Black Friday’s Lack of Appearance in Retail Stores Hurts Commercial Real Estate
Most of us are curious what Black Friday will look like this year given the multitude of changes brought on by COVID-19. No doubt that 2020’s Black Friday shopping will look different across the country for in-store purchases, but for online shoppers, there’s no need to leave home to save big. In many cases, online shoppers will see more savings, deals starting earlier, and, in extreme cases like Home Depot, will have access to two months’ worth of Black Friday deals and discounts.
Consumers are making more online purchases than ever before and some retailers are struggling to keep up with the demand. For the commercial real estate industry, the lack of retail traffic and the decrease in popularity of malls, department stores, and events is pulling the market into a downward spiral. As social distancing cements online shopping as a way of life and draws consumers away from in-person retail events, some entrepreneurs are able to find new opportunities and adapt to the chaos.
“When you watch as the consumers continue to spend and buy on the internet, they want same-day [delivery] and then it’s six hours [delivery]… it’s all shifting…” Joe Farkas, CEO and founder of Metropolitan Realty Associates LLC, recently stated at an investors panel. “There’s a big demand for industrial products to satisfy this growing consumer appetite and we were fortunate… we got in early on this trend and we bought two great industrial buildings. The investor hype is running up pricing and everybody wants to buy industrial buildings.”
Overall, the shift away from large gatherings of customers frothing at the mouth for the latest Tickle Me Elmo toy toward a more solitary shopping experience has everyone wondering — how will Black Friday work in 2020?
What Will Black Friday Look Like This Year?
While the tradition of insane crowds and shopping chaos on Black Friday has been fading in recent years due to the rise of online shopping, the current COVID-19 pandemic means the tradition may well be over for good. Stores will be closed on Thanksgiving and in-store Black Friday deals will be largely pushed online because both consumers and retailers are concerned about safety.
What will be a reality this year, however, is Black Friday will be starting earlier than ever online, according to retail executives and Yahoo Finance. Consumers can expect to see Black Friday online deals starting in early October for some major companies, including Amazon. These discounts will likely be extended by retailers seeking to bring in whatever sales they can amid their most important quarter after losses taken throughout 2020 at the hands of the pandemic.
Many major chains are already updating their holiday hours to announce that they will be fully closed on Thanksgiving this year. So far, the list of stores that plan to be closed on Thanksgiving traditionally are the ones that opened the earliest in years past:
- Bed Bath & Beyond
- Best Buy
Impact on Commercial Real Estate
2020 has transformed how people and companies finance, operate, and occupy real estate. Some big firms have been rethinking office needs altogether and some commercial real-estate deals originally cut as financing need to be reassessed. For example, coworking and flex-office firms, most notably WeWork, are struggling under big rent obligations after years of rapid growth.
The economic factors that many general retail stores rely on are foot traffic, which was already in decline before COVID-19, along with commission-based salespeople, who have also taken a huge hit during the pandemic. Without both of these crucial factors, many retail spaces can’t be open for large shopping events like Black Friday and may not survive the crisis.
There are disruptions caused by the pandemic that will manifest in both the short and long term. In the short term, unpaid rents and vacant spaces mean financial losses for building owners, resulting in lost confidence in real estate investments. In the long term, it’s worth evaluating the changes to traditional interactions with real estate to contextualize the overall effect on the industry.
If traditional patterns like going to brick-and-mortar stores, movie theatres, housing facilities, and hotels see permanent changes, the commercial real estate industry faces some serious risks that could lead to a reduction of the vertical’s value. The return on real estate investment trusts in these specific commercial sectors are feeling the year-over-year losses as illustrated in the chart below.
What Do These Changes Mean?
Since cities physically consist of real estate, you would expect a pandemic that has severely disrupted life in cities to disrupt real-estate markets as well — and it has. The energy you find in most bustling cities has fizzled away, and what remains does not feel the way it used to. Going outside and waiting in busy lines surrounded by people is not only a waste of time, but also a health risk today.
The ecommerce customer journey is an effortless, repeating cycle, and the commercial real estate industry will need to continue to adapt to this and other advances in digital technology if they wish to compete and survive. Adapting commercial buildings to meet customer demands is nothing new. Malls once served many needs to appeal to consumers, but in the face of instant online-shopping and a pandemic, consumer needs are changing rapidly.
It’s not likely that these changes in consumer behaviors will be temporary either. Much of retail has been seeing decreases in consumer presence and spending in-store, while ecommerce continues to skyrocket as shipping times decrease. The best change right now for commercial spaces to make is to adapt into product warehousing. If you have a good location near a town, or better yet a city, then you can focus your efforts on building your inventory and shipping to consumers.
What Can Businesses Do To Adapt?
This shift in how we shop and buy admittedly favors the biggest retailers because only the strongest will survive. Opportunities for small and nimble competitors may not return to retail, even when COVID-19 restrictions are relaxed. Small, emerging brands face a challenge in competing with the largest national brands or private-label suppliers to the largest retailers. However, there are still steps you can take to maximize your fight against bigger brands:
- Enhance your in-store and omnichannel marketing plans with the largest players in the grocery and pharmacy industries. Those companies will increase share over the coming months.
- Ramp up efforts to communicate with consumers through targeted influencer campaigns and social-media spending.
- Develop partnerships with other complementary brands. This “peanut butter and jelly” approach can drive success for both brands.
- Enhance your brand message to appeal to the post-pandemic consumer. These messages will embrace family, patriotism, health, and safety.
- Align with philanthropic organizations as corporate social responsibility is more important than ever. These new partnerships ensure that your brand is part of the solution and that we are all in this together.
Ready to Get Started With The CE Shop?
Whether you’re a new agent looking to start award-winning Pre-Licensing education or an experienced veteran wanting to finish your Continuing Education, we’ve got a 100% online curriculum that’s one of the most diverse and groundbreaking in the industry. And if you want to network with your peers, join our Facebook group and get connected!