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RETAIL

EMEA Real Estate Market Outlook 2020 Midyear Review
13 August, 2020

THE ERA OF TACTICAL SHOPPING

Due to the prolonged closure of non-essential retailers for as long as one to three months and social distancing measures, consumers have readjusted their shopping behaviours. Key trends include:

  • Queuing and booking appointments online/in app
  • Increased levels of online shopping
  • Preference for local shops

 

A shift in shopping behaviours was also observed after lockdowns were lifted. Changes include:

  • Reduced dwell times combined with a shift to more focused shopping
  • Higher spending per person compared to the pre-pandemic period
  • Increase in ticket value by up to 10 to 15% in some markets

 

SELECTIVE SPENDING IN UNCERTAIN TIMES

While consumer confidence rebounded in all markets as non-essential retail reopened, this has been counterbalanced with concerns over the global economy and job uncertainty, which are likely to lead consumers to continue to spend cautiously.

STEADY RECOVERY OF FOOTFALL

Despite the absence of tourism – especially in Spanish, Greek, Italian, French, German and British cities - and lack of events attracting consumers to shopping centres and high streets, footfall recovered steadily after lockdown in most countries. CBRE expects the rebound to continue in all markets, provided there is no second wave of COVID-19 cases leading to large-scale nationwide lockdowns.


FIGURE 27: REBOUNDING CONSUMER CONFIDENCE

 retail figure 27

Source: Eurostat. No data for Italy for April 2020 available.


FIGURE 28: HIGH STREET FOOTFALL POST-LOCKDOWN

 retail figure 28

Source: CBRE Supply Chain & Consumer Advisory, data as of 21 July 2020.

THE RETAILER RESPONSE

The abrupt nature of (re)lockdown and reopening, shifting consumer preferences and continuously changing government policies have created uncharted market conditions, making it hard to predict retail sales and operations in the coming months, let alone 2021.

Accelerating structural changes will lead to continued administrations and rental recalibrations over the next six months. Rent concessions are part of the strategy to safeguard cashflow. The strength of asset and performance figures will dictate retailers’ response to individual negotiations.

Retailers have also responded by refocusing on consumers and online sales and rationalising portfolios. Examples of practices include:

RENEWED FOCUS                                                                    RATIONALISATION

  • Stronger focus on omnichannel online sales but brick-and-mortar stores remain key to generating profit
  • Steering consumers towards click-and-collect
  • Expansion of home delivery slots
  • Direct sales to consumers
  • Digital campaigns focusing on brand experience
  • Acceleration of store portfolio consolidation
  • Medium sized retail spaces vacated
  • Expansion strategies and strategic frameworks rethought (e.g. Inditex
  • Sale and leaseback of headquarters (Ted Baker), warehouses (Next) and factories (Wolford)
 


 retail table 2


FIGURE 29: RETAIL SALES EVOLUTION, SELECTED MARKETS

 

 retail figure 29

 

Source: Eurostat.


SHIFT TO FLEXIBLE LEASES

With cashflow severely impacted due to lockdowns and the gradual pace of recovery, and challenging market conditions ahead, retailers are asking landlords to provide them with lease and rent concessions in the short-term.

  • Rent negotiations accelerated just before summer, but these discussions only concern rents until the end of 2020
  • Retailers are reticent to consider long term solutions beyond 2021 because of uncertainty
  • As a result, headline rents are falling in most EMEA markets


In nearly all European countries, governments have announced policy measures to support retailers, including several steps related to rent support.

GOVERNMENTAL RETAIL RENT PROTECTION IN KEY MARKETS

 retail table 1

 

In the long-term, the move towards more flexible lease terms might include:

  • Turnover rents
  • Including online sales as part of turnover rents
  • Shorter lease terms
  • Different break options
  • Shift from quarterly to monthly payments
  • Insertion of pandemic clauses

 

In nearly all European countries, governments have announced policy measures to support retailers, including several steps related to rent support.

  • A change to the definition of prime and secondary retail
  • Different measurement of what constitutes a successful retail destination

 

Landlords will require a holistic understanding of a retailer’s organisation and need to focus on managing their existing portfolios.


retail table 4


FIGURE 30: PRIME YIELD MOVEMENTS IN GERMANY

 retail figure 30

Source: CBRE 2020.


FIGURE 31: PERFORMANCE OF RETAIL CATEGORIES IN THE COVID-19 ERA

 retail figure 31

Source: CBRE 2020. Note: performance reflects quantitative and qualitative data on footfall, conversion rates and sales.

Key Takeaways

 

  • The pandemic has accelerated the already existing structural trends in retail.
  • Customers and retailers are adapting the way in which they organise themselves: while omnichannel is the way forward, brick-and-mortar remains an indispensable element of the equation.
  • In the short-term, exceptional prime retail assets are still investment-worthy across different retail categories.
  • Retail remains a versatile sector and is capable of evolving in myriad ways.

EMEA Real Estate Market Outlook 2020

Contributors

Tasos Vezyridis 326x248
Tasos Vezyridis
Senior Director, Retail and Logistics
+44 20 7182 8550
Annelore Hofman
Senior Analyst, EMEA Retail Research

EMEA Real Estate Market Outlook 2020 Midyear Review