July 31, 2020
Brick-and-mortar stores. Restaurants. Hotels and motels. Movie theatres. During the trough of economic activity resulting from the COVID-19 pandemic, most if not all businesses operating in these sectors were essentially closed.
With reopenings underway across the U.S., a fair number of operators in each of these categories won’t be flicking the lights back on. Marcus & Millichap has provided a high-level view of what to expect long-term in terms of shakeout from the current wave of business closings.
In the case of brick-and-mortar stores, whether the closures stem from corporate bankruptcy or simply weeding out unprofitable locations, “the pandemic accelerated a trend that would have likely played out over the next few years,” according to Marcus & Millichap’s special report, prepared by Scott Holmes, the firm’s national director | retail division.
“Prior to the shutdown, an additional 1% of retail sales were shifting to e-commerce from bricks-and-mortar each year,” the report states. “After spiking to nearly 20% of total sales during the health crisis, online retailing is anticipated to account for 18% of sales when the economy fully reopens.”
With full-service restaurants more vulnerable than their limited-service counterparts, expect significant shakeout in the dining sector as well. Prior to the pandemic, the report states, “approximately 650,000 privately owned eating and drinking establishments were located across the nation, representing growth of nearly 21% since the global financial crisis. Estimating how many restaurants will permanently close should come into clearer focus in the coming weeks as more stimulus is injected into the system and vaccine trials move into their final stages.”
Many of the approximately 70,000 hotels and motels across the U.S. were closed due to the pandemic, leading to a 50% decline in employment between February and May. “As some facilities resumed operating in June, the overall decline had tightened to 37%, though reopening will prove to be difficult for the sector,” says Marcus & Millichap. “A sizable reduction in travel is anticipated until the health crisis is over as flights are avoided or restricted. Mandatory quarantines of 14 days in some locations may also hinder operations.”
In the case of the New York tri-state region, that quarantine currently impacts inbound travel from 35 states and the District of Columbia.
The nation’s cinemas went dark during the peak of the stay-at-home mandate, and some local operators have already announced they won’t be reopening even when the major studios resume distribution of would-be blockbusters. “COVID-19 will not be the death knell for Hollywood, though many of the nation’s 5,800 cinema sites will have difficulty surviving,” the report states.
“If a vaccine is not found, box office receipts could fall more than 80% in 2020 after totaling $11.3 billion last year. Both national and regional theatre companies face the prospect of bankruptcy or buyouts.”
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