Centersquare Investment Management is a well-known investment management company focusing on real estate investments. According to its research, the US retail real estate market was severely impacted by the COVID-19 pandemic in 2020. However, three rounds of stimulus payments, accelerated vaccine rollouts, and economic recovery have driven a rebound in 2021. Investor confidence and capital inflows into the retail real estate sector are picking up pace. Multiple factors point towards a sustainable recovery trend going forward.
Retail rent collection recovering towards pre-pandemic levels
Centersquare’s data shows that only 15% of retail rents were collected in April 2020 during pandemic shutdowns. However, the first stimulus package brought signs of improvement – about 65% of tenants started paying rents in June-July 2020. By September 2020, 86% of retail rents were collected, just 10% below 2019 levels and 83% higher than April 2020. Factors driving the rent collection recovery include the economic rebound and stimulus funds in the hands of consumers and tenants.
Unemployment rates steadily declining after peaking in April 2020
The number of initial jobless claims in the US peaked at over 6 million per week in April 2020. This constrained consumer spending capacity and confidence. However, unemployment rates have declined every month since then. Accelerated vaccine rollouts, easing of restrictions, and a recovering economy are enabling more employment opportunities.
Retail sales bouncing back strongly across all categories
Census Bureau data analyzed by CBRE shows that retail sales have posted year-over-year monthly gains across every category tracked since January 2021. Clothing, general merchandise, and food services are seeing particularly strong double-digit rebounds compared to pandemic lows. This indicates recovering demand, boosted by stimulus funds and higher consumer confidence.
Investor confidence and capital flows re-emerging
CBRE expects commercial real estate transaction volumes in the US to approach pre-pandemic levels in H2 2021, boosted by high vaccination rates and economic growth. Retail real estate is benefitting from this vote of confidence – investor demand is driving increased capital inflows into the sector, expecting a sustainable multi-year recovery trend going forward.
In summary, Centersquare Investment’s data and leading indicators point towards a steady recovery in the US retail real estate investment landscape. Key drivers are recovering fundamentals, strong consumer demand and confidence, declining unemployment, and most importantly – returning investor appetite signaling a prolonged upcycle over the next few years.