Keith Reading, director of research at Morguard, a fully integrated real estate company, has talked a lot recently about commercial real estate but one key word keeps popping up. Confidence.
“As with any sort of downturn, when you come through the other side, you don’t really see a recovery until confidence is restored,” said Reading. “That’s confidence on the part of owners, on the part of shoppers. With this crisis coming through on the other side, consumer confidence is going to be a big driver and I think that’s where there could be quite a bit of change.
“Consumers will need to feel confident to go back into shopping centres. This is an unprecedented event that we will have eventually come through. Rebuilding that confidence will take longer than I believe ever before.
“There’s a tremendous degree of confidence to be built. That’s going to be key. With regard to shoppers, they’ve got to rebuild confidence in certain brands. They’ll have to develop confidence in what I think will be new brands and new ways of shopping. Right now there’s a lot of uncertainty of how different stores are set up to receive their customers and both retaining existing customers but also bringing in new ones. There’s a tremendous amount of work to be done to gain that confidence. That will take efforts on the parts of building owners and managers with regard to shopping centres.”
Prior to the COVID-19 crisis, Reading said foot traffic in shopping centres was down generally across the board. That will be even more of a challenge now.
“Necessity is the mother of invention. This will force shopping centres and their managers and their marketing teams to come up with solutions to get shoppers into the shopping centres themselves and get them back shopping with confidence,” he said, adding that the coronavirus has to become a distant memory before consumers really start to spend again the way they did during the recent peak before the crisis.
“Consumers have to be confident about their jobs, they have to be confident about the economic outlook and with that confidence will come a little bit of almost reckless abandon in terms of shopping to get back to where we were in the previous peak.”
There’s also pent-up demand right now with consumers itching to open up the purse strings.
“There’s that desire to say look we’ve just gone through this period where we haven’t been able to go out, we haven’t been able to do some of the things that we took for granted, we were forced in a lot of cases to stay home, and I think once things start to open up, people are in a position where okay let’s go out, let’s have some fun, let’s go buy something to make ourselves feel a little better, to lick our wounds so to speak. Absolutely there’s some pent-up demand and there’s some desire to have a little fun,” added Reading.
Shopping centres and plazas anchored with essential services such as grocery stores and drug stores have been able to weather this economic downturn.
“We really saw during the financial crisis (of a few years ago) how well shopping centres did that had a grocery store, perhaps a drug store, perhaps a liquor store. They all fared really quite well through the financial crisis and in fact after the financial crisis we saw a lot of demand for grocery-anchored shopping centres,” said Reading.
“I think on a relative basis those shopping centres have done really quite well. And I think that will be the case also through this crisis. You’ve got to eat, you need medicine for whatever ails you and liquor is one of those things that can add a little pleasure in your life, it’s something people like to do. So it’s those types of properties with those types of tenants who have really fared quite well.”
But also during times of crisis it can foster some creativity, he added. For example, there’s been tremendous growth in things like pop-up shops. Property owners in losing some of their tenants will have to and will take the opportunity to try to grow their tenant base. That will drive quite a turnover in the retail sector.
