How Human Connection Will Shape Our Future
Published in the Colorado Real Estate Journal – Retail Properties Quarterly
Written by Eric Diesch, Senior Advisor – Pinnacle Real Estate Advisors
I’ve been working in retail for 10 years, and every year I’m told we are about to see the end of retail. News flash… it’s not going away. As COVID-19 rips through the world and scratch-made sourdough achieves new “it” status, it’s become apparent that without retail, we would struggle to stay sane. In an increasingly stressful world, with social distancing and quarantine amplifying the anxiety, boredom, and loneliness that has come to define our “new normal,” retail culture persists. Retail is our paradise. Retail is our savior. Retail is our therapy. It’s likely the social impacts of COVID-19 have yet to be fully felt by the retail real estate market. Could COVID-19 be retail’s secret talisman?
Over the past 60 days, the real estate world has struggled to understand the impact this economic event will have on our pipelines. After watching a few dozen webinars and binge-reading articles daily, I’ve concluded that nobody knows how we are going to come out of this. CBRE analysts forecast positive movement by the end of the year. At the same time, American businessman Carl Icahn predicts a complete collapse of the commercial real estate market. Amid the whiplash, I can’t help but think that maybe, since an event like this has never occurred in the history of the modern economy, we just don’t know. Many readers may take issue with this statement and start drawing comparisons to previous pandemics and depressions. The simple truth is that global economies have never collectively shut themselves down for a month in modern times. While analysts are creating models using assumptions based on past economic data, I’ve been considering how the reactions of society living through chaos will ultimately shape retail’s future.
First, let’s look at the Boomers. Unlike their precious angels, the Millennials, the Boomers have lived through some serious conflict. The Korean War, Vietnam War, Polio, the civil rights movement, Black Friday; the list goes on. While Boomers’ pre-existing conditions are mounting by the day, they are a hardened demographic. Many of them are willing to face the realities of life without hesitation. My father- in-law probably said it best, “I came to terms with dying in Vietnam; I’ll be damned if this bug is going to stop me from living my life now.” Ironically, much of his cohort share similar sentiments, plus strong optimism of pulling out of this circumstance quickly. We need their confidence now more than ever because let’s face it: they have most of the money. According to a December 2019 report, Marketwatch estimates that Boomers hold a whopping $59 trillion in healthy pension pots and other assets. That equates to 21% of our nation’s wealth. We need the Boomers back in business doing what they do best, spending money and continuing to be the resilient backbone of our economy.
Now let’s assess Generation X. Although often overlooked, the truth is they are our bosses, they are steering the ship, and they have the fortitude to push through this disaster. This group, formerly known best for grunge and a general sense of gloom, now has families, companies, and governments depending on them, and they remember what it felt like to live through the 2008 crisis.
Lastly, we look at Millennials, the economic wildcard. We’re so fickle; the world is lucky that an unexpected warm breeze didn’t scare us back into our parent’s basement, right? Sort of. While many people like to point to the snowflake nature of Millennials, we’re an innovative bunch, and we’re growing up, albeit slowly and with a CBD-infused latte in hand. My partner Peter Sengelmann says, “This generation is better at finding solutions to big problems through leveraging technology than any other large demographic in history. This expedites our ability to find treatments and vaccines to battle COVID-19 and many of the future challenges that aren’t foreseen. While the tech solutions are way over my head, a scenario is beginning to cultivate, which is less obvious. Even with fourty Zoom happy hours a week to bolster the snowflake emotional state, all the tech in the world can’t fix one thing right now- loneliness.”
Traditionally, Millennials have resisted coupling and having kids. Now they are sitting in their apartments, alone, facing the harsh reality of an economic depression with no partner. When we are released, many of our favorite bars, coffee shops, and restaurants won’t be open for business. Many of us will be out of jobs, and we will start asking ourselves (and our therapists) questions. “After talking to my family so much over the last couple of months maybe this whole family thing is a good idea?” For those that have families living in the tight quarters of the city, “man, wouldn’t it be nice to have a bigger yard?” “Do I need to live near my office if my office can be my house?” These are questions many of us are already asking ourselves.
But what does this all mean for retail? Although no one really knows how we are going to launch out of this mess, our culture and lifestyle requirements remain strong, but the way we attain them is going to shift. There will be pent up demand, and Millennials will finally start to have kids. The former attractiveness of bustling city life will fade and give way to something simpler, familiar, homey: the suburbs. While our new COVID-19 families grow, our appetite for spending will keep pace. Restaurants will come back enforce, stay at home parents will seek outlets for sanity-restoration and amusement while the kids are at school, and the history of development cycles we’ve seen in prior times of disaster will repeat. This will create a rebirth of suburban retail in the next decade that no one has predicted.
Sound crazy? Well it just may be. After all, I’ve be locked in my house for 60 days straight.