The retail industry was experiencing headwinds before COVID-19 due to the rise of e-commerce and the evolution in consumer preferences. The pandemic has again posed tremendous challenges for the retail industry, and we are expecting major structural shifts among all retail sectors, with several high-profile bankruptcies already (and likely more ahead), especially for malls.
Availability for retail neighborhood, community and strip centers (NCS), was at 8.7% in Q1 2020, up 5 bps from Q4 2019, and NCS registered a 1.7% increase in rent. Due to the data collection cycle, the current Q1 2020 data does not capture much of the impact from COVID-19.
We are, however, expecting a major increase in the availability rate due to the pandemic, which we forecast to reach its peak in Q1 2021 at 12.5%, or 380 bps higher than our current levels. This increase will also surpass the negative impact from the Great Financial Crisis, which produced a 370 bps increase in availability rate at its peak. We forecast that rents will fall and reach its trough at Q2 2021, with an 8.5% decrease compared to Q1 2020.
Although we predict a rather quick recovery in terms of employment, we are expecting a systematic hit to the NCS retail sector. Our expectations are that both availability rate and rent will take 3 years to stabilize.