Emerging Coronavirus Variant Sows Uncertainty, Sinks Markets On Black Friday — Casting Another Cloud Over Real Estate

The emergence of a new variant of the coronavirus sent ripples through stock markets on Friday in what could have been a triumphant return to Black Friday shopping for retailers.

The market slump is the worst Black Friday drawdown on record, The Wall Street Journal reported. If the effects of the variant prove to be lasting, they could deal a major blow to REITs and other commercial real estate operators hoping that the world was finally reaching the post-pandemic phase.

When the delta variant first reared its head in early 2021, property managers considered the strain little more than the latest twist in the winding path out of the coronavirus pandemic. But the variant led to significant delays in return-to-office plans for commercial tenants — and office demand likely saw a delta-fueled pullback this fall.

The World Health Organization said last week that B.1.1.529 — dubbed "omicron" — is a "variant of concern," although scientists haven't yet determined whether it is in fact more transmissible or dangerous than previously seen versions of the coronavirus.

Over the holiday weekend, the United States, European Union and several other countries began to limit travel from South Africa, Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawai on fears that the variant emerged there.

Whether omicron’s effects prove as damaging as delta remains to be seen. However, U.S. infectious disease expert Dr. Anthony Fauci on Sunday said that Americans need to be prepared to do “anything and everything” to fight the new variant.

Appearing on ABC's This Week, Fauci said it was still too early to say whether lockdowns or new mandates will be appropriate.

“Inevitably, it will be here," Fauci added. "The question is will we be prepared for it? If and when — and it’s going to be when — it comes here, hopefully we will be ready for it."

Below, Bisnow has brought together an early look at how the variant complicated the holiday weekend:

• “No cases of this variant have been identified in the U.S. to date," according to the U.S. Centers for Disease Control and Prevention.
  
  
• However, by Sunday, the U.K. reported at least two cases of the omicron variant that are tied to southern Africa. So far, the variant has also been found in Israel, Belgium, the Netherlands, Germany, Italy, Australia and Hong Kong — but not yet in the U.S.
  
  
• Israel and Morocco became the first countries to impose bans on all foreign travelers, while the U.K. reintroduced mask mandates and PCR tests for travelers.
  
  
• In the U.S., many governors remained silent over the weekend, though New York declared a state of emergency. Most other states, including Connecticut, California, Rhode Island, Arkansas and Mississippi, issued public statements saying their governments were monitoring the new variant and urged calm. 
   
• Despite the turbulent market, early data seems to show strong sales and a slight return to in-person shopping. Data from Mastercard SpendingPulse showed retail sales up 12.1% over 2020 by 10 a.m. ET, CNBC reported. In-store sales were up 39.8% over 2020 totals as of mid-morning on Friday on the East Coast, the Financial Times reported.
   
• Consumers were on track to spend between $8.8B and $9.6B online on Friday, positioning e-commerce sales to potentially exceed last year's record-setting $9B, according to the Financial Times, citing Adobe Analytics.
  
  
• Meanwhile, after a difficult 2020, the National Retail Federation predicted that retail sales should climb by 8.5% to 10.5% year-over-year. Innovating Commerce Serving Communities, or ICSC and formerly the International Council of Shopping Centers, also reported that the number of consumers expecting to shop at a mall or shopping center would double.
  
  
• Shares of REIT Simon Property Group, the biggest mall owner in the U.S, dropped more than 5%. Simon Property Group also expects foot traffic to exceed 2019 levels at several of its properties, Chief Administrative Officer John Rulli told The Wall Street Journal.
  
  
• Shares of some of the largest big-box retailers dipped between about half a percentage point and 2.28%, according to CNBC. As of the close of markets on Friday, Costco was down 0.65% while Amazon and Home Depot were down 2.12% and 2.28%, respectively. 

• By Sunday at 6:30 p.m. ET, stock futures moved higher in overnight trading following the Black Friday sell-off. Futures on the Dow Jones Industrial Average had gained about 215 points, or about 0.6%. The S&P 500 futures added 0.7%, and Nasdaq 100 futures rose 0.7%.