In 2022, brick-and-mortar retail is coming back stronger than ever. Here’s how we know.
Brick-and-mortar retail is here to stay. At Cadence, we’re strong believers in that truth, based not only on our own lived experiences in commercial real estate over the past decades, but also current market trends and insights.
Physical, in-person retail has survived its share of crises and disruptions in 21st century America. Retail real estate was overbuilt before the Great Recession and had to contract painfully in order to correct itself. Of course, COVID has created turbulence in the market that is still resolving.
Even so, we’re fully optimistic about the future of in-person retail spaces – even the immediate future in 2022. Here are the most recent trends and insights that support our intuition.
Store opening announcements are outpacing closures
U.S. store closures have dropped 65% so far this year from the same period in 2021, according to Coresight Research. Store opening announcements, at 1,910 year to date, are up 3%. Additionally, openings have largely outpaced closings. In comparison to 2020, when 9,689 store closures were announced, 2021 was a stable year, the firm reports, and 2022 is shaping up to follow an upward trend of openings.
Stores are investing in a heightened customer experience
Far from neglecting or divesting from their in-person shopping experiences, retailers are setting their sights on improving them, innovating with technology and new amenities. For example, Giants like Walmart, IKEA, and Costco are investing more in stimulating sensory experiences and augmented reality to heighten the in-person experience.
In fact, even online-native retailers like Warby Parker are doubling down on their brick and mortar strategies post-pandemic, recognizing the benefits of a hybrid shopping experience for their loyal and tech-savvy consumer base.
The retail job market is heating back up
Retail, like so many service-based industries, suffered a loss of personnel in 2020 and much of 2021. But the sectors with the greatest downswings have made their comeback with the greatest upswings as post-pandemic life returns to normalcy.
The year 2022 started strong in general for job creation. Thirteen of the major industry groups gained jobs for the month. The group with the largest gain was Leisure and Hospitality, which added 151,000 jobs. In second place were Retail and Professional Services. Retail had healthy job gains in January 2022 as employers added 61,400 to payrolls, the industry’s second-best print over the last 12 months. This is especially noteworthy because January is typically an off month for retail employment as it readjusts after the holiday rush.
Supply chain issues are resolving, slowly but surely
Retail has had to bear the brunt of the crippling supply chain issues in 2021. Stores with half-stocked shelves became a regular occurrence for shoppers. Not only that, but the buildout of new retail spaces experienced a supply crunch, as construction inputs like lumber and concrete became scarce and more expensive. Construction labor has also been crunched and buried under a backlog of projects. This has all resulted in both fewer goods on retail shelves and less retail real estate inventory while demand for both continues to rise. Is there an end in sight?
Our answer is a cautiously optimistic “yes”. In 2022—if all goes well (and that’s a big if)—supply chains will have a chance to slowly recover, and the worst economic impacts will be behind us.
Leisure travel will fuel retail spending once again
Tourism has always been a major driver of retail spending. Both international and domestic travelers in the US pursue in-person shopping as part of their travel experience and simply cannot substitute it for online shopping while on their trip. It makes sense that this channel for brick and mortar retail sales was hardest-hit by pandemic shutdowns, and therefore has the most room for a heroic comeback in 2022.
Travel is showing resilience in the year to come, on track to approximate pre-pandemic levels. According to a new analysis from the World Travel & Tourism Council, the worldwide Travel & Tourism sector is on track to provide $8.6 trillion in economic output this year, which is just 6.4 percent less than before COVID struck. Retailers in major gateway cities for international travelers have the most to gain from tourism’s rebound.
So there you have it. We’re headed into the spring season confident in the “springiness” of in-person retail. The bounceback of retailers has been so heartening to watch—and to play a part in! Our clients, brokers, and other stakeholders in the ecosystem are all blazing forward into this next era for commercial real estate. We’re excited to see you there!