Recent months have seen most Covid-19 restrictions finally being lifted across Europe. Shops, bars and restaurants have re-opened. Although it is perhaps still too soon to tell what the ‘new normal’ will look like, and Covid-19 remains a fluid issue, it’s time to be optimistic again and have a look at the future.
Before looking ahead, it is useful to take stock. It is well-known that retail and the retail property sector were already undergoing significant transformation prior to the pandemic. Confronted with new paradigms – such as the continuing growth of e-commerce, changing consumer behaviour as well as demographic changes – the sector had already been investing significantly. It is converting pure retail spaces into ‘mixed-use centres’, anchored off an evolving demand for a shopping experience that reflects societies needs and aspirations, adding many other activities to increasingly become valued and genuinely important community hubs.
Past efforts had started to pay off. Footfall and sales were up in most major European markets in 2019. Share prices of listed retail REITs were also steadily moving upwards towards the end of the year. And then we had the repeated lockdowns, which hit the retail sector particularly hard. On average, footfall fell by as much as 50%, rental income was down by 25-30%, and share prices consequently tumbled.
As an organisation, we lobbied hard during this period to make decision-makers and financial institutions understand that landlords were too often required to take a disproportionate share of the economic burden that was not sustainable in the long term. To ensure that this short-term crisis would not have a longer-term detrimental impact on an otherwise successful industry, we published a paper highlighting some specific requests. These included more financial flexibility, particularly regarding the suspension/waiver of financial covenants, a more aligned approach across Europe to rental subsidies, a stronger role for the state and not the landlord, and additional/new credit lines for retailers.
Looking at the present, the latest footfall and turnover numbers from across Europe, though not yet at 2019 levels, are positive and encouraging, providing some much-needed relief. A good Christmas sales period could also provide a significant boost. Most countries are generally expecting to get back to pre-pandemic economic levels sometime in 2022, assuming that new restrictive measures such as the so-called ‘sanitary passes’ will not hamper this. New-build projects and renovations are also planned for 2022 in many European countries.
Back to the future. The pandemic has also accelerated – not curtailed – the green and digital transitions, something that the European Commission has welcomed and championed in its new Industrial Strategy adopted last year. Now the Commission is working on a new strategy tailored to the retail sector.
Looking at the digital transition, ECSP members are certain that the future is omnichannel, a seamless shopping experience whether at home, on a mobile device or in brick and mortar stores. However, existing regulation does not grant fair competition between online marketplaces and physical shopping places. Inequality in terms of applicable taxes, environmental regulation, sales and advertising rules and labour conditions should be addressed urgently by the European Commission in order not to hamper the further development of a sector that is vital to the success of our economy and for the future of our communities.
The retail property sector is also leading in delivering green real estate with reduced GHG emissions. Shopping places renovate at a rate that is unparalleled in the property sector. ECSP believes that as shopping places continue to decrease their emissions and evolve into multi-use spaces, it is more efficient and effective to renovate, than rebuild. However, investing in tomorrow’s decarbonised and digitalised retail will require additional funding, and Covid-19 did not help. Consequently, ECSP has emphasised the need for more funding from the EU, also calling for the set-up of a dedicated EU Retail Relief Fund.
Shopping places in Europe have always been vital to the life of communities and city centres. They are key generators of footfall and nurturing broader commercial activity, attracting billions of visitors across Europe every year. In the future, they will remain important hubs in a much broader value chain. Failure risks a much broader set of challenges, with urban decline, and stagnation and blight.