Retail: Finding solutions to old problems accelerated by Covid

New strategies and a fresh approach are needed to overcome current challenges, experts agreed at Real Asset Media’s European Outlook: Retail Investment Briefing, which was held online recently.

The epidemic and subsequent lockdowns have forced retailers to accelerate changes that were due to happen anyway.

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‘The problems have been there for a while but until now there was no real sense of urgency in the sector,’ said Chris Igwe, President, Igwe International. ‘Years ago I told retailers they should reduce their portfolios by 25% or even 40% because they had grown too much, especially in fast fashion with excessive inventories, but now reduction in portfolios is unavoidable.’

It is a difficult time, especially for landlords who have vacancies, but it’s also a time ‘to reflect and revise strategies in a clear and focused way’, he said.

Disruption has been a constant for the sector, first with shopping online and then with the epidemic.

‘The upshot is that the space race is over,’ said Rowan Verwoerd, Portfolio Director Germany, Redevco. ‘Covid-19 has accelerated the trend. In Germany we see hundreds of shops and department stores closing, so we must focus on the opportunities instead.’

As traditional stores close, new trends must be explored.

‘We see an acceleration of existing trends such as mixed-use, which is on the rise,’ said Herman Kok, Head of Research, Meyer Bergman. ‘In cities, this means creating urban areas where people can work, live, shop and socialise.’

Getting the mix right is a fine art, though, especially as things are shifting all the time. Take F&B, for example, which had been more than doubling its share from 10 to 20-25% but now it had to retreat because of coronavirus.

‘There is no perfect mix of tenant,’ said Igwe. ‘There was a trend to do less traditional retail and more leisure, but distancing requirements make that difficult. It is also difficult to make the figures stack up because leisure usually has tighter margins and pays less rent. A lot of re-thinking is going on.’

Another positive trend that is worth exploring is the outlet model, Igwe said: ‘Outlets create a collaborative environment because the owner has a vested interest in the success of the shops and the retailers believe in the project, so it’s also a good starting point to fix the relationship between tenant and landlord which is now broken.’

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