By Chris Igwe
Over the past few years, there was a lot that has challenged the retail real estate sector at multiple levels that we do not need to enumerate here. We really did not need the coronavirus to further compound matters. And yet, here we are.
Inevitably, we will see the continuation of limited retail expansion, more store closures as retailers adjust their portfolios, downsizing of stores, and even market closures. There will be reduced footfall as people slowly return to previous shopping habits, as well as seeing new projects, renovations or extension projects delayed or even cancelled. Not to be underestimated, the decision-making processes will be even longer than they have become already, as each company weighs up what their own future looks like in a forever-changed retail real estate environment.
However, as in all crisis, we should bear in mind that there is always a “before” and an “after”. We should focus on the latter. So, how can we as an industry come together to find both short term and long-term solutions? Retailers have decided to close stores voluntarily. How will their lease obligations be affected legally? Even those seemingly covered by a government-imposed closure will still face the same issues with their landlords. This would not be the time to consider only the letter of the law, but also the spirit of that law, to protect jobs and keep businesses alive. Governments will probably need to be pass laws and legislation on a range of issues such as business rates and taxes, trading hours, wages, Sunday opening in some countries, excess inventory, sales periods, and so on. Unless these issues are addressed and solved, recovery of the sector will be even slower.
It may be naive to think that relationships between the landlord and the tenant would improve as a direct consequence of the coronavirus, as they seek to find solutions on how to share the very immediate burden of paying fixed costs for non-trading stores. This would be a great outcome!
Taking a page out of the designer outlet sector’s book, there should be an awareness that both parties succeed when they understand each other’s problems and support ways that will benefit the shopper.
Physical stores and shopping centers will still be there in the future, but what about the consumers whose habits will necessarily change as a direct consequence of the virus? We are getting more used to shopping online due to social distancing and confinement. There will probably be a significant increase in e-commerce, which would affect growth of physical stores.
Another positive outcome, for tenants and owners alike, would be to find ways to use their spaces within the stores and the center to create a true sense of place and belonging for people. People who will have suffered weeks or even months of isolation from fellow human beings and loved ones will have experienced substantial psychological and emotional hardship. There will be an even greater need to fulfil the promise of providing not only safe havens, but invigorated places for social interaction. Perhaps we will see even more food and beverage as well as cultural, leisure and entertainment offers in the short term to include all generations. The retail real estate environment could be a great place to truly serve communities, so there is hope.