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Retail Outlook: In Changeable Times, Tenants Focusing on Customer Service and Convenience

Annual Levin Management Survey Reflects Industry’s Positive Trajectory

Within a changeable environment impacted by ongoing COVID-19 concerns, labor shortages, supply chain disruptions and rising inflation, brick-and-mortar retail tenants are cutting through the noise to focus on what they can control: providing top-notch service and convenience for customers. And coming off a strong year, they are optimistic about what 2022 will bring, according to Levin Management Corporation (LMC), which today released the findings of its annual Retail Sentiment Outlook Survey.

“Retail is on a positive trajectory, and tenants within our leased and managed portfolio are embracing that – despite some significant ongoing challenges,” noted Matthew K. Harding, LMC’s chief executive officer. “Simply put, people like to shop in physical stores and they are doing so, to the benefit of shopping center tenants.”

Unsurprisingly, LMC survey respondents had a better year in 2021 compared to 2020. Mirroring the industry’s well-documented progress, approximately 74% of participants reported annual sales volume that met or exceeded 2020 levels, and just over 70% reported holiday seasonal sales volume that met or exceeded 2020. As for 2022, nearly 73% expressed optimism for their store’s performance in the coming months, which is almost five percentage points higher than the LMC survey’s trailing 10-year average.

“Over the past year, brick-and-mortar retail has proven its value to the consumer,” Harding said. “Brands that survived the storm are moving forward, as reflected by stepped-up leasing and new store openings, particularly within open-air shopping centers. Add to that the growing number of digitally native retailers opening offline locations, and the evidence is clear.”

The LMC survey asked participants what they believe are the top advantages brick-and-mortar provides over online retail. In-person customer service and support was, by far, the leading response, selected by 52.8%. Continuing that theme, nearly half of LMC survey respondents said their company has recently adapted or has plans to adapt its business model to retain or improve competitive advantage. Within that cohort, two categories of change ranked particularly high: increased training and focus on customer service (55.0%) and increased use of technology-centered marketing tools in-store (52.3%).

“Retailers with the foresight to provide what their customers value most not only survive but thrive,” Harding said. “Today, service and convenience top that list. Our tenants are responding strategically, by investing in the high-level training and technology – from digital coupons and loyalty programs, to self check-out, click-and-collect and more – that bring measurable ROI.”

A notable percentage of tenants within LMC’s leasing and management portfolio are also moving forward with store updates and new locations. Just over 17% of the survey respondents indicated they anticipate expanding, renovating or reformatting their space in 2022. Nearly one quarter (24.4%) said their companies expect to open additional locations this year.

DIVING INTO THE ISSUES

Despite the generally upbeat survey findings, Harding noted that retailers face notable hurdles in the current climate. “Our participants ranked the top drivers they believe will impact their business this year,” he said. “Ongoing COVID-19 related concerns topped the list, followed by the economy/consumer confidence, inflation and inventory availability. About 54% of respondents say they have already raised prices or anticipate raising prices in response to inflation.”

Labor also remains one of the most pressing – and widely discussed – concerns for the retail sector. Nearly two thirds (62.6%) of LMC survey respondents are currently in hiring mode, and about 71% of that group say it is harder to find qualified job candidates than in the past. Yet this number is down eight percentage points from LMC’s mid-year poll, when 79% of actively-hiring respondents cited challenges.

“Our Outlook results could reflect a larger shifting in the right direction,” Harding noted. “The US Bureau of Labor Statistics’ latest preliminary numbers, from December, show retail job openings at 881,000, compared to a peak of 1.35 million job openings in August 2021.”

Still, retailers are working hard to win new hires. When asked how they are incentivizing new hires beyond hourly wage, LMC Outlook survey participants cited hiring bonus programs, additional commissions and tips, paid time off, and health benefits.

“There are so many moving parts as we settle into 2022, but retail is an industry that is accustomed to continual change,” Harding said. “Tenants are trying new approaches and embracing opportunities despite challenges – and that is encouraging.”

LMC serves as a trusted single-source commercial real estate services provider for institutional and private owners, maintaining an approximately 120-property, 16 million-square-foot diversified portfolio in the Northeast and Mid-Atlantic states. All LMC clients, and each property in its portfolio, benefit from the firm’s experience, relationships and fully integrated approach – from leasing, to development and renovations, to property operations, marketing and more. LMC’s Retail Sentiment surveys reflect the firm’s commitment to understanding issues and trends impacting retailers from a street-level perspective. In addition to the annual outlook, the surveys are traditionally conducted in May, exploring technology trends and mid-year sales performance, and in October/November, gauging expectations and plans for the holiday season.

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