In the fall of last year, many retail landlords were breathing a sigh of relief. They had gone all out to fill empty storefronts during the grimmest days of the pandemic, offering concessions to tenants and saying yes to pop-ups. That strategy appeared to pay off.
By the third quarter of 2021, the storefront scene was recovering in many parts of the country. Thanks to vaccinations, the return of international travelers and pent-up consumer demand, shoppers were flocking to malls and downtown districts and prospective tenants were signing leases. Asking rents, which had plunged in 2020, were leveling out and even rising in some places.
But the Omicron variant of the coronavirus may throw a wrench in the recovery, and landlords may need to extend temporary measures to fill empty spaces.
At the Oculus, the transit hub and shopping mall in Lower Manhattan, foot traffic has fallen precipitously recently, said Diana Grasso, the vice president of Westfield World Trade Center. “You saw the impact almost immediately,” she said.
the Delta variant interrupted the “hot vax summer” and prompted companies to postpone return-to-office plans, dealing another blow to the businesses that depend on commuters.
But cases from the fast-spreading Omicron variant quickly outpaced those of Delta. Already, visits to some businesses, like coffee shops, have declined, according to a new report from Coresight Research, which tracks the retail sector, as people avoid public spaces. And although it is too soon to say what the variant’s ultimate impact on real estate will be, some landlords are already adjusting their expectations.
After losing a few tenants in the pandemic, Ms. Grasso enlisted a nonprofit organization to bring minority- and women-owned businesses to the Oculus over the holiday season. Now she is considering a longer-term place for the businesses in one of the building’s vacant spaces.
“We want to potentially have a full, in-line space where we can continue to bring in these types of businesses,” she said.
But the setback from Omicron might not be as severe or prolonged as the one from Delta, experts say, in part because more people are vaccinated and because the variant appears to cause milder illness.
CoStar Group; that has fallen to 4.8.
“For many years, it was, ‘Either you sign a 10-year lease or we have nothing to talk about,’” said Ariel Schuster, a vice chairman at Newmark, summarizing the old attitude of many landlords. “Everyone has to be more adaptable.”
Then there are the stopgap measures — anything to keep the space occupied.
“That’s a desperation play,” said Michael Brown, a partner at the consulting firm Kearney. “That’s the Realtor saying, ‘I don’t have anything better to do with the space.’”