; constructed partitions between employees and patrons to limit the spread of germs; installed no-touch automatic entry systems and added delivery services and/or drive-thrus to their shops. Other retailers have increased their online presence making it possible for customers to order and receive curbside delivery to their vehicles. All of these new structures are done with the hope that customers will feel comfortable returning to their shops and restaurants when the quarantine is lifted. Retailers will operate under a “new normal” upon reopening. Consumer attitudes during the lock-down have gravitated toward supporting local business owners within their community. Hopes are high that retailers will reopen to increased business thanks to anxious consumers ready to support them.

Market Overview

The Columbia shopping center market is comprised of approximately 13.47 million square feet of shop space and posted a negative absorption of 2,551 square feet overall during the first quarter of 2020. While core shop space posted a negative absorption of 12,031 square feet, non-core retail shops absorbed 9,480 square feet. Construction completed at Lake Plaza 99, a 19,600-square-foot shopping center located within the Lexington submarket on North Lake Drive. There are several centers throughout the Columbia submarket that have expansion opportunities for existing tenants in the market or retailers expanding into the Columbia region. Due to minimal market activity and negative absorption, the overall Columbia retail market vacancy rate increased from 7.09% during the fourth quarter of last year to 7.28% this quarter. Overall core shop vacancy rate increased from 3.40% last quarter to 3.59% during the first quarter of this year. Despite non-core shops posting positive absorption, the new vacant construction delivery pushed the vacancy rate slightly higher than last quarter. The non-core retail shop space vacancy rate rose to 10.42% this quarter. The overall Columbia retail rental rate in core shopping centers averaged $19.98 per square foot and in non-core the rental rate average was $12.56 per square foot during the first quarter of 2020. Columbia retail rental rates across the submarkets range from $8.46 per square foot up to $22.00 per square foot.

Market Forecast

The retail submarkets in Columbia posted minimal market activity during the first quarter of 2020. Construction projects are expected to be delayed because of temporary business closings and set-backs related to COVID-19; however, construction that is underway is expected to eventually complete. Retailers will be forced to continue altering their business structures to adapt to quarantine restrictions. Retail rental rates are likely to drop somewhat in the next few quarters in response to retail closures.
Consumer attitudes are geared toward supporting local businesses by continuing to order carry-out food and shopping via curbside pickup or delivery services. Market activity is expected to resume, and even possibly boom, when the quarantine regulations have been lifted. Many retailers will implement changes to the way business is conducted so consumers will feel safe when they are able to shop again. While there are predicted to be many changes occurring within the retail sector, the true effects of the Coronavirus will not be evident for several quarters.

A Note Regarding COVID-19 

As we publish this report, the U.S. and the world at large are facing a tremendous challenge, the scale of which is unprecedented in recent history. The spread of the novel Coronavirus (COVID-19) is significantly altering day-to-day life, impacting society, the economy and, by extension, commercial real estate.

The extent, length and severity of this pandemic is unknown and continues to evolve at a rapid pace. The scale of the impact and its timing varies between locations. To better understand trends and emerging adjustments, please subscribe to Colliers’ COVID-19 Knowledge Leader page for resources and recent updates.

For additional commercial real estate news, check out our market reports here.