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Coronavirus and Retail Impact
COVID-19, better known as “the coronavirus,” has been spreading to all parts of the world. Meanwhile, in the U.S., the Centers for Disease Control has been warning the public to prepare for local outbreaks. Various questions have focused on how this epidemic is likely to impact commercial real estate. A recent article from JLL indicated that, from a retail perspective, a great deal will depend on how long the disease lasts, and how severe it is.
The article, entitled “Coronavirus’s Potential Impact on North American Retail,” indicated that the disease is already having an impact. Fashion stocks have been hard-hit; the recent outbreak in Italy disrupted Milan Fashion Week. Additionally, luxury retailers dependent on Chinese consumers have seen stock values decline.
At this time, the outbreak hasn’t impacted retailers or their inventory; much of the current stock in place was shipped in advance of the Chinese New Year. The JLL analysts, however, indicated that many retailers are adjusting their forecasts for anticipated disruptions in the supply chain, along with smaller returns in Q1 and Q2 2020, depending on the outbreak severity. Additionally, retailers relying on products coming through complex logistics networks will also be slow to recover.
On the other hand, tariffs placed on Chinese goods in September 2019 meant some retailers relocated some of their manufacturing operations out of China and into Taiwan and Thailand. JLL is forecasting that more retailers could do the same, over time.
Finally, a drop in tourism and travel could also impact retail revenues. Companies are already postponing or canceling conventions, meaning popular tourist destinations in the U.S., such as New York or Orlando, could feel the impact. In addition, potential inventory shortages could mean an increase in prices for certain products, which consumers would be unable, or unwilling, to pay for. Furthermore, cautious consumers might limit retail trips to brick-and-mortar stores.
For comments, questions or concerns, please contact Amy Sorter
- ◦Economy
