Page 14 — Retail Properties Quarterly — May 2022 www.crej.com Retail Trends A s you’ve likely personally experienced, the COVID-19 pandemic caused an unex- pected disruption for count- less industries on a global scale. On a humanitarian level, the pandemic changed the way people viewed their everyday lives – people questioned and reformed the out- dated structures we had become accustomed to. Living through and adapting to a global pandemic has had social and economic implica- tions that have reformed countless industries and, in our case, multiple sectors of the commercial real estate industry. One of the most notable sectors to witness a sudden change in consumer habits and behaviors is retail sales. While many maintained a doomsday mentality regarding traditional in-person retail, expect- ing the asset class to collapse due to modernized forms of shopping and consumer anxiety around personal contact, we can see two years since the beginning of the pandemic that is not the case. It would be unwise to dismiss the immense growth of e-commerce in relation to the pandemic. The U.S Department of Commerce tracks overall retail spending by various rev- enue streams. Data shows that prior to the pandemic, digital retail’s share of overall retail sales showed consis- tent incremental increases as both consumers and companies began to increase comfortability with online platforms and enhanced efficiency in their distribution channels. Prior to 2020, no year-over-year change of e-commerce’s market share was higher than 2 per- centage points. Due to COVID-19, online shopping’s share of retail rev- enue increased by 3.6%, jumping from 15.5% in 2019 to 19.1% in 2020, remaining at 19.1% through 2021. Aside from an increased penetration of over- all retail spending, e-commerce saw tremendous growth in revenue. There was an astonishing 50.5% increase in online spending between 2019 and 2021, while the median growth in revenue for the five years leading up to the pandemic stood at 14.2%. (Noted statistics were pulled from Digital Commerce 360’s analysis of non-seasonally adjusted Commerce Department data that excludes spending in the segments that don’t typically sell online – restaurants, bars, auto, gas and fuel). We can see this growth is attrib- utable to the market conditions brought on by COVID-19. As Centers for Disease Control and Prevention restrictions weakened and people became more comfortable with social interaction following vaccina- tions, consumers began to reduce their online shopping and returned to in-person retail. In-person sales accounted for 80.7% of overall retail gains in fourth-quarter 2021, with sales increasing by 14%, which is more than three times higher than fourth-quarter 2020, which reported a 4.5% increase. Online retailers’ share of retail revenue dropped to 13.1%, which is a significant drop from its peak of 17.3% in April 2020. Large retailers such as Amazon andWay- fair reported their second monthly fall (6.4%) and first annual decline. Taking a look at the Denver metro area’s retail sector, we can see it remains stable and shows opportuni- ties for investment growth as con- sumer spending remains consistent and retail revenue streams have sta- bilized. The asset value of the retail sector has shown a steady increase throughout the pandemic. Total asset value increased by $4.3 billion between first-quarter 2020 ($36.5 bil- lion) and first-quarter 2021 ($40.8 bil- lion) and is projected to rise to $43.7 billion through 2023. Vacancy rates were around 4% prior to the pandem- ic and rose as high as 5.3% in first- quarter 2021. Since the peak in first- quarter 2021, we’ve seen a steady decline in vacancy rates, which sat at 4.6% in first-quarter 2022. Despite the various vacancy rates over the evaluation period, we have seen a consistent increase in annual rent growth. Starting in first-quarter 2019, rent stayed around 3.8% and Tracking the trajectory of e-commerce in retail Natalie Dupree Associate adviser, Pinnacle Real Estate Advisors Please see Dupree, Page 21 In-person sales accounted for 80.7% of overall retail gains in fourth-quarter 2021, with sales increasing by 14%, which is more than three times higher than fourth-quarter 2020. Meanwhile, online retailers’ share of retail revenue dropped to 13.1%, which is a significant drop from its peak of 17.3% in April 2020. Large retailers such as Amazon and Wayfair reported their second monthly fall (6.4%) and first annual decline.