Twin Cities Retail Market Largely on Hold During Second Quarter
The Covid-19 pandemic has hammered the retail business. Mandated shutdowns meant that sales evaporated for retailers. News of fresh bankruptcy filings from large national retailers seem to land almost daily.
But the second quarter retail report from the local office of Toronto-based Colliers International doesn’t look so bad on the surface. Vacancy ticked up just 0.3 percent to 5.6 percent. Across the Twin Cities, the retail real estate market posted negative absorption of 69,320 square feet for the second quarter. (“Absorption” is a commercial real estate term that refers to the change in the amount of occupied space.)
Terese Reiling-Holden, vice president with Colliers, said that most tenants didn’t vacate space in the second quarter. The federal Paycheck Protection Program (PPP) helped businesses everywhere buy a little time to deal with the crisis.
“Most landlords were amenable to working with tenants on some type of a deferral during those couple of months,” said Reiling-Holden of the second quarter. “Everybody was still working through recovering from the mandated state closures.”
But there’s another key player in the mix: the lender who has provided financing to the landlord.
“Lenders still need their debt covered…not every lender is willing to work with landlords who need to work with their tenants,” said Reiling-Holden.
As a result, Reiling-Holden expects to see more vacancies in the third and fourth quarters.
Reiling-Holden noted that many of the larger national retailers who have filed for bankruptcy already had some weaknesses before the pandemic.
“On a national basis there were weaknesses in some of these large national concepts’ strategy,” said Reiling-Holden.
The biggest local retail news of the quarter was the opening of a new 215,0000-square-foot “megastore” that includes HOM, Gabberts, and Dock 86 in Bloomington. That provided a boost for the overall second quarter numbers.
The Colliers report noted that for some retailers, the pandemic has meant more business: “E-commerce giants Amazon, Walmart, and Target have done well with their online/app services, and they’ve pushed curbside pick-up to the forefront of their business. Grocery store chains are performing well too.”
In the big picture, the retail landscape is changing dramatically and quickly.
Said Reiling-Holden, “Covid is bringing about consumer changes faster than we’ve ever seen.”