Contact Us

Sales Rise, But The Retail Sector's Still Suffering Weak Fundamentals, CBRE Reports

Though U.S. retail sales have rebounded recently, retail sector fundamentals weakened in the third quarter of 2020, according to a new report by CBRE.

In particular, retailers have left a lot of space behind as they close and consolidate. Negative net absorption totaled 14.8M SF nationwide during the quarter, the report notes, which marked the largest such drop in space usage since the first quarter of 2009, when the Great Recession hit in full force.

Shopping in the era of the coronavirus.

Most of the negative absorption was experienced in neighborhood, community and strip centers, as retailers that occupy those spaces were hit hard by coronavirus pandemic-related lockdowns or simply the reluctance of consumers to visit stores in person.

Retail construction has slacked off as well, according to CBRE. During Q3 2020, only 6M SF of new retail was completed nationwide, the lowest the company has ever reported, including during the pit of the post-2008 recession. Completions were over 30M SF during the third quarter of 2019.

Though damage has been done to the retail sector, in more recent months retail sales have increased for most kinds of stores, the Census Bureau reports, as lockdowns have been partially ended and stores devise ways to sell goods without customers interacting with staff or other shoppers. In September, total retail sales were up 1.9% compared with August, and up 5.4% year-over-year.

Most retail sectors enjoyed monthly and annual sales growth. Grocery stores enjoyed a 9.6% increase in September compared with a year ago, though only 0.1% for the month. Furniture stores saw a 0.5% gain for the month and a 4.6% gain for the year. Health and personal care stores sold 1.7% more in September than in August, and 5.3% more than in September 2019.

Some sectors experienced a large monthly spike in sales, but are also still well behind last year. Clothing store sales were up 11% for the month, but down 12.5% for the year, and restaurants and bars managed to sell 2.1% more in September than August, but are still down 14.4% for the year. 

Reflecting the continuing impact of the pandemic, nonstore retail sales including e-commerce gained 0.5% for the month in September, and they were up 23.8% compared with the same month in 2019, the largest annual increase for any retail sector.

Even with a backdrop of rising retail sales, stores are still closing. By the end of Q3, Dunkin' (formerly Dunkin' Donuts) had closed more than 550 locations worldwide out of the 800 underperforming units expected it plans to close this year.

Other recent announced retail closures include The Gap Inc., which said it is closing 350 Gap and Banana Republic stores by the end of 2023, and children's clothing specialist Carter's, which is closing 200 locations as their leases expire through 2022.