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Bust to Boom – The Retail Resurgence

Feb 18, 2022

Coping with uncertainty – again. As we enter the New Year, what’s the outlook for real estate investors? EisnerAmper recently hosted the webinar, Bust to Boom – The Retail Resurgence. Our own Michael Morris interviewed Garrick Brown, COO of Lockehouse Retail Group, as they examined the state of the retail industry and how emerging trends will impact real estate investment strategies.


Hospitality and retail hit a wall during 2020 and 2021, but there has also been a resurgence. There have been concerns regarding consumer confidence and supply chains; however, the United States had one of the most successful holiday seasons in the last 25 years, demonstrating consumers are more confident. Consumers are flush with cash because savings spiked. Prior to 2020, the average saving rate was under 6%, but when COVID-19 hit, there was panic saving – resulting in a 33% increase in saving. Americans hold almost $5.4 trillion more in bank deposits, as of December 2021, than they did in March of 2019.

Impacts of the pandemic

Higher inflation: As a result of stimulus cash, we now have the highest level of inflation since the Ronald Regan’s presidency. This means that new construction, tenant build-out, and redeveloping shopping centers will experience price increases.

Labor Challenge: A shortage of labor in the market has resulted in higher labor cost – especially for lower-paying and service-related workers.

The government may try to increase interest rates to control inflation in the near future.

Retail Update

Approximately 8% of retail real estate in the United States are malls and department stores, and this sector faced deep challenges before the pandemic. The number of bankruptcies soared in 2017-to-2019, and a new record was set mid-2020 for retail, health clubs, and restaurants. In 2020, bankruptcies doubled the great recession level; however, 2021 saw the lowest since 2007. Often, the lender worked out favorable terms with the owner in 2021, as did the landlords who deferred the rent payments and negotiated the lease terms, so there were fewer on the bankruptcy watch list.

The pain of the pandemic was felt differently in different categories. For example, grocery centers, furniture, hardware, and dollar stores felt the least amount of pain, whereas restaurants, small stores, salons, and gyms felt the most pain. 


There is an enormous wave of new, entrepreneurial concepts coming to market as we seem to be emerging from the pandemic. Despite the impact of the pandemic on independents (particularly restaurants), small businesses, and boutiques – and the advantage provided by large chains with plenty of credit – there is a surge in digital-native brands and recent IPOs.

The trend of digital-native brands opening physical stores over the past few years has resulted in somewhat positive results for Bonobos, Duluth Trading, Fabletics, UNTUCKit, and Warby Parker. However, online players have never opened more than 200 U.S. stores in any one year. Amazon alone may open up to 100 units across all concepts in 2022 (and we anticipate those numbers will at least double in 2023). From digital-native brands, we expect exponential growth - although most chains will still post modest unit numbers (ten or less).

The dominant delivery companies have never consistently turned a profit during the pandemic, whether it is restaurant or grocery deliveries. A lot of VC money has been invested in the industry to increase efficiency through economies of scale. There is no question that consolidation among these players is inevitable, but that it will also extend to ride-sharing services and even to retail delivery of final mile products.

Over the next four years, 25% of U.S. movie theaters are likely to close. Every major movie theater chain in the U.S. is on bankruptcy watch lists now. There will be significant industry consolidation in 2022.

Dollar stores have been leading retail in terms of growth in the past decade. It’ll be interesting to see how differentiated dollar stores do in 2022.

During the pandemic, malls faced the greatest challenges of any retail property type. Any belief that densification was required in revitalization has gone away. In the past year, more than 45 Class A malls have begun replacing vacant anchor space with mixed-use elements (hospitality, multifamily, office - including coworking) and shifting their tenant mix to robust categories. We are aware of at least 70 Class B malls doing the same, or adding non-traditional users (education, entertainment, or medical space). More than 30 Class C malls have permanently closed — most are being redeveloped. This trend will continue to accelerate.

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Roopa shree Maistrypalya

Roopa shree Maistrypalya is a Tax Senior Manager in the Real Estate Services Group, with over 10 years in public account.

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