July 8, 2020 | By David Rivers, The Palomar Group
Palomar Comments on the New Tagline “COVID Proof” and CNBC’s Power Lunch discussing the “Exodus” of Central Business Districts.
On Tuesday CNBC’s Power Lunch discussed the recent exodus from urban Central Business Districts to suburbia. The Palomar Group agrees that the urban exodus is a trend that will continue over the next couple years. The majority of the Palomar Group’s investment offerings, as well as the deals we source on behalf of investors, are in southern suburban markets. Prior to COVID, the often-used marketing term in retail investment sales was “E-Commerce Resistant”. The most resilient and stable retail deals over the past five years have been either suburban grocery anchored or strip retail neighborhood shopping centers. These assets offer products and services that shoppers cannot purchase online or do not have the luxury to wait a day or two for the product to arrive. These assets will now get the added tagline of being “COVID Proof”, a tagline that will likely evolve to “Pandemic Proof”. This is more than just a marketing ploy. “Pandemic Proof” tenants are necessity-based businesses that in the event of another global pandemic likely will not be required to shut down. In the world of retail investment, an added focus will be on what percentage of the rent roll is made up of “Pandemic Proof” tenants.
Furthermore, we are also seeing investors flock to states that have proven to be more pro-business and reluctant to mandate businesses to shut down during the COVID crisis. Investment holdings in states that meet these characteristics will conceivably experience less volatility in the event of a second wave of COVID this winter or another global pandemic. Much like the previous five years, retail and markets will continue to evolve, and having a gauge on what that evolution looks like will greatly benefit investors in the years ahead.