Dive Brief:
- Foot traffic is expected to fully recover to 2019 levels by Q3 this year, and surpass pre-pandemic levels by 2025, according to a report released May 13 by CBRE. In 2023, average monthly foot traffic in 10 prime retail districts recovered to 81% of pre-pandemic 2019 levels, CBRE found.
- Offline sales surged to 78.1% in 2022, while digital growth tapered off at 21.9% compared to 2019 when digital sales saw 53.5% growth. Brick-and-mortar saw 46.5% growth that year, the report said citing Forrester’s 2023 Retail Competition Tracker.
- Rent, utilities and employee salaries are higher in prime markets. Rent for prime retail increased by more than 9% in the Americas and 4.8% globally.
Dive Insight:
It’s no secret how COVID-19 impacted retail. At the height of the pandemic, shelter in place orders led to an abrupt halt to in-person shopping while digital sales soared. Many retailers shuttered stores and, at the time, it was uncertain if or when full recovery was possible.
Recent reports are putting some of those speculations to rest.
Physical stores remain crucial and data suggests they’re needed to drive digital sales. Per an ICSC report, opening a retail location temporarily increases a brand's digital sales by 6.9%, whereas closing decreases its online sales by 11.5%.
While 70% of retail sales are digitally influenced, CBRE data found that brick-and-mortar retail became the primary driver of sales growth. By 2022, 78% of growth came from in-store purchases compared to 46% in 2019.
While digital sales won’t have the power to replace physical retail, CBRE suggests that current market conditions aren’t in favor of retailers, despite street retail’s popularity.
“Retailers face numerous obstacles to finding the prime space they desire, including record-low availability and rising rents,” Laura Barr, Americas retail leader for CBRE, said in a statement. "These market conditions are already inspiring forward-thinking retailers and investors to creatively solve for retailer growth targets despite a lack of space.”
Online sales continue to support in-person purchases, making up a large share of total retail sales, per the report.
“[T]here is no chance that e-commerce will render brick-and-mortar retail obsolete.” the report.states. “Rather, e-commerce will continue to act as a catalyst for more in-store sales.”
CBRE added this is further accurate within street retail, “where the experiences are unique and cannot be replicated by technology.”
