April 26, 2020
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- U.S. Retail Figures | CBRE just released its Q1 2020 report. COVID-19 did not impact retail real estate fundamentals in Q1 as it was too early to register. However, this is anticipated to look very different in Q2 2020/H1 2020 as the effects of store closures, nonpayment of rents, and drop in leasing velocity weakens the market. There was already an overall impact to retail sales in Q1 driven by decline in March sales as indicated. April sales are expected to decline further in nonessential categories and as panic buying of essential goods subsides. Looking forward, overall Q2 retail sales performance will depend on when retail reopens and how it is phased.
- Public companies and government relief – The US government is pressuring public companies to repay PPP loans within 2 weeks, following negative press concerned that funds intended to support small businesses went to too many large players. This will affect many large retailer and restaurant brands, including Ruth’s Chris, Pot Belly, and others. Shake Shack and Ruth Chris publicly announced this week that it would return the borrowed funds. A great article here: Public Companies Have to Repay Small-Business Rescue Loans
- About 150 public companies have received nearly $600 million in loans from the federal Paycheck Protection Program, created to help struggling small businesses cover payroll and certain other expenses.
- International Views
- The only markets fully reopen in APAC are China, Hong Kong, and Korea.
- Singapore shutdown extended this week until June 1st due to sudden increase in cases throughout foreign labor dormitories.
- Japan – local nonessential brands reopening, but international brands are still closed. Food & Beverage gradually reopening, but with limitations on hours of operation (i.e. alcohol sales only permitted until 7 or 8pm in restaurants)
- China – mixed retailer performance
- Almost all malls and high streets are reopen, but footfall is around 50% - gradual return amidst limited domestic travel, consumers still being cautious, and rotations in reopening of workforce. Government requiring masks to be worn.
- Luxury brands bouncing back as wealthy Chinese consumers are shopping domestically unable to travel to international destinations (i.e. Hermes $2.7m Saturday upon Guangzhou Flagship reopening)
- Outlet traffic & sales having robust bounce back - consumers feel more comfortable shopping open air centers than enclosed malls & are seeking value retail due to economic impact. One outlet center reported sales are up 136% YOY.
- Many Food & Beverage operators down 60-70% YOY. Starting to see some permanent closures i.e. Hakkasan Shanghai
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