When retailers are permitted to reopen, customers will find a very different environment. Stores, gyms and shopping centers will take on the protocols of cleanliness, social distancing and crowd control already in place at supermarkets and pharmacies. But many won’t survive, however.
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Bricks-and-mortar retailers already were under strain before the coronavirus pandemic, thanks to consumers buying everything from shoes to electronics online.
But with the virus shutting down stores for weeks, experts say, some retailers have lost too much business to survive.
“I strive to be a positive person, but I’m afraid the outlook could not be more negative for retail at this point,” said Orin Rosenfeld of Rosenfeld Realty Advisors in Boca Raton. “There’s no way these folks can hang on being closed so long.”
When retailers are permitted to reopen, customers will find a very different environment. Stores, gyms and shopping centers will take on the protocols of cleanliness, social distancing and crowd control already in place at supermarkets and pharmacies.
It’s still unclear whether consumers will be willing to leave their homes to shop in person. But some retailers can’t wait for any hoped-for consumer spending bounce. They are making big financial moves now.
National chains such as clothing retailer J. Crew already have filed Chapter 11 bankruptcy protection. Others, such as Neiman Marcus department store and Brooks Brothers men’s clothing, were reported to be weighing the action at presstime.
The parent of the Brio Italian Mediterranean and Bravo Fresh Italian casual restaurant chains filed for Chapter 11 bankruptcy protection in April. The company, which already had been struggling, was days away from a recapitalization when the pandemic hit, according to press reports. Brio has locations at The Gardens Mall and at the Boca Center in Boca Raton. Bravo closed its location at Harbourside Place in Jupiter in January.
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Locally, retailers are desperate for their businesses to reopen. Allan Prince is one of them.
Prince has mapped out how to spread out clients at his two IntensityX3 Fitness & Kickboxing gyms in Boca Raton. He bought special equipment to disinfect the air-conditioning systems. He’s even planning to hold some classes outside.
But none of these steps matters if state-ordered shutdowns to stop the spread of the pandemic do not allow him to throw open the doors soon.
A few days ago, Prince’s regional manager created a petition. The petition seeks support for inclusion of privately-owned gyms in the state’s phased approach to reopening businesses. By the middle of this week, the petition had more than 2,600 signatures.
“We’ve been lucky. A lot of people have stuck with us. But some members who lost their jobs had no choice” and had to cancel their memberships, Prince said.
Prince said he’s navigating this new business environment carefully.
He’s trying to keep customers happy by providing live exercise videos, while working closely with his landlords on rent and expenses. “They’re hurting. I’m hurting, too,“ he said of his landlords.
Industry experts say some shopping center owners will face tough times with large vacancies and tenants who can’t, or won’t, pay rent.
Since the pandemic began, the Michaels arts and crafts store has mostly continued to operate in a shopping center west of Boca Raton.
A letter from Michaels’ general counsel is taped to the store’s window. It states that Gov. Ron DeSantis deemed the national retailer an “essential” business, not subject to the state-ordered shutdown that affected other shops.
Employees deliver online orders to customers waiting outside the store in their cars.
Despite still operating and earning income, Michaels allegedly hasn’t paid a dime toward its April rent, according to a lawsuit seeking $30,000 from the company. The lawsuit was filed by Somerset Shoppes Fla LLC, Michaels’ landlord at the 8903 Glades Rd. center.
The Palm Beach County Circuit Court case is in one of the first legal actions filed in Palm Beach County to arise out of the pandemic.
Randy Tulepan, vice president of Roberts Equities, which owns the center, said he has tried to contact Michaels’ officials about the rent, to no avail.
Tulepan said he didn’t want to sue Michaels, but he did so to protect the company and help the center’s small tenants.
“I’m trying to come up with creative ways to put off rents and help the mom-and-pop stores as much as they can,” Tulepan said of the center’s independent shops and eateries that have closed during the pandemic. “But when one of the pillars (of the shopping center) refuses to even do the minimum, it can collapse the whole thing … it’s not fair.”
Michaels’ officials did not return inquiries seeking comment.
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To help businesses in West Palm Beach, the city has launched an online campaign dubbed West Palm Shops. The page features retailers who offer curbside drop-off of goods ordered online. The list includes a variety of shops, from Chelsea Lane home decor store to Picnic Fashion picnic retailer.
“We’re encouraging the general public to support these local businesses by ordering or calling from their homes and then swinging by to pick up their products curbside,” said Christopher Roog, director of economic development for the city of West Palm Beach.
Rosenfeld said retailers of every type face a stiff challenge.
Not only do they have to contend with financial pressures, he said. They also will be dealing with consumers whose shopping habits may be permanently changed.
“All these people have become accustomed to not going to these places and instead, buying things online,” Rosenfeld said. “These behaviors are going to be ingrained.”
The governor is taking a phased approach to reopening the state, under guidance provided by the federal government. As talk of reopening Palm Beach County progresses, shopping malls still are hoping for the best.
“I think there’s pent up demand,” said Al Ferris, leasing manager of The Gardens Mall in Palm Beach Gardens. “People still want to get out. But it’s going to be a gradual ramping up.”
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To ease customer concerns, shopping centers are doing everything they can to unveil protocols designed to keep complexes clean.
Simon Property Group, owner of the Town Center mall in Boca Raton, said its safety protocols include employee screening and protective equipment. Hand sanitizing stations will be stationed throughout the center, and the mall will have extra cleaning. Simon malls that have reopened in other parts of the county are operating at 50% of normal capacity and reduced hours.
At The Gardens Mall, The Forbes Co. plans to limit the number of customers in the mall, feature fewer tables at the food court and throughout the center, and require mall employees to wear masks and gloves, too.
Ferris said two other Forbes malls in Naples and Orlando did not open this week, as permitted. Instead, Forbes decided to hold back a week to get feedback from merchants and customers. “We don’t just want to open. We want to open right,” Ferris said.
Retail experts said the moves will help create confidence in the safety of enclosed centers, which tend to be large spaces.
But they also say open-air centers such as Rosemary Square in West Palm Beach and Mizner Park may have an edge. At these centers, customers can walk around in the fresh air, not recirculated air-conditioned air, said Dominic Delgado, senior director with Cushman & Wakefield brokerage. Some outdoor centers have sidewalks, allowing people to cross over to another part of the project, too.
All that space “creates a comfort level,” Delgado said.
The advantage is not lost on the owner of Rosemary Square, formerly CityPlace, in West Palm Beach.
Gopal Rajegowda, senior Vice President the of Related Cos., said the company has worked to turn the shopping and dining center into an entertainment complex filled with outdoor experiences. “Now more than ever, we’re optimistic that open-air spaces will thrive as we’ve imagined for years,” Rajegowda said.
But Related also is making a number of changes to limit the spreading of germs. Common areas will be cleaned hourly, not just daily. Some 30 hand sanitizing stations will be installed in high-traffic areas. Entrance and exit paths will be marked, valet parking will be closed, and guest services, security and cleaning staff required to wear masks and gloves.
In addition, by year-end, plans are to add about 200 additional outdoor seats at the center’s new restaurants, Pura Vida, Barrio Sangria, Planta and True Food Kitchen.
Restaurants are most at risk for an uneven recovery, said Rosenfeld, who predicted at least half of all restaurants will not reopen. Trying to do business at 25% capacity, or even 50% capacity as some municipalities have mandated, is not feasible financially, he said.
With profit margins normally thin in the restaurant business, “the majority of restaurants live from day to day anyway,” said Boca Raton restaurant broker Jeff Sussman. “And a lot had one foot in the grave before this whole thing came about.”
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Still, there’s room for optimism that the retail industry will recover over time. “I hate to use the word opportunity, but things really depend on which side of the fence you are on,” Delgado said.
Retail and restaurant brokers say they are advising owners of stores or restaurants eyeing prime space to wait. Centers that charge big rent will be dropping rates as existing tenants fail.
And if a shopping center goes back to a lender, as Rosenfeld expects will be the case in certain situations, the property might be resold at a price lower than the debt to a new owner. That owner then will be able to lease space at lower rates than nearby competitors, he said.
With the passage of time, restaurants and stores crafting deals during the pandemic will be in a better position financially when the crisis passes and people return to most activities. “I’m betting on the future,” Sussman said.
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