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Tom McGee, CEO of the International Council of Shopping Centers (ICSC), joins Yahoo Finance Live to discuss the findings of a recent survey, which reveal that retail and commercial real estate (CRE) leaders expect pandemic-induced changes to propel the industry forward, and foot traffic to return to pre-COVID levels.
MYLES UDLAND: Pandemic changing a lot of industries potentially for good, potentially permanently, potentially just temporarily, though the retail industry seems unlikely to see non-lasting impacts from the pandemic. Joining us now to discuss the future of physical retail here in the US is Tom McGee. He is the CEO of the International Council of Shopping Centers.
Tom, great to speak with you this morning. I'd love to-- you know, you guys just put out your latest report on kind of the state of the shopping center. And I'd love to maybe just talk through the process of trying to form a thesis around what that even is, after all the disruption that we saw in 2020.
TOM MCGEE: Well, good morning, and thanks for having me on. You're right. I mean, retail has been at the epicenter of this crisis for sure and arguably has been the most impacted industry. I do think the industry has shown a great deal of resilience throughout the pandemic.
And a lot of the changes that you've seen take place during the last 11 months were really an acceleration of trends that were happening before that, where you see the convergence of the physical and digital world. And that's manifested in curbside pickup and Click and Collect. But then also, a lot of new things, as it relates to safety and security, plexiglass awnings, directional arrows obviously more prominent, sanitation within stores and shopping centers. I think all of that will continue post-pandemic.
Our most recent survey would suggest that when the pandemic passes-- and obviously, it will pass at some point-- that the vast majority of retailers and property owners are fairly optimistic about the future, that they do believe that shoppers will return, and that over a 12 to 24-month timeframe, that we'll get back to levels that were consistent with what we saw pre-pandemic.
But the shopper experience will be different. There'll be an increased use of digital for sure. And you will see retailers invest a lot in digital engagement with their customers, hopefully to encourage them after that engagement to go experience shopping within a store. And that convergence becomes a reality. But fairly optimistic about the future, despite the challenges that exist today. And there clearly are continued challenges for sure.
MYLES UDLAND: You know, Tom, I wanted to ask a bit about some of those safety measures and the way that the layout of stores has changed, the way people may have rearranged checkout. And I'm wondering if, you know, if there's a concern that retailers are seeing this as, oh, I don't need as much square footage as I've taken on because I had to take 30%, 40% of the product out of my store. And I'm still pleased with the throughput of what remains. And in a future where I don't have to have everything six feet apart, maybe I do want a smaller footprint. Is that something that's out there, or how are your members thinking about that?
TOM MCGEE: You know, clearly, there's a lot of conversation around the future use of space. But I actually think that the opposite may be true. One, first of all, I think customers are going to want those physical and very visual aspects of safety to continue for the foreseeable future.
But secondly, don't minimize the impact of just the convergence of the physical and digital world. And what you're seeing a lot of retailers do is really use their stores to solve that last mile. And so, while there may be less space used for the traditional aspects of aisles for people to walk and shop, there will be more square footage devoted towards curbside pickup and Click and Collect and satisfying those orders.
And so, many of our larger retail members are actually saying that real estate has never been more important in their strategies going forward because of what's taking place over the pandemic, that the way they use the space will differ from the way it's traditionally been used. But the importance of real estate has never been more. And you can kind of see that when you look at some of the essential retailers, whether they're grocery chains or whether they're the Walmart's or the Target's or the Costco's of the world.
You know, they've reconfigure their stores to some extent to accommodate what's happened in the pandemic towards curbside pickup, the Click and Collect. And I don't think they and I don't think the industry as a whole believes that that's going to change. I think that's going to continue to post-pandemic. Customers like that convenience, but they still enjoy the immediacy of going to the store and picking it up.
MYLES UDLAND: All right, Tom McGee, CEO of ICSC, International Council of Shopping Centers. Tom, I really appreciate you taking some time to talk with us this morning. And I know we'll be in touch.
TOM MCGEE: Thank you.