04/26/2021 | By John Cumbelich
The past year was a trial by combat in the scorched earth environment of the commercial real estate industry. The government-mandated closure of retail and dining establishments did much more than punish the present – it pulled the rug out on the future as well, moving proven retail brands and enterprising entrepreneurs alike to the sidelines, if they remained at all.
The fight for survival among these brands was chronicled daily in the business press, as countless business failures, as well as innovations around online purchasing, take-out and delivery services quickly unfolded. Brands and their customers scaled a learning curve together in real time as the national economy became a business-to-consumer test laboratory. Less understood and far less reported on was the plight of the contractor, the architect, the consultant or, yes, the brokerage company whose income was entirely dependent on the constant and evolving growth of a retail real estate industry that had been locked down.
As weeks turned to months and news about the pandemic worsened, bankruptcies multiplied and vacancies across each and every retail submarket surged. One thing we learned quickly was that in 2020, our business was no longer about signing leases or purchase agreements. I searched for opportunity within the upheaval, learned patience, counted my blessings, and kept looking for opportunities to build.
One thing we saw was how an interesting array of essential uses and smartphone savvy brands had the opportunity to become kingmakers in brokerage. Fuel & C-store brands from Maverik, to EG, to Rocket burst onto the scene, while stalwarts like 7-11 and Circle K stepped on the gas. Dunkin’, salon suite concepts and deep discounters like Dollar Tree each identified expanding windows for growth in the midst of the disruption. The alpha-male of disruptors, Amazon, took the opportunity to begin its own aggressive expansion into bricks & mortar retailing.
“Business conditions change and survivors adapt.” So said the most successful retailer of the 20th century, Sam Walton, some forty years ago. His words came into sharp focus over the past year not because his teaching had suddenly become true, but rather because the chaos of the marketplace perfectly illustrated the veracity of this essential dogma of doing business.
For businesses like ours it was hard to determine if 2020 was going to be our Watergate…or our Waterloo. Was it merely a crisis, or would it prove to be a defeat? Firms like ours had long ago learned how to grow our businesses whether the industry was breathing out or breathing in; expanding or contracting. But when a global health crisis and the government mandated shut down of the economy froze businesses, the industry froze with it.
Into this paradigm, Mr. Walton’s heirs had to learn to adapt. Adaptation means many things: cutting costs, restructuring financing, adding business lines, dropping others, re-evaluating clientele and business partnerships, and more. For us, a key to this adaptation was harvesting new business with an eye to the future – listings on land, vacated big boxes, transit-oriented developments, and suddenly vacated but well-located retail, to poise the firm to prosper as soon as the market was ready to transact. Of course, listings are great, and prime listings are even better. But as the old saying goes in brokerage, nobody gets paid until the sign comes down. Undeterred, we waded into the swelling ranks of troubled landlords, not with a long list of active tenants in tow, but rather with a long resume, one that detailed how we had navigated our clients through prior storms.
Another adaptation was showcasing our commitment to being the market leader in relevant, useful, retail market data. In an industry suddenly devoid of transactional data or comps, our reporting on vacancy and absorption data stretching back several years in various submarkets brought current market conditions into meaningful context. Adapting means differentiating in a productive way. And each time that we published data on what was happening in the marketplace, our phone rang and our inboxes filled with people who needed to talk.
Through numerous downcycles over the past thirty-three years, we have learned, and re-learned, how strong firms in every industry have the opportunity to grow market share in down markets. Collecting the revenue that comes from increased market share comes later, but a bigger slice of the pie compensates for the long wait.
Tough times in business are a filter that tell us many things about ourselves and others. Beyond the more obvious feedback about financial wherewithal, generational cataclysms in business reveal something important about character. Pessimists are ill-suited to tough times. The ability to see through the storm’s dark clouds and envision a bright future on the other side is a test of one’s faith in himself and those he has partnered with. Maybe Sam Walton said it best: “High expectations are the key to everything.”
About John Cumbelich & Associates
John Cumbelich & Associates is a San Francisco Bay Area based firm that provides commercial real estate services to Fortune 500 retailers and select owners and developers of retail commercial properties. The firm's expertise is in developing store networks for retailers seeking to penetrate the Northern California marketplace and the representation of premier Power Center and Lifestyle developments.