In the words of Albert Einstein ''within every crisis lies great opportunity.'' 2020 will certainly go down in history as not only a global crisis but one of the property industry’s most extraordinary years with the onus on us all to identify and capitalise on the opportunities presented.
The global pandemic has enticed shoppers all around the world to dramatically shift their shopping behaviours with the socio-economic effects of the Covid-19 crisis resulting in the transformation of everyday life. The crisis has certainly taken retail out of its comfort zone and has functioned as a trend accelerator with e-commerce gaining further momentum, digital technologies providing the means by which consumers can be contacted, contactless payment methods have become the norm and localisation and local commerce are now favoured.
As such by mid-September approximately 14,000 shops pulled down their shutters for the final time which is a 25% year on year increase and non-food retailers have lost more than £9 billion in sales. It is feared that if restrictions continue 1 in 10 shops could disappear for good and 12 million square meters of retail space could be lost. Noting, of course, that business rates remain a huge issue for retailers and leisure operators alike with an extension to the “current pause” being requested and much lobbying of the Government on lowering the business rate multiplier.
Meanwhile, Britain’s unpaid rental bill for commercial premises during the pandemic is likely to reach £4.5 billion by mid-September with final quarter rents for shops, offices and warehouses being billed on 29 September with £2.7 billion becoming due. The Government’s extension this month of a blanket ban on property companies evicting tenants or taking recovery action to collect rent until the end of the year is understandably of concern to landlords and foreign investors alike.
Undoubtedly footfall to our urban centres remains the biggest concern with August footfall across the UK down 34.3% year-on-year with the major cities hit hardest. Whilst improvement month on month is being realised, the fresh wave of Covid-19 cases and the Government’s latest call for employees to work from home where possible will stall this upwards trend and be a further blow to the commercial real estate industry as a whole.
An upturn in spending in August does not hide the fact that sales are still below pre-pandemic levels and the lack of people in our high streets and urban centres is having a devastating impact on shops operating in places once thronged with workers. Indeed in-store sales of non-food items were almost 18% lower in the three months to August than in the same period of 2019.
However it must be acknowledged that many of the key trends now being witnessed were driving our businesses before Covid-19, including the digitalisation of retail, the focus on sustainability, urbanisation and community engagement, these trends are now simply here to stay.
With so many aspects of our lives being touched by the pandemic, a lasting shift of some kind is inevitable but the “new normal” will take time to develop. For the foreseeable future, many people will choose not to travel far from home for their holidays and social interactions. However social cohesion and collaboration will remain a valuable component in people’s lives and the provision of the context to facilitate the social atmosphere will be more important than ever.
Healthy, sustainable living will also become a primary focus in our urban centres and beyond with the use of parks and other outdoor spaces increasing as people seek locations for gathering, sports, exercise, and walks.
Of course, acknowledging that the repurposing of redundant space in our urban centres is not new with 40% of developers reporting that their town and city centre voids (primarily retail) were already subject to remodelling and indeed much capital has now been earmarked for further repurposing to enliven our centres and entice footfall yet again.
It is however recognised that many investors are sitting on their assets awaiting further market stability but investment in UK property (retail assets in particular) from global investors and developers is becoming more attractive with falling values offering a baseline for long term investment.
As we emerge from the life-changing event that is Covid-19 which was a massive shock to property markets, experiences, personal transformations and enduring legacies will take centre stage. We need to respond by moving beyond the concept of single property asset classes and adapt our investment strategies and modelling to reflect location's unique, mixed-use offerings of appropriate size and scale across the UK to offer both convenience and community-led destinations as well sensitively phased, large scale urban regeneration. Public and private partnership will need to become the norm once again to support the viability journey and form a platform for further investment whilst offering much-needed support to the local economy. Innovation and creative thinking is required from collaborative development teams working alongside informed stakeholders. If you are up for change then this is one massive opportunity waiting to be realised.