Our latest store openings and closures research, as expected, paints a fairly bleak picture of what’s to come for high street retail and leisure. There have been fewer openings, an increase in closures, and permanent changes to the make-up of shopping and leisure destinations.
With openings and closures, comes a significant strain on real estate and, with property often accounting for a significant proportion of costs, difficult strategic decisions will need to be made. However, none of the trends we are seeing have been initiated by the COVID-19 pandemic alone, rather it has accelerated major trends that were already taking shape. Businesses have been afforded little time to react, but there is a rare opportunity to create a mandate for potentially radical business transformation for which real estate can be the enabler.
We believe there are a number of short and medium term approaches that can allow businesses to seize this opportunity and emerge leaner, smarter and stronger.
Amid accelerating closures (a record 11,120, and record net decline of -6,001) there have still been consistent openings (5,119 - the highest since 2017).
Whilst arguably, the crisis has accelerated a longer term market restructuring that was already pending, dealing with the immediate issues in hand must take priority:
Property is an often-underestimated enabler of cultural change and business growth. For businesses able to take a longer-term view, it’s important to think holistically about how a business will occupy real estate and how cost savings could be used to facilitate strategic change.
With a clear view of the business' future direction and with an understanding of the assets/locations that they want to be in long term, then it’s important to consider how this can be achieved most effectively. For example could the business’ leased portfolio be renegotiated to achieve rent reductions? Options might include:
Use data to uncover patterns and trends in customer purchasing behaviours and make better data driven decisions.
When it’s right for the business, leaders should grab this chance with both hands. While hasty decisions are to be avoided, however, so is inertia. The changes that have been surfacing in the real estate sector are accelerating and can no longer be ignored.