Report by Colliers International MENA
Covid-19 continues to dominate global headlines, ushering in unprecedented changes to the way we eat, live, work, shop and play- changes that just months ago were unfathomable. This survey was conducted to anonymously gather and provide real data concerning the impact of Covid-19 on the retail industry in the Middle East and how both landlords and retailers are coping. Thanks to all the respondents we have been able to conduct a meaningful survey and we are confident that the data output of this survey can subsequently provide strategic insights that can be used by landlords and retailers for their decision-making process.
This survey covers both landlords and retailers with a split of approximately 39% and 61% respectively. Respondents operate their business in the United Arab Emirates, Saudi Arabia, Kuwait and Bahrain.
The respondent landlords own regional shopping centres, community centres, street retail, standalone retail and retail below residential and/or office buildings. Respondent retailers are active in a wide variety of retail categories such as fashion (men’s, ladies, unisex, luxury), fashion accessories, handbags, shoes, gym, sportswear & goods, electronics, food and beverage, supermarket/hypermarket, jewelry & watches, health & beauty, cosmetics, perfumes and entertainment amongst others. It is fair to conclude that the majority of retail categories have been covered in this survey. The survey did not get any participation from super regional mall landlords; this might be due to the fact that the majority of super regional mall landlords contacted during the course of this survey were already working on and announcing, in some cases, generous tenant support packages and countermeasures to mitigate the impact of COVID-19.
This survey has identified six key conclusions which will be discussed throughout document, followed by the survey conclusion.
“Retailers physical store revenue impact is estimated to be hit harder than landlords retail asset revenue for Q1 and Q2 2020.”
Quarter 1 2020 impact
35% of retailers estimate the decrease in revenue to be more than 70%, in sharp contrast with landlords’ estimations where only 9% estimate the same decline.
The fact that landlords estimate their Q1 revenue impact to be significantly lower than the retailer’s revenue impact most probably lies in the fact that landlords generally collect quarterly rent in advance, whilst in contrast, retailers saw an immediate drop in revenue the moment stores were forced to close.
Quarter 2 2020 impact
Responses show an even bigger discrepancy between landlord and retailer expectations of the pandemic’s revenue impact on their business with 59% of the retailers estimating that quarter 2 will bring a revenue decrease of more than 70% and only 9% of landlords.
The continued negative Q2 outlook from the retailers might be because the physical store closures only happened towards the end of Q1, leaving retailers in shock and in “damage control” mode.
For Q2 and depending on how long restrictions and countermeasures will stay in force, they might believe the shift in consumer behavior will not have returned to levels that were seen before COVID-19, because consumers are expected to be cautious when going outside. In addition to this, retailers typically give landlords postdated cheques – in advance – for the yearly rent, which in theory means landlords can collect the rent if they cash the cheque when it is due, potentially seriously impacting the retailers cashflow position.
Here are some highlights from the report:
You can find the full report here.