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Belgian Chocolatier Shutters All North American Stores

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The forthcoming flood of retail closures is starting.  Godiva is closing 128 storefronts and cafes across North America by the end of March. Their chocolate will continue to be available online and in partnering retail and grocery stores. With the bulk of profits stemming from tourism, special occasion and impulse buying, the decrease for in-person shopping is to blame for the company’s shift. Chocolate sales have risen by 5% during the pandemic. In-store operations will continue in Europe, the Middle East and Greater China.

Commercial Real Estate Faces Existential Crisis

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When compared to the 20 bankruptcies that were filed per month over the last year, the 11 companies who filed for bankruptcy over the past month could point to a slow down. Cheap money/capital have helped troubled companies stay afloat, slowing the bankruptcy filings.

However, the retail, office, and hotel sectors are particularly vulnerable. The impact of the pandemic is trickling down as the government intervention to prop up the economy starts to slow.

Weekly Brief – January 25, 2021

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As we observe the impact of COVID-19 on the residential, office, and retail sectors, there is a much longer-term factor that I am also observing. The impact of electric and/or autonomous vehicles on real estate.

First, electric vehicles. As the percentage of electric vehicles increases, there will inevitably be an impact on petroleum retailers. These gas stations are generally found in “prime” corner locations. If there is an economic impact on gas stations that causes a contraction of the number of locations, this will open up these locations to alternative developments. However, given the simultaneous decline of bricks and mortar retail, the users of these prime locations remain to be seen.

Second, autonomous vehicles. There are two potential impacts of autonomous vehicles that I want to highlight. As an initial matter, if one is able to “call” a car to pick you up when you are shopping or working, the need for close parking locations may decrease. This could have an impact on the requirement of zoning ordinances to provide on-site parking. If zoning ordinance requirements change, the impact on land use could be substantial. Second, if the shift to autonomous vehicles leads consumers away from vehicle ownership, and towards “on-demand” vehicles, this could have significant impacts both in our infrastructure needs and, in Detroit specifically, in the economy. If vehicles are rented on demand rather than owned by individuals, the sales volume could substantially decrease, as consumers could make more efficient use of available vehicles. Imagine if your car, parked in your office parking lot, was instead able to be used throughout the day by others.  If sales volumes decrease, the economy in Michigan could be detrimentally impacted.

Again, these are all long term issues. But a smart investor, owner, or consumer, will monitor the trends.

Allen Park’s “The Hill” Welcomes New Aldi Store

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Allen Park’s Fairlane Green Shopping Center, otherwise known as “The Hill”, is slated for an Aldi store. The exact date of the renovations or start of the project is unknown at this time. The new Aldi store will take the place of the Staples Office Supply store. In addition, Crafty Crab restaurant, Aspen Dental, and Dunkin’ will join the shopping center. Grocery is one of the more resilient retail categories.

First Cannabis Retail Location Opening In West Michigan

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The Gage Cannabis Company opened the doors to the first provisioning center in West Michigan, located in Grand Rapid. Gage prides itself on three things: Cannabis, culture, and community. The retailer is already working on the community focus by providing vouchers to area small businesses for their patients. The company is on the move with a goal to operate over 20 locations by the end of 2021.

Northern Michigan Small Retail Businesses Pivot in Pandemic Times

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Two Boyne City small businesses are vacating their store fronts. However, it’s not goodbye. The Outdoor Beerdsman, a retail store, is moving to online sales. The difficulty in securing available workers has pushed the owner toward a virtual storefront that will include a sister company.  The second business, Long Road Distillers, is relocating to Charlevoix and is awaiting its liquor license.

Weekly Brief – January 11, 2021

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I want to highlight a few topics that I believe will dominate the Michigan real estate landscape at a macro level in 2021.

First, mortgage foreclosures will begin to impact the residential market later this year. Although there is the potential for further federal or state moratoria, eventually we will be unable to kick the can further down the road. These foreclosures will begin to place downward pressure on sales prices at the end of 2021 or early 2022, as the foreclosed properties will begin to be marketed for resale.

Second, the impact of COVID-19 on commercial properties will begin to be felt in 2021 as well.

Although it appears the industrial class is weathering the storm quite well, the same cannot be said for retail and office properties.

For retail properties, in addition to the impact of “stay home” orders, you have the continuing trend of online shopping, which only accelerated due to COVID-19. Paradoxically, the decline of the retail sector has contributed to the stability of the industrial sector, as logistics and warehouse uses that support online retailers have thrived during the pandemic.

Major retailers often file for bankruptcy protection in January, after the cold realities of a failed holiday season hit home. This year, I would expect that major retailers, as well as “mom and pop” stores will have to fact reality in early 2021. The “sit-down” restaurant sector will likely also be impacted.

For the office sector, it remains to be seen is whether the impact will be long-lasting. If companies permanently shift work to a remote, or work-from-home, setting, the impact on the office sector could be significant. However, if employers move back to a traditional work setting, 2020 may be a blip on the office sector radar.

Finally, the lifting of eviction moratoria will impact the residential market. Evictions could have a net positive impact on the investor-owned market, as non-paying tenants are shown the literal, and proverbial, door. Or it could merely signal that rental rates will be forced down, impacting investors and overall residential market pricing.

If you would like to track articles on foreclosure and evictions, those articles are specifically tracked on this page of the Michigan Real Estate News website.

 

Macy’s Announces More Store Closings

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Macy’s will close 45 stores nationwide by the middle of 2021. These closures come on the heels of the company’s February 2020 announcement of their plans to cut 2,000 jobs and close roughly 125 locations. The company received a credit line of $3.15 billion in June of 2020 which has allowed it to survive the impact of COVID-19. The timing of the store closings may be adjusted as Macy’s monitors its recovery from the pandemic and the performance of its competitors.

Business is Booming in the Retail World For Pets

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Southeast Michigan-based Pet Supplies Plus has purchased 40 Pet Valu locations in seven states, including Michigan. CEO Chris Rowland expects to top $1 billion in revenue for the second stratight year. With a record year in growth, Pet Supplies Plus plans to add more than 100 locations in 2021.

Successor to Art Van Closes Multiple Locations

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Loves Furniture is shrinking its business footprint due to supply chain issues in Asia, caused by COVID. The company plans to close Michigan stores in Dearborn, Waterford, Port Huron, Livonia, Burton, Saginaw, Bay City, Muskegon, and Petoskey, where it just opened a store on November 7, 2020. Although the company claims that customer demand is high, the company claims it can not fill the inventory needs of the stores.