COVID-19 has undoubtedly influenced retail assets across the globe, from regional and super regional-shopping centers to strip retail and community malls. The decrease in footfall and resulting decline in sales had led to the inevitable increase in vacancy rates and decreased profitability levels. To help guide clients, CBRE has put together a series of four insight pieces highlighting several solutions available to proactive landlords looking increase the efficiency and value of their assets.
Retail flexibility, adapting through creativity
COVID-19 has presented retailers with a maelstrom of issues. Lockdown measures in the early stages of the pandemic had severely reduced footfall and increasingly downbeat economic predictions depressed consumer spending. Whilst we have since witnessed the reopening of retail from the second half of 2020, CBRE research suggests that some retailers globally have seen around 50-60% reduction in turnover for the full year.
Historically, retailers in Dubai have relied heavily on the large number of tourists visiting and leveraged footfall generated during shopping events, such as the Dubai Shopping Festival (DSF). However, due to the pandemic and the resulting restrictions, which reduced footfall to brick-and-mortar retail and in turn sales, mall operators and major retailers have extended their presence to online retailing to boost sales performance. These omni-channel platforms are being introduced across all retail categories from F&B to luxury brands and continue to gain momentum as shoppers become accustomed to this additional level of convenience.
With the pandemic rapidly accelerating consumer behavioural changes, retailers are facing the most challenging trading environment seen for some time. More so, with the ever-growing uptake of online shopping, alongside subdued footfall levels and increasing set-up costs, we have seen additional store closures and limited new openings. Whilst in 2021, we may see somewhat of a resurgence in new store openings as retailers begin to resume, at least revised expansion plans, vacant units will present landlords both challenges and opportunities going forward.
One strategy on offer for landlords will relate to re-purposing of units. For example, landlords could look at ‘white box’ vacant units, where they invest in getting units to a good standard so it can be used for multiple purposes. Such repurposing of units could allow emerging brands to host pop ups, charities and local community groups to utilise the space, or allow for retailers to trial experimental retail without the need to extensive capital expenditure, all of which is likely to drive additional footfall. This combined with more flexible leases, not only provides greater accessibility less risk for retailers, but will also allows landlords to keep the retail offering fresh and relevant to consumer trends.
Those retail landlords that will be best placed to thrive post COVID-19 are likely to be those that are the most flexible in re-purposing their retail assets, thereby diversifying their occupier and revenue base.
If you are a landlord that is worried about increased vacant retail units and want to know about future-proofing your retail assets please get in touch with Alex 00971 52 684 3621 or email [email protected]