MAY 2020
Colliers International – COVID-19
Impact On Retail - Survey
“Together through challenging times”
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INTRODUCTION
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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 the document,
followed by the survey conclusion.
Colliers International – COVID-19 Retail Impact Survey, May 2020
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SURVEY SAMPLE
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61% 39%
Retailers Landlords
Respondents’ Country of Operation
Typology of Respondents
Colliers International – COVID-19 Retail Impact Survey, May 2020
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SURVEY SAMPLE (CONT’D)
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What is the business focus of your company?
Landlords
Retailers
*Other (please specify): Strip Malls, Waterfront Retail below residential building, various retail
Colliers International – COVID-19 Retail Impact Survey, May 2020
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SURVEY SAMPLE (CONT’D)
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How many people are employed in your company?
Landlords
Retailers
Colliers International – COVID-19 Retail Impact Survey, May 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.
“Retailers physical store revenue impact is
estimated to be hit harder than landlords
retail asset revenue for Q1 and Q2 2020.”
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ESTIMATED PANDEMIC IMPACT
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Landlords
Retailers
How would you estimate the pandemic's revenue impact on your physical
retail store(s)? Can you give a rough percentage estimation for Q1 2020?
How would you estimate the pandemic's revenue impact on your
retail asset(s)? Can you give a rough percentage estimation for
Q1 2020?
*Increase (please specify): both online and in storeColliers International – COVID-19 Retail Impact Survey, May 2020
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ESTIMATED PANDEMIC IMPACT
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How would you estimate the pandemic's revenue impact on your retail
asset(s)? Can you give a rough percentage estimation for Q2 2020?
Landlords
Retailers
How would you estimate the pandemic's revenue impact on your physical
retail store(s)? Can you give a rough percentage estimation for Q2 2020
Colliers International – COVID-19 Retail Impact Survey, May 2020
Quarter 1 2020 impact on online sales
Retailers that had their e-commerce platforms up and running before the Covid-19
pandemic started have hugely benefited from a change in consumer behavior,
shifting from predominantly in store shopping to - in many cases forced - online
shopping, due to store closures. The vast majority of retailers, 59% have seen an
increase of between 20% and over 70%.
Quarter 2 2020 impact on online sales
For the second quarter of 2020, 60% estimated an increase of between 20% and
more than 70%.
The short - and medium-term outlook of retailers for their e-commerce business is
optimistic, many retailers believe they have reached new customers and existing
customers have started spending more online. Many retailers therefore believe this
might result in an ongoing change of consumer behavior.
“Retailers see incredible growth in online
sales in Q1 2020 and they expect this
growth to continue in Q2 2020”
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E-COMMERCE - RETAILERS
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How would you estimate the pandemic's revenue impact on your e-
commerce business? Can you give a rough percentage estimation for
Q1 2020?
Retailers
Retailers
How would you estimate the pandemic's revenue impact on your e-
commerce business? Can you give a rough percentage estimation for
Q2 2020?
Other: Decrease of 70%+
Other: Decrease of 70%
Colliers International – COVID-19 Retail Impact Survey, May 2020
All the landlords offering rent free periods stated they offered 1 to 3
months. With the same % of those landlords offering rent free also
offering to extend the lease term for the same rent-free period.
92% of retailers are seeking rent free periods of between 3 to 6
months. Only 58% of retailers offered to extend the lease term for
the rent-free period.
“Landlord and retailer expectations of support
packages are not aligned.”
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RENT-FREE PERIOD
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Have you offered rent-free or other support packages to your tenants? What
are they?
Landlords
How long is the rent-free period that you have offered?
Landlords
*Other (please specify): rent deferment with lease extension, too early to estimate the impact
Colliers International – COVID-19 Retail Impact Survey, May 2020
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RENT-FREE PERIOD
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Have you asked for any rent-free or other support packages from your
Landlord(s)? What are they?
Retailers
Retailers
Other: Rent break and Turnover rent
How long is the rent-free period that you have asked for?
Other: Depends on situation as example all malls was closed by government
Colliers International – COVID-19 Retail Impact Survey, May 2020
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a SERVICE CHARGES DURING RENT-
FREE PERIOD
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Did you ask the tenant to pay service charges during the rent-free period?
Retailers
Landlords
Did you offer to pay service charges during the rent-free period?
*100% of landlord respondents that have offered a rent-free period
Colliers International – COVID-19 Retail Impact Survey, May 2020
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a EXTENDED LEASE TERMS FOR RENT-
FREE PERIOD
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Did you offer to extend the lease term equivalent to the rent-free period?
Retailers
Landlords
Did you offer to extend the lease term equivalent to the rent-free period?
*100% of landlord respondents that have offered a extension of the lease term equivalent to the rent-free
period
Colliers International – COVID-19 Retail Impact Survey, May 2020
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RENT BREAK PERIOD - LANDLORD
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How long is the rent break period (deferred rent payment period) that you
have offered?
Landlords
Landlords
Did you ask the tenant to pay service charges during the rent break period
(deferred rent payment period)?
Other: One to one approach. Deferring Q2 payment over following 3-4 months
*100% of landlord respondents that have offered a rent-break
Colliers International – COVID-19 Retail Impact Survey, May 2020
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RENT BREAK PERIOD - LANDLORD (CONT’D)
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Did you ask the tenant to extend the lease term equivalent to the rent break
period (deferred rent payment period)?
Landlords
Landlords
Did you offer a step rent/balloon payment equivalent to the rent break
(deferred rent payment) at the end of the lease?
*100% of landlord respondents that have offered a rent-break
*100% of landlord respondents that have offered a rent-free period
Colliers International – COVID-19 Retail Impact Survey, May 2020
“There is a much greater alignment from
landlords and retailers on recovery
expectations, the reduction in physical space
requirements and structural lease changes.”
Retailers are more optimistic than landlords on the prospect of recovery going beyond a
year; 64% of landlords and only 35% of retailers.
Both landlords and retailers agree that they expect the long-term consequences for the
retail industry to be an increased usage of e-commerce by customers (82% landlords
and 76% retailers).
They also agree that there will be an increase of turnover based rent (64% landlords
and 71% retailers).
Divergence of opinion appears on the future of physical space with 36% of landlords
believing that retail space may be redeveloped for other uses against only 12% of
retailers.
If retailers indeed believe that consumer behavior is going to change in the longer-term,
spearheading increased spending online, it appears intuitive that landlords and retailers
both have a great belief in changes in physical demand for retail space.
The impact of turnover rent based only deals can provide a lot of flexibility to retailers.
Shorter lease terms in combination with turnover based rent only will also create a
challenge in terms of real estate financing with banks most likely seeking a fixed rent
component in order assess repayment risk.
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RECOVERY
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From today and for your business, how long do you think it will take to
recover from the outbreak?
Retailers
Landlords
From today and for your business, how long do you think it will take to
recover from the outbreak?
Colliers International – COVID-19 Retail Impact Survey, May 2020
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LONGER TERM CONSEQUENCES
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In your opinion, what longer-term consequences can be expected for the
retail industry?
Retailers
Landlords
In your opinion, what longer-term consequences can be expected for the
retail industry?
Other: Decline in addressable market as a result of (1) potential population drop, (2) reduced discretionary
spend as people are made redundant or take salary cuts.
Colliers International – COVID-19 Retail Impact Survey, May 2020
“Both retailers and landlords look at the same
counter measures to minimize the impact of
the pandemic to their business, including
increasing their online presence, increasing
sanitization measures, temperature checks,
social distancing policies and food and
beverage delivery from physical restaurants”
36% of landlords are looking at increasing their online presence (I.e. virtual malls) whilst
65% of retailers intend to do the same.
64% of landlords will allow food and beverage operators to deliver out of their physical
restaurant whilst only 24% of the retailers intend to do this.
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COUNTERMEASURES
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What are your countermeasures to minimize the impact from the pandemic?
Retailers
Landlords
What are your countermeasures to minimize the impact from the pandemic?
Colliers International – COVID-19 Retail Impact Survey, May 2020
“There appears to be an opportunity gap for
landlords to recover a possible decline in
retail physical space demand by providing
other support spaces”
76% of retailers stated that they already have an e-commerce platform and 77% of them indicated that they
will invest more in them conversely. 9% of landlords indicated they will invest in this, 45% won’t and 45%
are undecided.
41% of retailers indicate that they already have a fulfillment or mini fulfillment centre and 57% of them
indicate that they intend to invest more in them. Landlords on the other hand indicated that 55% of them
won’t invest in them and 45% are undecided.
29% of retailers indicate that they will invest in a collect, try and return store and 9% of the landlords
indicated that they would invest in this.
18% of retailers indicated that they would invest in cloud kitchens and 64% of landlords indicated they
won’t invest in cloud kitchens.
Increased spending online drives the need for logistics, warehouses, fulfillment centres, cloud kitchens,
collect try and return stores and data storage facilities; providing investment opportunities for investors.
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INVESTING IN DIGITALIZATION
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Are you looking to invest in digitalizing your physical retail portfolio
(examples: Virtual Mall)?
Retailers
Landlords
Are you looking to invest in an e-commerce platform to create an omni-
channel customer experience?
*77% of retailers that already have an e-commerce platform indicate they will invest more in it
Colliers International – COVID-19 Retail Impact Survey, May 2020
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CLOUD KITCHENS
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Are you looking at introducing “cloud kitchens” in your physical retail
portfolio (cloud kitchens are shared kitchen spaces not accessible for
customers and made for restaurant delivery only)?
Retailers
Landlords
Are you looking at investing in “cloud kitchens” (cloud kitchens are shared
kitchen spaces not accessible for customers and made for restaurant delivery
only)?
Colliers International – COVID-19 Retail Impact Survey, May 2020
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FULFILLMENT CENTRES
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Are you looking at introducing “fulfillment or mini fulfillment centers” in your
physical retail portfolio (fulfillment centers are physical locations not
accessible to customers where e-commerce customer goods are fulfilled.)?
Retailers
Landlords
Are you looking at investing in “fulfillment or mini fulfillment centers” to
better service your e-commerce customers (fulfillment centers are physical
locations not accessible to customers where e-commerce customer goods
are fulfilled.) ?
*57% of retailers that already have a fulfillment centre or mini fulfillment center indicate they will invest more in it
Colliers International – COVID-19 Retail Impact Survey, May 2020
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Are you looking at introducing "Collect, Try and Return" stores in your physical
retail portfolio (Collect, Try and Return stores are physical locations where e-
commerce customers can collect, try and return their orders.)?
Retailers
Landlords
Are you looking at investing in a "collect, try and return store" to better
service your e-commerce customers (collect, try and return stores are
physical locations where e-commerce customers can collect, try and
return their orders.)?
Other: No objection and will promote this
Other: 3 times - not applicable to our business
Colliers International – COVID-19 Retail Impact Survey, May 2020
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CONCLUSION
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It has become apparent from the survey results that the COVID-19 pandemic has caused
unprecedented - largely negative - short term consequences for the retail industry in the
Middle East, at the same time it provides various opportunities for both landlords and
retailers alike. The identified discrepancy between landlords and retailers in Q1 and Q2
revenue signifies the lagging effect of when exactly both parties feel the impact of reduced
income flow. Physical store retailers were affected quicker and harder due to forced
physical store closures; contrasting to the almost instant increase in e-commerce business.
As consumers were forced to move from mostly buying their products in brick and mortar
stores to e-commerce platforms this has created new online customers for retailers,
accelerated an already growing base and is expected to further drive the shift in the retail
landscape and customer behavior.
Conversely to retailers, landlord’s initial revenue impact has been delayed as rents are paid
in advance, but they are likely to see a greater long-term impact with potential store
closures and the reduced demand for physical space as retailer's online presence grows.
The relationship between landlord and retailer is expected to shift further with a greater
emphasis from retailers on flexible arrangements such as shorter lease terms and greater
reliance on turnover rent-based payments. The inevitable consequence is a move towards
a deeper partnership approach as the shared risk and mutually beneficial outcome begins
to overtake the current transactional relationship model.
In the immediacy of the COVID-19 impact, retailers are mitigating their short-term revenue
shortfalls by asking for support packages from landlords. From the survey results it
becomes clear that landlord and retailer expectations of support packages are not aligned.
Tenants seek uncompromising rent-free periods of 3 to 6 months with no obligation to pay
service charges with landlords responding with 1 to 3 months of rent-free. Retailers and
landlords are aligned over two key issues. Firstly, both are expecting a slow recovery of
their business with the majority of them believing it will take most likely 7 to 12 months or
more than one year to recover. Secondly the implementation of COVID-19 related
precautionary measures.
Whilst the current format of the physical retail store may be under threat cooperation can
exist and future investments opportunities exist in; in e-commerce platforms, cloud kitchens,
fulfillment centers, logistics and collect try and return stores.
Colliers outlook is that the pandemic has potentially triggered a paradigm shift in consumer
behavior, which will subsequently effect retailers and landlords, not only when it comes to
revenue impact but also when it comes down to their future (contractual) relationships,
omni-channel retailing, customer experience and innovation. It becomes increasingly
apparent that dialogue and a mutual open-minded attitude towards the future of landlord
and tenant relationships are crucial to overcome the Covid-19 impact on both their
businesses and to address the future of the retail business.
Colliers International – COVID-19 Retail Impact Survey, May 2020
FOR MORE INFORMATION
Pedro Santos
Associate Director
Retail Advisory
Middle East and North Africa
+971 52 645 21 66
Ricardo Bergsma
Director
Retail Advisory & Retail Leasing
Middle East and North Africa
+971 55 743 37 37
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