Daily needs retail is shining amid the coronavirus pandemic, as consumers rushed to local shops to stock up on essential items. The trend has revealed the necessity of grocery and other daily needs retailers in the community and has quelled conversations about grocery sales moving online, at least in any significant way.
“There is some segment of retail that will never go away,” Mike Sebastian, industry principal of investment management at Appfolio, tells GlobeSt.com. “Right now, the COVID-19 virus has shown the necessity of retailers like Costco, Target and Walmart. People are panicking, and they are going to go right to their local store. Those are doing exceptionally well. The smaller shops are having a much harder time competing.”
Retail investors have already been focusing on daily needs and internet-resistant tenants, and while ecommerce giants like Amazon have tried to improve online grocery shopping, in-person shopping continues to be the preference of consumers. “There are things that ecommerce doesn’t do well, like delivering fresh food. Even with companies that do delivery of those items, it is usually sourced locally. In a situation like this, people aren’t going to wait for delivery, and ecommerce can’t keep up with the volume. We need to have these stores, and they are going to continue to exist and thrive.”
While this event has shown the importance of essential retailers—and a long-term place for brick-and-mortar—ecommerce shopping will continue to grow. Investors are continuing to pivot to industrial investments over retail. “The shift to industrial from retail has been happening for years now, but it still has a way to go. The strategy is moving from infill warehouses—although there is still a lot of growth there—to last mile facilities so that companies can distribute goods faster,” says Sebastian. “At some point industrial is going to be saturated, but last mile is currently the best place for investors to be looking.”
Brick-and-mortar retail is performing well in class-A locations, but other retail assets will likely be converted into alternate uses. “Class-B and class-C malls are the ones that are suffering, and we are seeing that those malls are getting converted into other spaces,” says Sebastian. “These big spaces that have been vacated will be vacated into co-working space or apartment space, and that will create an ecosystem in the structure.”
Appfolio is recommending retail conversion and industrial opportunities to investors. In addition, it is helping companies continue to operate digitally during the pandemic. “We are getting information out to investors, and we have tools that help to market specific opportunities more efficiently,” says Sebastian. “In times like these where everything is going online because people can’t be in person, we help with that and we automate daily tasks.”