For the first time in a year, since Covid-19 began spreading across the United States forcing Americans to stay home, retail alcohol sales have fallen almost 2%. Why the change in alcohol sales? No, people are not consuming less alcohol. What does this mean for residential real estate? What is causing the decline in alcohol sales?
What was in the data about alcohol sales?
According to newly released data from Nielsen, total alcohol sales declined 1.9% for the week ending March 13. Wine sales fell 8% for the week ending March 13, with spirits flat and beer sales slightly higher thanks to the continued popularity of spiked seltzers. If Nielsen excluded seltzer sales from its beer measurement, that category would have fallen more than 2% for the week. Perhaps more notably, total alcohol sales for the week would have fallen 3% if not for hard seltzers.
Why are alcohol sales declining?
During the pandemic and lockdowns, consumers were worried about being forced to stay home and were became concerned as shortages occurred and grocery store shelves were bare. As a result, they stocked up on alcohol, toilet paper, hand sanitizer, etc… This trend is beginning to reverse. Consumers are finally beginning to pull back from the “stock up” mentality as the pandemic wanes and vaccines are rolled out. Furthermore, people are venturing out more to bars/restaurants as everything opens.
How will the decline in Alcohol sales impact residential real estate?
The decline in alcohol sales is a tipping point that the “stock up” mentality is starting to wane. Real estate got a huge benefit from the “stock up” mentality as years of demand were pulled into the last year or so as buyers stampeded out of cities to suburban/rural locations to ride out the pandemic with more room to roam. Alcohol sales are an indicator that this huge demand for suburban/rural locations will wane as people migrate back to cities/urban locations, visit restaurants/ bars, go to concerts, etc…
It will not be a light switch that all the sudden turns on with demand, but over the next 12-24 months the exodus from urban locations will start to reverse course as comfort grows with the vaccine and consumer preferences change. Don’t get me wrong, there is a group that might never return to an urban location, but I think the majority will resume their old habits of desiring urban locations.
How will the decline in Alcohol sales impact commercial real estate?
It is not possible to discuss residential real estate without an impact on commercial real estate. The decline in alcohol sales indicates a drastic shift in consumer behavior for commercial real estate as well. There have been dire predictions that the office will go extinct. Unfortunately this couldn’t be any farther from the truth. As companies are coming out with plans on office reopening, the majority are going to a hybrid work plan, with workers coming into the office 3 or 4 days with maybe one or two days remote. This is a drastic change from earlier predictions of remote work forever for all workers. As the pandemic further wanes the office will come back front and center.
With companies announcing plans for office openings in a hybrid work force look for employees to migrate closer back to where their office or schools were located prior to the pandemic. It is not like people all the sudden want to commute an hour and a half each day to get to the office even if it is only for 3 or 4 days. After a while this is not sustainable and the migration to urban areas will accelerate.
Summary
The decline in alcohol sales is a tipping point that the “stock up” mentality is starting to wane. Real estate got a huge benefit from the “stock up” mentality as years of demand were pulled into the last year or so as buyers stampeded out of cities to suburban/rural locations to ride out the pandemic with more room to roam. Alcohol sales are a leading indicator of normalcy returning to residential and commercial real estate. Over the next twelve months look for a migration back to metro areas and more lights on in offices throughout the country. The pandemic trade is reversing; the only remaining question is how quickly it will occur.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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