Toledo retail landscape not as bad as expected, report says
Thirty major retailers filed for bankruptcy in 2020, a devastating year that saw nearly 15,000 stores close and thousands of workers jobless. But while the loss of major retailers also was felt in the Toledo area during the year of the coronavirus pandemic — with chains like Steinmart, Pier 1, and Art Van Furniture, all filing for bankruptcy — a recent retail report by local commercial real estate firm the Reichle Klein Group, suggests that an expected second-half wave of local retail business failures miraculously did not occur. To be sure there, were casualties both big and small.
After Art Van closed in March, from its ashes arose a new chain, Love’s Furniture & Mattresses, which took over its Holland store in September but then filed for bankruptcy the first week of January and is now holding a liquidation sale. Fowl & Fodder, a popular farm-to-table restaurant in Sylvania Township, closed its doors in May due to a decline in business caused by the pandemic. Owner Scott Bowman closed the restaurant to consolidate his resources at a sister restaurant, the Odd Fodder, in Perrysburg.
However, as the Reichle Klein report happily noted, “… the retail-space market is proved to be quite stable and solid during the second half of 2020.”
The report stated three factors that may have contributed to the stability of a market from July through December that even the Reichle Klein Group predicted at mid-year could be “pandemic-induced carnage among retailers” by year’s end.
The factors were enduring confidence among retail players focused on an economic post-pandemic rebound; a delay in potential distress due to government assistance, landlord and lender accommodations, and eviction moratoriums, and an ongoing right-sizing of retail space in the market through demolition, adaptive reuse of space, and new construction that does not exceed demand.
Reichle Klein CEO Harlan Reichle said that he and his retail commercial real estate team that helped prepare the report were all surprised by the year-end numbers:
- A declining vacancy rate that was 11.5 percent at the end of 2020, compared to 11.7 percent at mid-year 200 and 12.1 percent at the end of 2019;
- A lease rate of $8.92 a square foot, down from $9.10 a square foot in 2019 but not excessively so, and;
- Net absorption of 39,183 square feet — meaning a shrinking market for space — compared to additional 133,951 square feet added to the market in 2019.
“Truthfully, these results were surprisingly more solid than one would have expected and I think that was the general consensus among all our retail people. Given the drumbeat of bad news last year I think we would have candidly expected numbers that would have lent a more negative picture, more distress than has shown up so far — with the qualifier being ‘so far,’” Mr. Reichle said.
A big surprise, he said, is the demand for restaurant space. “The single biggest area that’s being talked about as where all the pain is, the restaurant space, is where the greatest number of deals were in,” he said.
Mr. Reichle said it has been fascinating for him to see the reactions of small business owners who, rather than accept defeat, have decided they were not going to let the pandemic beat them. “They just roll with the punches,” Mr. Reichle said. Scot Yarnell, co-owner of Earnest Brew Works in south Toledo is among those small business owners determined not to let the virus deter the business plans that he and his partner, Keefe Snyder, laid out.
“I thought for sure 11 months that it would be really bad. …But then, I look back at the Spanish Flu and (the country) made it out of that one,” Mr. Yarnell said. “So it’s going to end at some point. We’re optimistic,” he added.
This month, the two men announced plans to expand into a former supermarket in the Southland Shopping Center, and also open a tap room in downtown Toledo near Fifth Third Field. They are well into making those plans happen. “We kind of understand where Covid is going. Once people get vaccinated things are going to open up,” Mr. Yarnell said.
Tim Friedman, owner of Culture Clash Records, also wasn’t going to let the virus control his business. He had plans to eventually move his business from Secor Road in West Toledo to Monroe Street downtown. When the pandemic began and many businesses were forced to close, he chose to use the time to move. “I knew most of 2020 was going to be a crapshoot anyway. And downtown had been calling for me for some time,” he said. So he moved in July and reopened in August. “People are following us or finding us faster than I expected,” he said of the decision to move. “I’m still working on the year-end numbers. But overall it looks like it was a relatively flat year.
“For that to occur during a pandemic, during a relocation, and being effectively closed for one month during the move, that’s insane,” Mr. Friedman said. “It’s not really surprising. It’s reassuring,” he said.
Bill Wersell, a small business consultant who worked with several small business owners throughout 2020, said for most such businesses are more than just income. “This isn’t just a hobby for these people. So to walk away or give up just isn’t in the plans for these business owners,” he said.
The start of the pandemic was a shock to the area’s small business retailers, Mr. Wersell said.
“But once they got over the initial shock, many adjusted their businesses accordingly. I think many of them found whole new models for their businesses,” he said.
“If they were suffering before Covid, that probably put them out of business. But if they were on the cusp, they cut their expenses and hunkered down for the long haul,” he said.
Sam Zyndorf, a commercial real estate agent and retail specialist with the Toledo office of Signature Associates, said the Reichle Klein report is accurate and the local retail sector did not see a lot of closures in 2020. But Mr. Zyndorf fears that much of the dearth of closures was due to government assistance — small businesses loans, grants, and the Paycheck Protection Program.
“That PPP money, for a lot of restaurants that kept them viable,” Mr. Zyndorf said. “The real story will come when that money is no longer there. So I don’t think we’re seeing the entire picture today because it’s been artificially subsidized.”
Mr. Zyndorf said once there are no longer loans and grants available there could be a rash of casualties. “I know people who are just holding on, hoping they can keep going,” he said. “But at some point the government is going to stop subsidizing them. They can’t subsidize them forever and that’s when you’re going to see whatever the reality is.”
Posted By: The Toledo Blade on February 14, 2021. For more information, please click here to read the source article.
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