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This Week in Retail Banking | May 23, 2020

Traffic, Business Trends in Cities That Reopen Amid COVID-19 Decline

As the country continues to ease COVID-19 restrictions, banks want to know what to expect across different markets when cities begin to reopen. Novantas used its new geo-mobile analytics data set to provide a digital “birds-eye view” of traffic patterns, analyzing several markets that reopened a few weeks ago and comparing them with markets that remain under lockdown.

Although many uncertainties remain, one thing is clear: the pandemic has accelerated the need for banks to master real-time data in ways that they have never done before.

THE FUTURE OF WORK CENTERS

It isn’t an understatement to say that work centers have been some of the hardest-hit areas in recent months as work-at-home orders kept Americans away from the office. Work centers are characterized by high daytime (work) population and significantly lower residential population – typically in downtown areas and central business districts. With restrictions on the number of people who can be in one place, most flexible businesses have instituted some form of a work-from-home policy. These actions have significantly restricted traffic in areas with large concentrations of office space.

The big issue now is how traffic patterns will look when cities reopen, but employees decide to keep working from home. Many companies are extending work-from-home policies through the end of the year or even permanently (as has been announced by Facebook, Twitter and Square). Many have suggested that businesses are adapting well to remote working and expect that they will allow workers to stay home even if it isn’t a formal policy. All of this suggests that work centers may never return to pre-COVID traffic volumes.

As evidence of that, work-center traffic in the Atlanta market is still down 60% relative to normal levels, even as the region has partly reopened and some foot traffic increases. To be sure, Georgia still has orders in place that ban gatherings of more than 10 people, a rule that significantly restricts the ability for people to return to offices. With many summer camps getting cancelled, there will also be even more pressure to avoid back-to-office mandates until school resumes in the fall – assuming no other delays caused by a second wave of COVID-19 cases. This points to a minimum of three to four more months of challenged foot traffic.

It is a different situation in Oklahoma City, where work-center traffic was down 58% at the lockdown peak, but is now only down 33% as the city has reopened.

The picture is particularly grim as we consider the retail environment within the work centers. Many of these areas have high occupancy costs that make it unlikely for them to weather a six-month-plus period in which traffic volumes are down by more than 40%. It is well-known that retailers typically have about 19 days of cash buffer. Retailers that have accessed PPP loans have extended their buffer, but it is still probably not enough to make up the gap.

Banks should monitor trends like these to understand what the future network in these markets should look like based on demand. At the same time, they should be aware of – and capitalize on – the opportunity for rental rates that may fall dramatically.

Atlanta: Change in Average Weekly Visits (vs. Jan 30 - Mar 4)

Legend

Source: Novantas Analysis, NovaLocation, PlaceIQ

WHAT TO EXPECT AT REOPENING

With many markets now planning for reopening, it presents a good opportunity to take another look at Atlanta, Oklahoma City and a few other markets to understand what changes when the markets reopen. In addition to a large surge in visitation to health and beauty venues (everyone needs a haircut!), there have also been traffic surges at arts & craft stores (keep the kids entertained), auto parts stores (summer road trips instead of air travel) and home improvement stores (more gardens and house projects).

Interestingly, there haven’t been many big winners in other categories. Most experienced 20% increases in visitation as people have started easing into the new normal. There are several losers, though, with shopping malls, recreation and travel at the top of the list.

In markets that have reopened, there was a bounce back in several of the “occasional” shopping locations like discount and apparel stores. Shopping malls continue to have more difficulty attracting consumers, a behavior that will need to be resolved for them to partly recover – and may depend on whether they are fully or partly-enclosed. The majority of foot traffic is occurring in the feeder markets where people live.

In diving deeper into Atlanta, we wanted to assess the value of bank locations located near malls – and whether they might suffer the same long-term fate. Traffic volume has been bouncing back in areas surrounding many of the malls, mainly because most of these areas have a much broader retail base than just the mall itself – including restaurants, big-box stores and others. The implication: bank branches in these areas will still have some billboard value. While these areas may have lost the largest magnet, people are still accustomed to going to many of the surrounding stores. That will likely continue.

A few of the malls, though, still have significantly muted traffic volumes in the surrounding areas as well.

Local tracking will be critical as banks move forward with decisions about if, when and how they should reopen branches.

Change in Average Weekly Visits (May 7-13 vs. Jan 30- Mar 4)

Perimeter Mall | Atlanta, GA

Perimeter Mall | Atlanta, Georgia

Mall of Georgia | Gwinnett County, GA

Mall of Georgia | Gwinnett County, Georgia

Legend

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Source: Novantas Analysis, NovaLocation, PlaceIQ

CONSUMER DEPOSIT BALANCES STABLE, ACQUISITION RATES RETREAT

Average consumer balances have remained largely stable over the last few weeks as higher-balance customers who received stimulus payments exhibit new positive savings while their lower-tier counterparts continue to deplete theirs.

A recent bump in branch-based savings acquisition rates reversed itself, in part because direct banks led a wave of nationwide rate cuts.

Savings balances continue to grow, albeit at a slower pace, but an anticipated increase in discretionary spending as states ease lockdown measures may weigh on consumer savings behavior in coming weeks.

A full weekly deposit tracker is available to CDA clients. Contact Adam Stockton at astockton@novantas.com for details.

NEWS OF THE WEEK

More than half of workers say their jobs have become more difficult due to the pandemic, according to a survey released by CNBC and SurveyMonkey. About half of the 9,059 respondents said they have been working remotely in recent weeks and nearly 40% of those said they want to work from home more often than they used to once it becomes safe to return to their workplace.

A new study from the University of Chicago’s Becker Friedman Institute estimates that 42% of recent pandemic-related layoffs will result in permanent job loss. The report also finds that the pandemic prompted three new hires for every 10 layoffs.

A growing number of companies, including American Express and Visa, said they will allow the bulk of their employees to work from home for the rest of the year if they can do so effectively.

Three-quarters of all U.S. small businesses sought aid from the Paycheck Protection Program, according to the Census Bureau. A Census Bureau survey also found that more than half of respondents said that the pandemic has had a large negative effect on their business.

U.K. bankers are grappling with the prospect of negative interest rates after the government sold three-year notes at an average yield of -0.003%.

Park National Bank said it would close 21 branches in Ohio and North Carolina, representing about 15% of its network, as a growing number of customers shift to digital banking services.

The Treasury Department said it would issue nearly four million stimulus payments by prepaid debit card instead of paper check.

Stay up to date on the latest banking trends

For more information, contact Novantas Marketing

+1 (212) 953-4444


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