Retailer operating income will grow between 10 and 12 percent in 2021, led by the hardest-hit sectors like apparel retailers, department stores and off-price retailers, according to Moody’s. The credit rating firm just upgraded its outlook for the U.S. retail and apparel industry from stable to positive, as the U.S. recovery gains traction on the back of strong macroeconomics. Moody’s expects fundamental business conditions to improve over the next 12 to 18 months. “As pandemic pressures ease and the cadence of vaccinations accelerates, we expect the retail sector to experience broad-based improvement,” said Moody’s vice president and senior credit officer Mickey Chadha.

While department stores like Macy’s will increase operating profit by around 200 percent in 2021, off-price retailers like T.J.Maxx will lead the comeback and will see operating profit grow by over 350 percent. The exceptional profit growth that home improvement retailers, discounters, dollar stores, warehouse clubs, supermarkets and big-box retailers generated in 2020 won’t be sustainable in 2021 as the economy reopens and consumers shift spending back to travel, entertainment and restaurants, Chadha says.

2020 turned out better than expected for the U.S. retail sector, which ended on a surprisingly strong note despite the pandemic. Although Moody’s had forecasted a 15 percent decline for 2020, retailer operating profit turned out to be flat for the year.

A sampling of experiential tenants on the horizon

Landlords have a growing number of options for fun factor to draw consumers out of their homes this summer. SCT has written about drive-in movies and pet parks. At Glendale, New York’s Shops at Atlas Park, United Skates of America will open a summer outdoor roller skating rink. Meanwhile, Adventure Golf & Sports is introducing a customizable, modular entertainment concept called GamePark Promenade that incorporates giant checkers and chess, bocce, croquet, miniature golf, bean bag and ring toss games and a putting green. It features a landscaped, park-like setting about the size of a basketball court with benches that visitors also can use for picnics, group activities and movie screenings.

Mom-and-pop retailers comfort shoppers

Ninety-four percent of consumers believe in supporting local business and restaurants, according to a survey of 1,112 people conducted March 25 April 12 on behalf of NewMark Merrill Cos. And they’re already doing it. Ninety-seven percent have made purchases at locally owned businesses in the past month. Among the reasons most gave for shopping local: They feel like they’re contributing to their communities, they trust the products or services more, they personally know the owners/operators or their families, and the operators or employees make them feel special.

Dog-friendly outlet center

Customers log off their computers and head back to physical stores

The retail sector could be headed for a strong rebound, according to Cushman & Wakefield. U.S. retail sales soared 9.8 percent from February to March, surpassed only by the surge that occurred from April to May 2020 as COVID-19 lockdowns lifted. And more of today’s sales are happening in physical stores. The gains e-commerce made during the lockdowns last year are reverting to more normal numbers, according to Cushman & Wakefield’s first-quarter U.S. Shopping Center Marketbeat report. Online sales as a percentage of retail sales jumped from 17 percent in 2019 to nearly 25 percent at mid-2020. Although e-commerce likely made permanent gains as households adopted those technologies, the share of online sales has come down since last summer’s peak, and it dipped below 22 percent in the first quarter of 2021.

Moreover, after a record 15,000 store closures in 2020, the firm expects new store openings will exceed store closures in 2021. Cushman & Wakefield is tracking 11,700 new stores that will open in 2021, the most in three years.

The supply side of the equation also bodes well for the vacancy rate at existing centers, which was 7.3 percent in the first quarter. Construction deliveries declined in the first quarter of 2021, continuing the trend of the previous several years. New space deliveries totaled 1.9 million square feet in the first quarter of 2021, the lowest of the past decade. Developers have 10.7 million square feet of retail space under construction.

“It is likely the strong consumer spending pattern we are just now starting to observe will continue throughout 2021,” Cushman & Wakefield economist Kenneth McCarthy writes in the report. “In general, any type of experiential retail that people can’t buy online is poised for growth.”

The way we were

The topics that were top of mind for SCT readers this time last year.

What will retail’s normal look like after COVID-19?
Where to start if your company wants to help
Simon’s strategy for reopening 49 malls
Macy’s Inc. plans to reopen all stores within six weeks
Health-care services boost shopping center traffic
Federal Realty, Kimco and Phillips Edison launch curbside pickup programs
Jamestown forms relief fund for small-business tenants with reopening plans
Site Centers wrestles with April rent collection
Stores are the best way to reach the fast-growing cannabis retail market

10 recent retail property deals

Northbridge sold the 84,814-square-foot, Aldi-anchored Kendall Pointe shopping center in West Kendall, Florida, to self-storage provider A+ Storage for $22.4 million. Other tenants include PetSmart, French bakery and cafe Bonjour and Luna Salon Suites.

MAB American and DRA Advisors sold the 66,279-square-foot, Publix-anchored Tiger Point Pavilion in Gulf Breeze, Florida, to ExchangeRight for $19.9 million. Additional tenants include Aspen Dental, AT&T, Dickey’s Barbeque Pit, Great Clips and Select Physical Therapy. With an attached drive-thru pharmacy, Publix and its adjacent liquor store account for 57 percent of the annual rental income at the property. JLL Capital Markets marketed the property on behalf of the seller.

Rockpoint Group and Kushner sold a 16,000-square-foot retail condominium at the base of a multifamily building in Williamsburg, Brooklyn, for $11.7 million.  Tenants include SoulCycle, La Nonna restaurant, NYC Pet, Bright Side coffee and Pure Cleaners. Marshall Real Estate represented the sellers and the buyers, a joint venture between Regal Acquisitions and The Jackson Group.

KW Partners sold the 17,122-square-foot Shoppes at Starkey Ranch and a 3,565-square-foot Chase outparcel in Odessa, Florida, for $11.5 million to the Brown Family Trust in a 1031 exchange. The shopping center delivered in the first quarter of this year and is fully leased to 11 tenants. Tiktin Real Estate Investment Services represented both the buyer and the seller in this transaction.

Prologis purchased the site of the former Hilltop Mall in Richmond, California, for $11 million and plans to redevelop the site into a mixed-use complex with residential, retail, industrial and office. The 1.1 million-square-foot structure sits on a 77-acre property.

The 22,782-square-foot Owings Mills Retail Center in Baltimore County, Maryland, traded for $8.1 million. Tenants include NTB Tire & Service Center, Dunkin’, Jersey Mike’s Subs and The Vitamin Shoppe. Neuman Commercial Group represented the seller, Cohen‐Fader LLP, and procured the private buyer.

BroadReach Retail Partners bought a 180,000-square-foot, Food Lion-anchored center, in Henderson, North Carolina, from an LLC for $7.25 million. Other tenants include Badcock Home Furniture & More, Harbor Freight and Roses.

A new, 50,000-square-foot, single-tenant retail building at Bermuda Square in the Richmond suburb of Chester, Virginia, traded for $6 million. JLL marketed the property, which is net leased to Hobby Lobby, on behalf of the seller, GBT Realty Corp. An institutional owner acquired the asset.

The Kent Mall LLC purchased the 46,700-square-foot Rustburg Marketplace in Rustburg, Virginia, from Rustburg Ventures for $4.7 million. Tenants include Family Dollar and Virginia ABC. S.L. Nusbaum Realty Co. represented the seller.

Regal Acquisitions acquired the 35,482-square-foot retail component of 2000 Collins Ave. in the South Beach section of Miami Beach, Florida, from Madison Capital. CVS anchors the property. Other tenants include Joe & The Juice, Sweet Liberty Brothers, Orange Blossom restaurant, Hennah International Salon, Anthony Liggins Gallery and Raspoutine, a nightclub owned by the Bagatelle Group.

Send news to SCT executive editor Brannon Boswell.