Some Retailers Won’t Survive the L.A. Closures

Sunday night, Los Angeles Mayor Eric Garcetti announced the closure of bars, entertainment venues and fitness centers and restricted restaurants to take-out and delivery only as a result of the spread of COVID-19. The list of restricted retailers will sound familiar to those in the commercial real estate industry. These are the businesses that have driven retail leasing activity and that have expanded rapidly in last two years as retail has recovered. That will likely come to a halt as a result of these closures, and depending on the length of time, could result in the permanent closure of businesses, particularly mom-and-pop or locally owned shops.

Each of these segments of retail will be impacted differently. Restaurants have the best chance of making it through, because they are able to stay in business—and generate revenue—through delivery and to-go orders. “The majority of businesses have credit lines that they can draw down from. From the business owners’ standpoint, they are leveraging the opportunity to do take-out and delivery,” Chris Maling, principal with Avison Young, tells GlobeSt.com.

For entertainment venues, and specifically movie theaters, the temporary closures could have a major impact, particularly for chains like AMC. “This could be a tipping point for national chains. If they are shut down for an extended period of time, they may not reopen,” says Maling. “They will look at survive-ability going forward because this is devastating to their bottom line. Because it is a highly specialized use, it is expensive to replace the tenant and convert the space into alternate uses.”