Market Analysis: What Vaccination Milestone Means for CRE Sectors

At the time of writing, the US was progressing towards a significant psychological and immunological milestone: almost 50% of the population receiving at least one dose of Covid-19 vaccination. The United Kingdom has just surpassed that level, while the global average is a much, much lower 8.42%.

Economists and analysts expect a positive turn in many sectors as these numbers rise. Let’s see how some of commercial real estate’s (CRE) most affected spheres are faring and shaping up for recovery.

Retail on the up

The Wall Street Journal (WSJ) reports that the number of vaccinated shoppers who are “heading back to the mall” offers retail “hope that the worst of the pandemic downturn is over”.

Drawing from data provided by analytics firm Placer.ai, the WSJ reports that foot traffic in a “representative sample of 52 malls” had climbed up a whopping 86% year-on-year. Pacer.ai bases these figures on location data from mobile devices.

The numbers are still down compared to March 2019, but – WSJ says – “mall owners are suggesting that their business has turned a corner”, attributing this to both the vaccination rise and the effect of the government stimulus checks.

Travel optimism

Other spheres that bear the brunt of the pandemic effects are travel, tourism, and hospitality. Thankfully, according to the Associated Press quoting AAA auto club, the number of people travelling is expected to climb, starting with Memorial Day weekend.

AAA told the agency that “it expects more than 37 million people to travel at least 50 miles from home during the holiday weekend”. This is an expectation of a 60% increase compared to the same time last year – although that figure is off the lowest base since 2000, when AAA’s record keeping began. If we compare to pre-pandemic levels, this is still 13% fewer than the same holiday weekend in 2019.

AAA cites the vaccination roll out as being a key reason for this sharp climb in travel plans and consumer confidence.

Also counting on a bounce-back is the hotel sector in New York City. Here the WSJ again reports that there are new hotels in NYC opening in the lead up to the summer travel season. Specifically, it writes, “Data firm STR is projecting that 78 hotels with more than 13,000 rooms combined will open in 2021, the largest year for deliveries in recent memory”.

The city is seen as a litmus test for broader hotel trends in the country. As national director of hospitality analytics at CoStar Group, Jan Freitag told WSJ: “New York was, is and always will be in the forefront of developers’ minds.”

Office space

And finally, countless CRE professionals are keeping an eagle-eye on the state of the office space market which took a dive under “shelter at home” orders but is expected to make a sharp recovery. The shape of said recovery, however, remains unsure.

MarketWatch reports that Reset Work’s survey of 55 human resources leaders and “return-to-workplace decision makers” shows that almost a third (27%) of companies have not committed to a specific workplace arrangement yet, but that “hybrid arrangements that mix in-office and remote work are the clear frontrunner so far (63%)”.

The poll sought input from companies in financial services, retail and e-commerce, consumer goods, professional services, and internet and technology spheres, among others, and found that a mere “6% of companies plan to be fully remote” going forward.

September is generally flagged as a tentative date for bounce back plans. Even Broadway recently announced that they expect to open theatre doors again in September. It makes sense then that almost three-quarters of those workplaces planning a return to their physical offices expect to do so by the end-September.