Spotlight On... the Retail Market

Before the COVID-19 pandemic, the retail real estate market was in a state of flux due to e-commerce, along with the completed, pending and anticipated bankruptcies of retailers. The news is not all bad, though, as grocer-anchored retail centers have continued to perform reasonably well.

Calendar year 2019 included 17 major retail bankruptcy filings, some for the second time. Among them: Shopko; Gymboree; Things Remembered; Payless ShoeSource; Diesel; Z Gallerie; Roberto Cavalli; Charming Charlie; Barneys New York; and Forever 21. Liquidations increased as well, with more than 9,500 store closings.

Bankruptcies continued in early 2020, pre-COVID, and included Pier 1, which intends to sell or close 450 stores, and SFP Franchise Corp. (American Greetings, Carlton Cards, Paper Destiny and Papyrus), which decided to liquidate after failing to receive concessions from its landlords.

Post-COVID bankruptcies include: Brooks Brothers; GNC; Tuesday Morning; JCPenney; Centric Brands; Stage Stores (Gordmans, Bealls, Palais Royal, Peebles, Stage and Goody’s); Aldo; Neiman Marcus; J.Crew; Roots USA; True Religion; Modell’s Sporting Goods; Art Van Furniture; 24 Hour Fitness; the corporate parent of Chuck E. Cheese; and Bluestem Brands (Appleseed’s, Fingerhut, Old Pueblo Traders and other regional brands). Most recently, NPC International, the largest U.S. Pizza Hut franchisee with 1,225 locations (along with nearly 400 Wendy’s outlets), filed Chapter 11 seeking to restructure. Bankruptcy plans varied, with reorganization, entity sales, store closures and/or liquidation.

With the impact of COVID accelerating, retail rent collections plummeted to 58% in April, the first full month of the pandemic, compared to 96% for the same month one year earlier. Along with smaller locally-operated retailers including mom-and-pop shops, 21% of the 135 major retail chains paid no rent or only a small fraction of their obligation. On the positive side, grocers, banks, pharmacies, fast-food restaurants, home goods stores and pet stores comprised the list of retailers paying rent.

Retail rental payments began to show signs of improvement in June; roughly 61% of rental obligations were collected, a result of the loosening of business restrictions across many states. However, roughly 75% of those surveyed were still paying less than what was paid in March. Grocers and big-box retailers constituted the tenants paying close to full rent (dependent on the brand).

One of the hardest-hit retail segments is restaurants, along with theaters and gyms. OpenTable has suggested that around 25% of restaurants will not survive the pandemic. Additionally, the Independent Restaurant Coalition has projected that up to 80% of independent restaurants will cease operations. For some, variable or percentage rent agreements could represent the difference between survival and closure.

As an example of the “new normal,” malls in New York state will be required to provide an air filtration system (such as HEPA) capable of filtering out the COVID virus. While this is specific to larger properties, smaller retail centers may be forced to adapt with additional protective measures.

So, what does the future hold for retail developments? Will e-commerce continue its assault on the brick-and-mortar retail centers (retailers and owner/landlords alike), creating an even stronger dominance? Or, will there be a renaissance for physical retail centers whereby they will flourish based on the emotional need of the public to “get out of the house,” presuming conditions are safe? Time will tell, but in the interim, the retail market will continue to be one of the hardest-hit sectors.

For all your retail and other real estate valuation needs or questions,
please contact Michael Maglocci, MAI, MRICS at (312) 372-5331 or by email at

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