When the omicron coronavirus surge overtook the U.S. in late 2021, the situation escalated from challenging to overwhelmingly dire in some parts of the country. In December 2021 and January 2022, hospitals across the U.S. became overwhelmed as COVID-19 cases soared. And while COVID-specific restrictions were never implemented on a national level, many businesses had to shutter temporarily in the wake of staffing issues and health concerns.
Thankfully, the worst of the omicron surge seems to have passed domestically. But that doesn't mean omicron isn't still wreaking havoc.
In fact, several companies have reported a recent uptick in COVID-19 cases on container ships. And that could lead to increased supply chain bottlenecks -- and subsequently, a whole lot of pain for retailers.
Image source: Getty Images.
Will the supply chain crunch get worse?
Retailers spent much of 2021 coping with supply chain woes. Not only did many miss their inventory targets in time for the holiday boom, but they also had no choice but to spend more money to source goods and move them across the world as well as the country.
Over the past month or so, the supply chain crunch seems to have eased. But growing COVID-19 cases on container ships could reverse that progress and create a nightmare for retailers, many of which are still struggling to recover from the blow the pandemic dealt them.
Recently, ship management company Anglo-Eastern reported that infections are breaking out on five to seven vessels per month -- a notable uptick from this time last year. And a big reason boils down to omicron's more transmissible nature.
If ship-based outbreaks continue to pick up, it could result in more quarantines and supply chain holdups. And so retailers may need to brace for a few more months of inventory shortages and extensive delays.
Should real estate investors be worried?
Real estate investors -- particularly those with money in shopping center and mall REITs, or real estate investment trusts -- want retailers to thrive so that store closures don't become necessary. As it is, 2020 saw a record number of retail bankruptcies and closures, leading to vacancies in shopping centers and malls all over the country.
Thankfully, store closures have slowed tremendously, as a strong economy has leant to decent sales numbers. But if inventory issues persist, it could be enough to drive struggling retailers into the ground -- and perpetuate a vacancy crisis.
Of course, it's too soon to jump to that conclusion. But all told, supply chain issues have already managed to wreak havoc on retailers at a time when they can't afford a hit. And if things worsen in that regard, even temporarily, we can't write off the possibility of store closures picking up to some degree in the aftermath.
The good news is that many retailers have already taken steps to overcome inventory challenges by sourcing products more strategically. But companies all over the U.S. still rely heavily on goods shipped from overseas. And if those goods are now subject to extensive holdups, it could cause a world of pain for retail and real estate investors alike.
