Early indicators that digital brands will continue to seek brick-and-mortar

Digitally native brands once were a hot class of prospective shopping center tenants. Will they survive COVID-19 lockdowns and aftermath? Acadia Realty president and CEO Kenneth Bernstein thinks so.

Digitally native brands are responsible for 5 percent of Acadia’s net operating income. Rent collections from these tenants was low in April, according to Bernstein, but “the retailers have been coming back to us already over the last several weeks to talk about how they get reopened and how they get current on rent, and I find that encouraging.”

Bernstein has high hopes for these brands’ abilities to continue to open and operate physical stores post-pandemic. Sales for most of Acadia’s digitally native tenants have remained steady through the crisis, he said. “This new environment is going to be tough, but for young and exciting brands, such as Allbirds and Warby Parker, it has become even clearer that physical real estate is the pathway to profitability for these brands, especially as the department store and wholesale channel has become even more challenged.”

Footwear brand Allbirds quickly repositioned its 14 brick-and-mortar stores for online-order fulfillment. “The technical and operational capabilities to do this in-store fulfillment that we built to serve consumers during normal times ended up being really useful in this crisis to continue to serve consumers,” said president of international Erick Haskell. In response to lockdowns, Allbirds also has enabled web shoppers to connect with store associates via video chat.

And new leases are happening during the COVID-19 crisis. Acadia recently executed a lease with up-and-coming direct-to-consumer brand Veronica Beard in Chicago’s upscale Gold Coast neighborhood and one in Greenwich, Conn. “These leases had been in the works prior to the shutdown, but we got them over the finish line recently,” Bernstein said. And in the mall space, Macerich CEO Tom O’Hern said sustainable-apparel brand Faherty recently leased space at The Village of Corte Madera in California, and footwear and apparel brand Golden Goose at Scottsdale Fashion Square in Arizona.