Although direct-to-consumer (DTC) brands such as Allbirds, Casper and The Farmer’s Dog continue to make significant market share inroads, traditional retailers still place an extremely high premium on their brick-and-mortar presence. But experts who participated in the “Real Estate Trends to Track” webinar sponsored by Commercial Observer, suggest usage of the traditional store may be shifting from a sales hub to a location used to function as a showroom, returns depot or marketing venue.

“Diminished foot traffic at brick-and-mortar retail locations during the pandemic demonstrated the incredible importance of traditional store fronts,” stated Ethan Chernofsky, Vice President of Marketing for and the webinar’s moderator. “It reinforced how vital stores are in initiating the buying process, engaging consumers and furthering the brand. Buying is and will always be a social experience and physical stores will always play a critical role in our economy.”

Dramatic reduction in store closings

Promising data illustrating the dramatic slowing in store closings supports this premise. More than 12,000 large and small retailers closed stores in 2020, according to research from CoStar Group, representing nearly 160 million square feet of space. However, that number is expected to drop to approximately 3,700 stores this year, accounting for 40 million square feet of space which is the lowest annual figure since 2016, says CoStar.

“The occupancy of our retail portfolio is now higher than when the pandemic began,” noted David Donato, COO of Continental Realty Corporation, a Baltimore-based owner of outdoor strip centers primarily in the Southeast and Mid-Atlantic. “There has been positive leasing absorption in 2021. New concepts, non-traditional shopping center concepts, and omnichannel retailers still have an appetite for quality real estate.”

Brick-and-mortar role may shift 

“We are as bullish as ever on the future of retail and the apocalypse that so many have predicted will not come to pass,” stated Brian Roache, Managing Director of Atlantic Retail. “Physical stores are as critical as ever given the large volume of transactions taking place and consumers crave purchasing options – including while they are actually in the store. The general public is now flush with cash after not taking expensive vacations last year and, by and large, staying home. They are now ready to get out and experience a return to normalcy and that means shopping at stores.

“Consumers have embraced the curbside pick-up option and frictionless shopping and they will always gravitate to what is easiest. But traditional stores will always have an important place because retailers need more opportunities to touch the customer. Many are still figuring things out with stores segueing to becoming a place to browse, then returning home to complete the purchase, or the preferred venue to return or engage goods. No matter what, physical stores are still needed.”

Survival of the fittest

“I see Target as a big winner in the retail category given its one-stop shopping environment and the ability for consumers to purchase food, clothing and household goods,” said Daniel Klein, President of Klein Industries. “My feeling is that life is precious and people want to live it and we are seeing consumers return en masse. My 10-year-old daughter attended a birthday party at an AMC Theatre, which was something unheard of just one year ago. Retail has always been a survival of the fittest and we are seeing strength in many different sectors, especially in the fitness category as fueled by new technological advances. “

“No industry had more challenges to deal with than restaurants and they seem to be nearly 100% back,” added Roache. “Imagine operating within an environment in which people said your business contributed to the health crisis. Then throw in the labor shortage and it is amazing how many restaurants actually survived. We believe restaurants have returned to 2019 reservation levels as consumers are now willing to come back.”

The retail sector, however, is likely facing further challenges

“We predict a great regression in certain categories including home improvements and furnishings because sales reached unsustainable levels,” said Roach.  “Activity will revert to the mean as consumers will have completed expansions or upgrades to their house, such as enlarging the outdoor deck or converting a spare bedroom to an office.”