Key takeaways:

  • Consumer spending is the key driver across the economy and a critical component to the performance and valuation of commercial property
  • The recent rebound in consumer spending in May is positive news, but it should be taken with a grain of salt, as there is still a ways to go before recovering
  • Technology, income & savings, and shifting consumer preferences are three key factors that are enabling and contributing to FOGO, which may result in muted consumer spending in the coming months




anxiety or hesitation caused by perceived or real increased health risks of certain consumption behaviors, initially catalyzed by the COVID-19 pandemic, but further enabled by technology and broadly accepted social norms.

“Even if the economy opens up, instead of buying it in person, I would prefer to order it on-line because of my lingering FOGO”

Consumer spending by the numbers

We live in a consumer-driven economy. Consumer spending accounts for 68% of total gross domestic product (GDP) and is by far the largest contributing category to this measure of economic activity which also includes government spending (18% of GDP), investment (17% of GDP), and net exports (-2% of GDP; negative because we import more than we export).

Pre-COVID, approximately 70% of all consumer spending was spent on services, while the other 30% of total consumer spending was spent on goods (i.e., durable and nondurable goods; 10% and 20% of total consumer spending, respectively). This spending is what keeps factories, stores, and businesses earning and open – and the labor force employed. It is because of this significant role that consumption plays in the economy, that it is imperative to understand changes in the collective consumer behavior.

On June 26, data released by the Bureau of Economic Analysis, showed that consumer spending in May increased by 8.1% over consumer spending in April – the largest monthly increase in over 61 years of record-keeping. The second largest monthly gain was 2.7% in October 2001, when consumers returned to life following the 9/11 attacks.

The May 2020 rebound, while positive, needs to be taken with a grain of salt as the May consumer spending still trails the February figures by 11.7%. The May bounce comes after two consecutive monthly record declines – the first record set in March when consumer spending dropped by 6.6% over February, which is only second to the 12.6% drop seen in April.

Also of note, the May numbers show that consumers decreased their spending on services (66% of total consumer spending in May) and increased their spending on goods (34%), of which 22% was on nondurable goods and 12% was on durable goods. This change, albeit slight, deviates from the consumer spending preferences seen over the last years.

Open, Shut, Repeat = FOGO

Consumer behavior is not static, but gradually shifts over years (i.e., less spending on goods and more spending on services) and are largely influenced by demographics and technology. However, the current pandemic’s impact on the economic and social norms have been so significant, that the collective consumer psyche which makes consumption decisions may be fundamentally changing.

While we are all hopeful that the virus is temporary – the spike in new cases in June and a new wave of restrictions on mobility within and between states – reminds that the virus is not certainly behind us yet. The repeated exercise of lockdowns may be adopted as the permanent “temporary” fix – at least until a scalable vaccine or therapy can be produced and distributed. And it is this “Open, Shut, Repeat” routine that will condition many consumers to change their purchasing habits. This lasting impact, at a high-level, is the psychological change in consumer behaviors catalyzed by the COVID-19 pandemic and enabled by technology – and is called Fear Of Going Out or “FOGO”.

The “fear” in FOGO, may be actual fear related to perceived health risks (i.e., decreased willingness), or could also be general hesitation to spend due to budget constraints (i.e., decreased ability). And the “going out” refers to both purchasing and consuming goods and services outside of one’s residence. FOGO speaks to the changes in:

  • What people buy (e.g., specific goods and services)
  • How much people buy (e.g., $ amount spent)
  • Where people buy (e.g., in-store, on-line)

FOGO factors

Three of the major factors fueling FOGO are:

  1. Technology: Even though the consumers have been shifting to making more purchases online instead of in-stores for years, the adoption rate of ecommerce has been super charged by stay-at-home orders and quarantine measures. A recent report by Deloitte showed that online sales grew 68% year-over-year in April, well above the historical trend rate.
  2. Income & savings:  Not all businesses will make it through the pandemic-induced recession, and many of jobs will be lost permanently. This means that fewer Americans will have income to spend. In the recent months, the government has transferred over $250 billion to consumers through pandemic-related stimulus and relief. Barring additional consumer stimulus, the overall ability for consumer spending to increase will be limited by the growth in disposable income (e.g., income less taxes). Additionally, recent history has shown Americans saving between 7 and 8% of their disposable income; however, the savings rate jumped in April and May this year to 32.2% and 23.2%, respectively. Each dollar saved, is not spent; which could indirectly put pressure on the businesses that rely on consumer spending.
  3. Shifting preferences : The lifestyle changes forced on many people this year have altered what we choose to spend on. From food (i.e., online grocer, food delivery) to travel (i.e., flights, RV rental) to normally in-person interactions (i.e., counselling, hair cuts) – consumers are looking for substitutes, or at least exploring the alternatives.

Implications for commercial property


Lower levels of disposable income and concerns over hygiene related to travel will dampen the demand for hotels; additionally, travel restrictions (inter-state and internationally) will contribute to the decreased levels of demand and will elongate any road to recovery.


Retailers with an online presence and / or quarantine-proof products (e.g., recreation, autos, furniture) will fare better than those without. Resiliency of restaurants largely depends on the local government responses and financial condition of the company pre-COVID.


Distribution and fulfillment centers will outperform manufacturing facilities. Competition for last-mile space will continue to be hot, however may cool some if urban centers de-densify.


Effective rent growth will be challenged if unemployment rate stays elevated and tenants cannot afford the increase; competition between properties likely to heat up with more concessions given to support stated rent, while still making the units affordable for tenants. Expect to see less tenant demand for common or shared amenities and greater demand for individual unit amenities and larger units.