The pandemic changed the way a lot of people shop. Last year, many consumers adopted online shopping habits in an effort to stay safe. This was understandable given the absence of COVID-19 vaccines.
This year, things look very different on the vaccine front. Not only are they widely available, but a larger portion of the population is eligible for them.
In spite of that, consumers may still be favoring online shopping over visiting physical stores. And recent Black Friday shopping data confirms that the online shopping trend may be far from short lived.
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In-store shopping was down
Traffic at retail stores dropped 28.3% on Black Friday of 2021 compared to 2019 levels, according to Sensormatic Solutions. That's somewhat surprising for a few reasons.
First, as mentioned, many Americans now have protection against COVID-19 in the form of vaccines. Secondly, while the omicron variant is now fueling a surge in COVID-19 cases, the variant wasn't really a factor over the Thanksgiving holiday weekend.
Now the good news is that store traffic was up 47.5% on Black Friday compared to 2020 levels. But the fact that physical store visits didn't come close to matching 2019 levels is bad news for real estate investors.
A continually precarious situation for physical retail
Ever since the outbreak began, shopping center and mall REITs, or real estate investment trusts, have been sluggish. Widespread store closures have left many shopping center and mall operators with vacancies to grapple with -- and have left investors on edge.
Of course, Black Friday in-store numbers alone won't dictate whether retailers make the decision to shutter more locations or not. But total holiday shopping patterns might. And while the season is still going, if 2021's final numbers aren't that impressive, retailers may decide to shutter underperforming locations, resulting in additional vacancies.
Supply chain issues could help physical retailers
For months, supply chain bottlenecks have resulted in inventory shortages and hassles for retailers and consumers alike. To some degree, those backlogs might benefit physical stores. If consumers can't find the goods they need online, or if they can't get them shipped out in a timely fashion, they may be more inclined to pick up and visit stores to search for alternatives or avoid delays in getting the things they need.
But still, those supply chain bottlenecks will, ideally, resolve themselves in time. And so real estate investors are really banking on a strong holiday showing for brick-and-mortar stores.
In late October, the National Retail Federation predicted that total holiday sales could rise as much as 11.5% over 2020's numbers. But whether that increase stems from in-store purchases versus online purchases will make a huge difference to real estate investors.
Of course, a decline in physical store purchases may be bad news for shopping center and mall REITs, but it could benefit industrial REITs. As the demand for online purchases increases, there should be huge opportunities in the industrial space, which includes warehouses and distribution centers. But that won't help investors who already have shopping center and mall REITs in their portfolios.
