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Left: GLATT shopping center in Switzerland. Right: Marcel Stoffel, Founder and CEO of the Swiss Council of Shopping Places.

Drastic sales losses in Swiss malls

Malls in Switzerland are currently losing 39 million Swiss francs in revenue per day.

By Marcel Stoffel

Switzerland’s 191 shopping centers (excluding train stations and airports) generated a market share of 19% of the country’s total retail business. Therefore, approximately 5,000 stores and restaurants in these 191 malls generated an annual revenue of 17.35 billion Swiss francs on approximately 2.79 million sq m of retail space.

This year’s forecasts are significantly worse. Due to the lockdown and the resulting closings of most stores and restaurants, Swiss shopping centers are currently losing 39 million Swiss francs in revenue per day.

The calculation base for this prognosis consists of the estimated and projected revenue of those industries that are allowed to remain open for business, according to the Federal Office for Public Health’s regulation of March 17, 2020. These are grocery stores and health facilities (medications, daily supplies incl. pet food). The share in sales areas and revenue of these industries is substantially higher in small and medium-sized neighborhood centers than in bigger malls, oftentimes due to food retailers who are anchor tenants at these smaller malls. Therefore, one can assume that sales losses in smaller and medium-sized centers are proportionally lower.

Pent-up demand or not?

How much individual centers are affected by the current loss in revenue depends predominantly on their product ranges and tenant mix. The current prognosis is a general overview which only takes those sales areas into account that are currently still in use at the 191 centers.

It is still uncertain how the current sales situation will impact the annual turnover. Some experts assume that there will be pent-up demand, which will partially compensate for lost sales. However, this effect will largely depend on the respective industries. E-commerce business is currently booming and many new customers experience this shopping channel for the first time. It is unclear how many of these customers will come back to stationary retail and how often they will continue to shop online.

Quite a few centers that recently experienced downright onslaughts (panic buying) and generated above-average sales, are now facing massive declines in frequency. This situation will result in further losses in revenue. On the other hand, the Federal Council’s recommendation to stay at home seems to be effective, and that is certainly a good thing in the face of this acute situation.

Closing the affected stores entails additional challenges like lease payments and ancillary costs. Is the well-known rule “rent comes from revenue” still valid today? In any case, now is certainly the time for lessors and lessees to find fair, viable, and acceptable solutions.

Information about this prognosis

This report is part of a current study by the Swiss Council of Shopping Places, which is expected to be published in the Swiss Council Market Report 2020 by the end of April. Sources: GfK Switzerland, retail trade 2019; GfK Switzerland, Shopping Center Market Switzerland 2019; stoffelzurich, Shopping Center Market Report 2018; stoffelzurich, Detailed Tenant Mix Analysis at 20 Swiss Shopping Centers