Liquor Stores Giving Landlords A Buzz
Across the U.S., bar stools are still empty, but alcohol consumption is soaring as more Americans turn to liquor stores for their favorite after-dinner drinks.
Commercial real estate has taken notice, and liquor stores are now considered a top-tier anchor tenant post-coronavirus — right behind grocery stores.
"I'm already seeing larger fitness operators that have gone dark now have larger format liquor stores looking to infill them, so landlords have shifted their thinking on what a liquor store means for the merchandizing mix inside a shopping center," Transwestern Senior Vice President Mason Bishop told Bisnow.
Bishop said landlords are blessed to have liquor stores as tenants, since they drive consistent revenue and have remained classified as essential services throughout the pandemic.
The more successful players are combining brick-and-mortar storefronts with curbside and online delivery options to keep up with consumer demand, Bishop noted.
During the national shutdown, liquor store demand online remained strong. Nielsen Co. reported a 234% increase in online alcohol sales during the seven-week period ending April 18 as the pandemic shuttered most U.S. bars and restaurants. Nielsen called alcohol the "fastest growing e-commerce department among consumer packaged goods." E-commerce and brick-and-mortar can work hand in hand more than other retail segments — for example, online alcohol companies Drizzly and Minibar source their deliveries through local liquor stores rather than independent warehouses.
On-site liquor store traffic also rebounded faster than retail outlets not selling alcohol. Retailer Total Wine saw a dip in store traffic right after the pandemic hit, but quickly regained momentum with traffic growing on an annualized basis every month since April, retail data provider Placer.ai said.
Between June and August, monthly traffic at Total Wine rose between 7.2% and nearly 13% year-over-year, even as other mainstream retailers continued watching store traffic plummet, Placer.ai noted.
While office retailer Staples saw traffic in June through August hover in the negative 17.6% to negative 29% range, department store Macy's was slogging through negative 44.3% to negative 48.1% traffic and clothing retailer Kohl's traffic ranged between negative 22% and negative 26%, alcohol retailers like Goody Goody Liquor, ABC Fine Wine & Spirits and Binny's Beverage Depot recorded major year-over-year traffic increases. In July, Goody Goody's year-over-year traffic rose 17.1%, while ABC Fine Wine and Binny's Beverage Depot saw traffic increases of 13.5% and 34.1%, respectively, Placer.ai said.
"When looking at six different brands, we see impressive year-over-year growth for May, June, July and August for all but two brands analyzed," Placer.ai said in a statement to Bisnow. "As the pandemic continues and cases also continue to resurface in states such as Florida and Texas, it's safe to assume that traffic for these brands will only continue to increase as the months progress."
Demand is keeping liquor stores so busy during the pandemic that Bishop has a tenant trying to open a third location in Dallas-Fort Worth. The tenant made the decision to add another liquor store after seeing sales rise 30% to 35% during the pandemic, Bishop said.
"He's interested in getting a new store open because he has done so well, and he continues to see that being a trend."
High demand for alcohol products is even evident when looking at how traditional bars and distilleries have survived in a world of mass closings and social distancing.
M2G Ventures developer Jessica Miller Essl said bars are struggling across Texas, but one of her distillery tenants in Fort Worth's chic The Foundry District is thriving after deciding to focus on manufacturing and product delivery.
Blackland Distillery lost its ability to drive sales through on-site tours and tastings, but the company's ability to deliver product through other channels kept it a solid tenant, Miller Essl said.
"He has done very well," she said. "He pivoted early and converted [the distillery to] developing hand sanitizers and distributing his [beer] product."
Miller Essl said the pandemic proved alcohol providers with the ability to deliver goods through multiple channels are quality tenants in both good times and in bad.
"If you have other channels and can pivot to delivery, then you are a really strong tenant at this point," she said.
Going forward, Bishop expects to see liquor store activity remain at least 20% above year-over-year sales as more consumers struggle with the fear of going back to food and beverage establishments.
One thing that has changed for the better during the pandemic is commercial real estate's perception of liquor store tenants in general.
"If any landlord previously had concerns about liquor stores being perceived as being detrimental to their tenant mix, I think they have certainly changed their tune and are welcoming high-quality and well-merchandized liquor stores," Bishop said.