Is an urban retail recovery underway?
“It’s slow progress, but retailers’ interest in urban corridors is returning and deal volume is inching up, while shoppers, workers, travelers and diners return to city life,” according to a new report from real estate services firm JLL. Are they right?
The report finds more workers heading into the office, although well below pre-pandemic rates. Since March, the average occupancy rate for security firm Kastle Systems’ 10-city average has hovered at around 43 percent of their pre-pandemic occupancy level, up from 17.5 percent at the start of the year. Recent analysis by The Wall Street Journal found cities with longer commutes have taken the biggest economic hit, while urban areas where people live closer to work have a higher return-to-office rate.
Tourism has revived with Times Square and San Francisco’s Union Square seeing the biggest gains in foot traffic from last year. According to JLL analysis of Placer.ai data, foot traffic from domestic tourists is up 14 percent in New York City from 2019. San Francisco is still below 2019 levels, but foot traffic to Union Square has doubled over the past year and retail leasing interest is starting to return.
Foot traffic to Chicago’s prime urban corridors is within 10 percent of 2019 levels. Miami’s hotel lodging rates are well above 2019 levels despite restrictions on international travel. The U.S. still requires pre-departure COVID-19 testing for international passengers.
Meanwhile, dining is poised for a “full recovery” to support city visits as concerns ease about eating out, according to JLL. According to a Morning Consult survey, Americans’ comfort with dining out sits at 75 percent as of the end of May, 14 points higher than it was at the start of the year. Dining outdoors hit a new high since the pandemic, with 82 percent of people feeling comfortable with that option.
On its first-quarter conference call, Jeff Gennette, Macy’s CEO, said international tourist traffic, particularly from Central and South America as well as Europe, aided its Herald Square and Union Square flagships, along with many other downtown locations. He said, “While our downtown locations continue to lag in performance versus 2019, we saw a year-over-year improvement in their sales trend, with these locations outperforming the balance of the stores.”
- How far along is the urban retail recovery? – JLL
- Getting America Back to Work – Kastle
- Report: Here’s what it will take for urban retail to rebound post-pandemic – Triad Business Journal
- US Airlines Continue Pressure on White House to Lift Pre-Departure Restrictions – TravelPulse
- High gas prices not impacting most workers’ decisions to return to office – The Hill
- Dreaded Commute to the City Is Keeping Offices Mostly Empty – The Wall Street Journal
- Tracking the Return to Normal: Dining – Morning Consult
- Macy’s (M) Q1 2022 Earnings Call Transcript – The Motley Fool
DISCUSSION QUESTIONS: How confident are you that urban retail will soon return close to pre-pandemic levels? Will the return of office workers, tourists or some other factor be more significant in driving the recovery in most cities?