The Retail Market
Market vacancy was 9.7 percent at year-end 2020, saw a pandemic fueled increase to 11.6 percent at mid-year, then gained almost all of it back in the second half of the year… ending the year at 10.1 percent. While industrial, apartments and the single-family home markets were capturing everyone’s attention, retail has had a strong year flying under the radar. Yes, there are still pockets of pain – theaters, boutiques, experiential retail – but most retailers are back in a big way. And the reasons are rather obvious, pent-up demand from the pandemic, personal debt at historic low levels, and consumers flush with cash (The Wall Street Journal put the number at $2.3 trillion, the additional money Americans have now compared to before the pandemic). Per the post-Christmas Mastercard SpendingPulse report, holiday sales increased nearly 11 percent over 2019. Almost all retailers show a big jump in sales over 2020 and most are significantly ahead of 2019 pre-pandemic sales.
Keep in mind that our economy was pretty good, and retail was pretty good before we shut it down for the pandemic. Then we turned on the spigot, by our count Oklahoma received $3.8 billion of PPP funding and $3.0 billion in ARPA funds. This doesn’t count the billions of dollars in direct payments to Oklahomans and the enhanced unemployment benefits. This background is needed to understand what is about to happen in 2022.
The roll retail started this year should continue at least through 2022. There remains too much demand, too much consumer purchasing power and too much of the above money that remains to be spent and circulated through the economy. Yes there are concerns – the labor shortage and supply constraints are squeezing margins. And there’s always the possibility of the pandemic rearing its ugly head again (the rise in omicron didn’t affect Holiday sales much, but did shift a significant percentage to online – 20.9 percent of total year-end sales were online). But retailers are resilient and figuring out ways through these issues. With most of the pandemic vacancy filled, we should see further positive absorption in 2022 which is expected to lead to the return of some of our larger developments that were put on hold during the pandemic – Oak, Chisholm Creek, The Cotton Mill, and The Half among them.
That makes you start thinking about the tenants we might see in 2022. Restaurants are at the top of the list with the Truck Yard coming on the lower canal, Bar K Dog Bar in the Boathouse District, the recently opened Milo at the Ellison and the restaurants & bar at The National. And there are some national concepts, like Capital Grille, that may land here in 2022. How about a third Costco location, or a Restoration Hardware, or a Public Lands? Perhaps. Dollar General's upscale concept Popshelf? A couple of large entertainment concepts – lunar golf, games, bowling – have toured the market. Rockler Woodworking & Hardware would be a great addition. Everyone (ok, almost everyone) is excited about the possibility of a Buc-ee's coming.
Maybe we’ll see one of the new Vuori stores to take advantage of the athleisure clothing boom. Kroger’s is entering our market, but with their delivery only format. Walgreens is doing a small 3,500 square foot concept. QuikTrip will be opening its first couple of OKC stores. Dutch Brothers and Scooters will continue the drive-through coffee wars; we’ll get our first drive-through salad store, Salad N Go. It’s worth noting that we have a very vibrant group of local retailers that will no doubt add some creative new concepts as well. And while not all these tenants will come, Oklahoma City will get a lot of looks in 2022.
What’s going on with our economy is unprecedented both nationally and locally. It is hard to find businesses that aren’t doing well. The numbers all look good, and, as noted above, we anticipate this to continue through 2022. But we’ve never been here before, never had this much money injected into the economy, never borrowed this much money as a country. This tempers the long-term outlook and creates some anxiety despite all the positives.