I can only imagine that we are all very glad that we have reached the fourth quarter of 2020. In a football analogy, we are all still in the game, but glad this one will be over soon. However, unlike a football game, time will keep marching on. Certainly, many trends that began before The Days of Covid have greatly accelerated. To focus on the commercial real estate space, data centers have become even more important with the increased work-from-home Zoom world we have entered. Microsoft’s huge data center campus in the Texas Research Park is about complete, and they are adding on even more space. Other data center developers, like Cyrus One, have also been active. Attribute some of this to the Defense Departments $10 Billion “JEDI” cloud computing project, awarded to Microsoft last year and contested by Amazon this year but confirmed to MS recently. The Cloud needs lots of storage space for those little 1’s and 0’s and that is only accelerating.
Other areas of commercial real estate that are evolving: retail is merging with industrial and medical offices, and may be converting to residential. The International Council of Shopping Centers is THE trade organization for all things retail real estate. It is highly respected, so I thought it would be interesting to look at some of the important take-aways from their national virtual conference on the topic of “how to successfully integrate e-commerce into retail operations”. In these Days of Covid that is an existential question for all retail operators. “Omni-channel” is the important phrase for bricks and mortar retail stores growing into on-line marketers. Since in-person presence in a store has been dramatically curtailed in the pandemic, the physical store is beginning to be viewed more as a warehouse/logistics hub/fulfillment space. The new acronym is BOPIS, buy on-line, pick-up in store. It is possible to do front door delivery, but it is expensive. Since so many retailers, from Ann Taylor to Brooks Brothers, are now out of business, it is the consumer that has to pay for the delivery.
So, BOPIS may still be the most cost-effective method. The forced adaptation of digital shopping has transformed the logistics chain. Will big fashion malls with big box retail stores that are now dark, like JC Penny’s, Sears, Neiman-Marcus, some Nordstroms and Macy’s, be turned into Amazon fulfillment centers? Even Bed, Bath and Beyond and Whole Foods have gone dark in some locations and are turning the black boxes into processing orders for to-door deliveries. Another term you need to know is Ghost Kitchen. Really appropriate for Halloween. These are like commissaries, where meals are prepared for delivery only. No dine-in guests, and probably no walk ups, either. These may be opened in old 2nd generation restaurant spaces that are no longer attractive for dining in, but are well located for Uber Eats, Lyft, Grubhub, DoorDash and Favor. Some operating restaurants are also opening these, like Brinker International. They have simpler menus, and lower overhead.
Texas manufactures expanded activity for the third month, but at a slightly slower pace of growth, the Dallas Federal Reserve Bank reported. Company executives took a more positive view of general business activity in August than in July. And the unemployment rate in August dropped to 6.8%, up from 3% a the at the beginning of the year but down from 13.3%. It has been that kind of a roller coaster year!