As I was getting my exercise today, I passed several homes for sale and empty mall parking lots. In my opinion, real estate and commercial business are two industries that are in limbo as a result of the coronavirus-induced lockdown.
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I thought about what real estate agents are doing during this period. Since most real estate agents work on commission, I wondered how they are making money when so many people are worried about just having a job.
Prior to the Coronavirus Pandemic, Shopping Malls Were Struggling to Survive
Malls were struggling to survive even before the pandemic due to the growth of online shopping. CNBC’s Laura Thomas reports that department stores “are on a sinking ship racing for a lifeboat that might not be big enough for all of them.” Among those that may not survive, she mentioned such household names as JC Penney, Macy’s and Neiman Marcus.
Personally, I have always said there is room for them all, but not in the same manner as before the coronavirus pandemic. Many stores then were attempting to “reinvent” themselves in light of consumer behavior.
What will happen to America’s dwindling number of shopping malls once we come out of the present predicament? Will they be able to weather the storm any better, especially if some of their anchor retailers go out of business?
I had the opportunity to pose some questions about the future of real estate and retail to Dr. Kevin Forehand, APU Program Director of Real Estate and Retail Management.
Dr. Harper: What do the recent events mean for the real estate industry? Will it go into a recession? Are people still buying/selling homes? What does it look like for the commercial industry?
Dr. Forehand: No, I do not believe we will see a recession. However, we have seen some interesting results such as in commercial real estate. In many cases, rent payments on commercial spaces have stopped.
For example, at retail, some stores are not paying rent to conserve cash so they can cover payroll costs. This loss of revenue is certainly affecting commercial real estate owners and investors in a negative manner. The question is how long will this last? We simply do not know for sure.
The same is true for residential rental properties. However, homeowners or landlords may have the option to suspend their mortgage payments if a mortgage exists on their properties. This tactic will help to offset their lack of rental income in the short term.
Yes, people still have homes listed for sale, but the buying has slowed to almost a halt, even with historically low interest rates. Due to the pandemic, many states have issued orders for people to stay in their homes with the exception of purchasing food and medicine.
This restriction greatly hampers the ability for real estate agents to perform one of their primary duties of scheduling and performing home tours. At this time, the COVID-19 pandemic has hit the pause button on the residential housing market.
At the end of the day, due to lapsed rent payments, we may see current leases amended and we will certainly see some legal verbiage in future leases to address such an issue if not already covered in current lease content. I believe this may be true for both commercial and residential rental properties.
Dr. Harper: Many retailers now only have online shopping. In your opinion, were they prepared to meet the shift in demand? Will the stores ever bounce back?
Dr. Forehand: No, overall retailers were not prepared. However, an increase in demand is one thing.
But in this case, it is an increase in demand on top of a supply chain problem. Based on reports, the virus originated in China and many of our products sold at retail are manufactured there. Therefore, the supply chain saw a major disruption due to manufacturing and shipping shutting down in China due to the virus.
With that said, we have seen many out-of-stock situations at major retailers such as Amazon, Target and Walmart, to name a few. In addition, it should be pointed out that while retailers have risk management plans in place to handle emergencies, the COVID-19 pandemic is something we have never encountered before. We have had to react in very different ways, as we gained the knowledge from scientific experts.
Yes, some of the stores will certainly bounce back. Malls were already on the decline, and we will probably continue to see this same trend.
However, some mall locations are being repurposed as condominiums with indoor play areas and restaurants. Retailers selling staple goods have continued to perform well, although the out of stocks have hurt their sales.
I would say that once we are able to ease the social distancing and stay-at-home guidelines, we will see a surge in the return to brick-and-mortar retail. We may even see traditional stores become more favored for a time, simply because we were forced to shop primarily online for many of our favorite items for what seems like a long period of time.
I believe some of the changes that we are seeing put into place will stay in place, such as Plexiglas shields at the checkouts to protect both the customer and cashier. Of course, the contactless payment features are here to stay and this is certainly a good thing, technologically speaking.
Dr. Harper: Leaders in both industries have time to think, so what types of long-term strategies should they be thinking about to come out on top once this pandemic crisis is over? What will the ‘grand re-opening’ look like?
Dr. Forehand: Retailers have had to think and react quickly, which is what we do at retail to best serve our customers. Long-term, I believe we will see more cross-training of associates to be able to cover different positions in a store. This tactic certainly benefits store operation during a crisis time like this and during peak business.
I also think for customers who were forced to use BOPIS [buy online pick up in store] for the first time, this trend may have a lasting effect simply because of the convenience. I believe we will see some bolstering of this aspect for major retailers.
Staffing is always an issue in retail, and having ample team members to fill orders right now is proving to be a challenge for many of our major retailers. Therefore, we should see more efficiencies put into place for hiring associates quickly.
I think the grand re-opening message will be business as normal, but with greater safety measures in place for consumer protection. I know we are all ready for this to happen, but we must be patient. I believe when non-essential businesses begin to reopen after this pandemic, social distancing safety measures should and will continue to be followed for some time.
Dr. Harper: What are you doing in your programs to prepare students for the post-coronavirus era? What will be relevant?
Dr. Forehand: We are adding this issue to our Risk Management course as a discussion, and we will add additional content as it is available. Our first step is to be sure we can cover and discuss this pandemic in our online classrooms. This certainly helps in the learning process. But my retail team believes it also helps our students to be able to talk about the risks associated with the virus.
One important piece that retailers use to make informed decisions is big data. Therefore, we recently added a new Business Data Analytics offering to our Retail Management program.
The world of digital retailing is certainly relevant now and into the future. The fact is our online shopping technologies greatly helped us to purchase much-needed items from the safety of our homes during this difficult time.
We launched our new Digital Retailing concentration in the Retail Management program earlier this year. This features such courses as Digital Retail, Principles of E-Business, Digital Retail Technologies, Digital Retail Analytics, Digital Retail Strategies, Digital Marketing, Digital Merchandising and Retail Cybersecurity. We believe this is exactly what our students need to be successful in their retail careers.
About the Authors
Dr. Marie Gould Harper is the Dean of the School of Business at American Public University. She holds an undergraduate degree in psychology from Wellesley College, a master’s degree in instructional systems from Pennsylvania State University and a doctorate in business from Capella University. She is a progressive coach, facilitator, writer, strategist, and human resources/organizational development professional with more than 30 years of leadership, project management, and administrative experience. Dr. Gould Harper has worked in both corporate and academic environments.
Dr. Gould Harper is an innovative thinker and influential leader, manifesting people skills, a systematic approach to problems, organizational vision, and the ability to inspire followers. She is committed to continuous improvement in organizational effectiveness and human capital development, customer service, and the development of future leaders.
Dr. Kevin Forehand is the Program Director for the Retail Management program at American Public University. Kevin earned a Doctor of Business Administration degree from Northcentral University and an MBA from Thomas University. He has worked in the retail industry for more than 20 years in a variety of roles, including sales associate, support manager, assistant store manager, store manager, district manager and Vice President of store operations.
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