NM brokers, developers grapple with murky retail outlook.
NM brokers, developers grapple with changing commercial landscape
More than eight months since the COVID-19 pandemic reached New Mexico, Albuquerque’s retail scene has fared better than many markets, but there are still plenty of lingering question marks.
Local developers and brokers agree the pandemic has accelerated existing trends among restaurants, big-box stores and other retail sectors, forcing businesses to adapt to changing conditions. And some of these changes may be here to stay even after the pandemic abates.
“You’re either going to be a part of the change, accept it, welcome it and embrace it, or you’re going to run from it, and deny it,” said Bob Feinberg, senior vice president with Colliers International in Albuquerque.
2020 so far
Heading into 2020, things were looking up for Albuquerque retailers. Keith Meyer, partner and principal at NAI Maestas & Ward, said the retail landscape was buoyed by the ongoing economic recovery from the Great Recession and an uptick in housing permits as 2020 got underway.
“The momentum going into this year was extraordinary,” Meyer said.
While individual Albuquerque restaurants and stores have struggled mightily during this period, Albuquerque’s overall retail sector has fared better than some larger markets
around the country.
A third-quarter report from Maestas & Ward showed that the virus, and associated business restrictions, caused vacancy levels to rise and asking rents to decrease throughout the retail sector over the spring and summer, though perhaps not as sharply as expected.
Overall, retail traffic in Albuquerque actually increased by 3.2% in the second quarter of the year, compared to February, according to the report. In contrast, the report showed that retail traffic declined by more than 35% nationally during that period.
Up until recently, Meyer said Albuquerque was in the 90th percentile of markets for retail traffic since February, which he attributed in part to the city drawing in shoppers from smaller New Mexico cities, where the move toward online shopping is less pronounced.
“Albuquerque has always benefited from being the regional shopping hub for the whole state of New Mexico,” Meyer said.
Developer Art Gardenswartz said Albuquerque has attracted more residents than it’s lost during this period, which has helped it remain more competitive from a retail standpoint.
“I think long-term, our climate, our cost of living ... is an advantage,” Gardenswartz said.
Meyer said the effects of the pandemic hurt some retail sectors more than others. While sitdown restaurants were hammered by long-term restrictions on indoor dining in New Mexico, Meyer said restaurants with drive-thru windows have flourished during this period.
“In some ways, they’re more profitable now than they were in normal times,” Meyer said.
On the other hand, Meyer said he’s concerned about sit-down restaurants — particularly local ones — being able to stay afloat if the shutdowns continue.
“There was no way you could have planned for this,” Meyer said.
Similarly, Meyer said the pandemic has so far been hard on stores like TJ Maxx and Ross Dress for Less, which rely heavily on in-person shoppers who flock to the store seeking bargains.
“I’m not sure people will treasure hunt online as much,” Meyer said.
Unclear future
Gardenswartz and Meyer agreed Albuquerque’s short-term future is clouded by the statewide health order, which required nonessential retailers to stop their in-person operations through the end of November.
“No one knows what’s going to happen on Dec. 1,” Gardenswartz said.
While New Mexico lawmakers passed a $330 million aid package last week, some have criticized the lack of federal support for businesses.
Tai Bixby director of NAI Maestas & Ward’s Santa Fe division, said Santa Fe retailers have been hit particularly hard by limits on tourism and large gatherings, and called for a renewal of the federal Paycheck Protection Program that helped support businesses early in the pandemic.
“I’m aware of several business owners who, if this continues and we don’t get another PPP bailout, are looking at having to make a choice between either defaulting on real estate loans or declaring bankruptcy,” Bixby said.
Gardenswartz said he expects some of the changes in consumer behavior to shift back once the pandemic abates. Once restaurants are able to serve indoors safely, for example, Gardenswartz said he expects a shift back toward indoor dining and other services that require an in-person presence.
“There’s certain things that we all need that don’t go away,” Gardenswartz said.
Meyer added that he expects experience-driven businesses, like Top Golf and Main Event, to come back strong after the pandemic wanes, provided they can make customers feel at ease.
However, other changes during the pandemic may shift how Burqueños shop for years to come.
Feinberg, who has brought big-box retailers like Home Depot and Lowe’s Home Improvement to New Mexico in the past, said he expects a strong shift away from in-person shopping at those types of stores.
He said the pandemic has prompted shoppers, who have gotten more comfortable ordering products online and having them delivered or picking them up curbside, to re-evaluate how much time and energy they want to devote to shopping.
“Shopping used to be an event,” Feinberg said. “And now, it’s just a moment.”
Going forward, Feinberg said he expects to see large companies doubledown on curbside pickup, with some big-box stores adding drive-thrus to keep up with the demand. While some stores may struggle to adjust, Feinberg said he expects it to benefit customers and innovative companies.
“If we can make something easier time-wise and effort-wise ... to me it’s betterment,” Feinberg said.