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The Power of Pent-Up Demand: Industry Experts Predict Comeback for Retail in 2021

National Multifamily Housing Council
Courtesy of Luca Micheli

By Catherine Sweeney

After a difficult year amid the COVID-19 pandemic, industry experts reported retail nationwide is appearing to make a comeback. During a webcast hosted by brokerage firm Marcus & Millichap, panelists explained that retailers likely will see an increase in revenue due to pent up demand in consumers. 

Since April of 2020, Marcus & Millichap reported 3,700 total retail transactions nationwide, 625 retail financing transactions and more than $10 billion total retail volume, with these metrics expected to increase.

“The power of pent up demand is essentially beginning to carry the economy. So is the stimulus that has been pumped in, in addition to people’s ability to live their lives and do what they would normally do,” President and CEO of Marcus & Millichap Hessam Nadji said. 

Panelists explained the retail industry in general struggled as nonessential businesses were forced to close and approximately 22 million people lost their jobs in the first two months of the pandemic. However, as nonessential retail – including department stores, malls and the restaurant and bar industry – performed poorly, other essential retailers, such as grocery stores, outperformed during the pandemic. 

According to research by Marcus & Millichap, restaurant and bar expenditure surpassed grocery store expenditure in 2015 for the first time since 1993. The pandemic, however, put a halt to this growth, and restaurant and bar expenditure dropped from approximately $65 billion to below $35 billion. At the same time, grocery store expenditure spiked from approximately $60 billion to nearly $80 billion during 2020.

As traditional retailers shut doors, Marcus & Millichap reported more people shifted toward e-commerce. In 2015, e-commerce made up for less than 15 percent of the total core retail sales. During the pandemic, however, it jumped nearly 15 percent and has reportedly begun to stabilize as COVID-19 restrictions loosen. 

“What ecommerce basically did during the pandemic in an accelerated fashion was bring in a lot of consumers who had not embraced e-commerce, shopping online in general, but are now regular customers. And in our estimation, the trend line that was already happening got moved up,” Nadji said. 

However, despite the transition to e-commerce, industry experts reported that as more people are vaccinated and the U.S. begins to reopen, consumers continue to put more money into brick and mortar retail. In fact, since the start of 2021, core retail sales have increased by 14 percent. 

“The good news is from a consumption perspective, from a business perspective, you see retail sales are well above what they were pre-pandemic,” Nadji said. 

As retail reopens and consumer demand heightens, panelists looked ahead at what could come from the rest of the year. With a reported 14 million jobs returning to the U.S. since the pandemic, panelists said this could be a strong indication of the economy wanting to come back. 

However, as more jobs became available,there is also a lack of workers available to retail operators. Marcus & Millichap reported 8 million job openings available in the retail market nationwide. Industry experts said this is likely due to the public not wanting to return to lower wages after receiving unemployment benefits throughout the pandemic. 

In response, larger corporations have begun shifting gears, offering higher wages to fill employment gaps. Amazon, for example, intends to hire an additional 75,000 employees with a starting pay of $17 an hour. Bank of America also raised wages to $25 an hour to meet employee demands, ultimately aiding in increased consumer spending. 

“The labor force is naturally shrinking at a time when the economy is booming, I think wages are going to be a stickier form of inflation,” Panelist and Managing Director at Blackstone Joseph Zidle said. 

“I think what this recovery is going to end up looking like is we’re going to have two legs in this expansion in this economic cycle. The first one is going to be the boom, this pent up demand we’re all discussing here…but there’s a second wave of growth that’s going to be lower but it’s going to be more sustainable because it’s going to be demand in the service consumer economy.”