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Bricks-and-mortar retail is now regarded as more eco-friendly

Henrike Waldburg, Head of Investment Management Global, Union Investment Real Estate

Customers’ growing interest in sustainability is a positive for bricks-and-mortar retail, delegates heard at Real Asset Media’s European Opportunities – Investing in Resilient Retail briefing, which took place online recently.

“Consumers are more aware than ever of the ethical and environmental aspects and online retail is seen as less eco-friendly,” said Henrike Waldburg, head of investment management global, Union Investment Real Estate.

The amount of packaging waste, the number of returns going to landfills, the carbon emissions and traffic congestion caused by deliveries, are all seen as negatives by eco-aware consumers.

“It is a unique opportunity for stationary retail to use this trend to move forward, encouraging responsible purchases,” said Waldburg. “Sustainable offering is a big theme in retail of the future.”

The question is, how can institutions and investors support the evolution of the sector?

Focused retail and high sustainability add to tenant mix

“We provide the buildings and they must be sustainable, that’s the first step,” she said. “But we can also add on the product and tenant mix, by picking retailers with a special focus and high sustainability standards and launching new initiatives in this space.”

The crisis must be seen as an opportunity to transform space, evolve the tenant mix and experiment with innovative concepts in order to attract and engage customers.

“Experiential and entertainment retail has been penalised by the pandemic, but we see current obsolescence as just an interruption of a successful service,” Waldburg said. “We need to separate temporary from structural trends.”

For example, food and proximity retail has seen big growth during the lockdowns, which may not be sustainable once things returns to normal. The food market is Europe’s largest retail sector, estimated at €3 trillion, and it remains structurally sound, but Union Investment believes it will soon return to pre-Covid patterns of 0.5%-2% growth.

“Online shopping has achieved an evolutionary leap, with five years of projected growth compressed into 13 months,” she said. “Click and collect has been the main driver of online sales growth, because of necessity and the need for safety.”

These were temporary effects, but the shift to online shopping will be permanent. Omnichannel in particular “is a must have now, and retailers have recognised they need to invest in this space”.

Omnichannel is here to stay because it is a great digital integration tool for retailers, which substantially reduces costs for firms but it is also convenient and attractive for customers.