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COVID-19 Implications for Australian Retail Property

COVID-19 implications for the Retail Property Market in Australia.

Whilst we are only at the beginning of the COVID-19 epidemic, it is impossible to say at this time how long this will affect our daily lives & shopping habits. Needless to say, it is going to have some major effect on general retail activity.

This all comes on top of the considerable effect that the enthusiastic embracing of online shopping has had on store sales and foot traffic. We have seen many of the savvy retailers accommodate this by establishing online shopping options, which has helping to stop the bleed away from their businesses.

Retail businesses report that up to 40% can now be sourced from their online activity & that it can have the additional benefit of driving foot traffic back to their retail stores. So there is already a strong argument for retail rents to be re-assessed in terms of the proportion of gross sales which they now represent. Of course, there are certain retail occupiers who cannot operate online, such as hairdressers and other service providers. However, they can also argue that the local retail environment, be it a shopping mall or retail strip, is creating less foot traffic & hence business opportunity for them, making their retail position less attractive & valuable.

If we consider that shopping can be either purposed or for entertainment, it is fair to say that the entertainment or recreational shopping activity is likely to see a steep drop-off, as the fears of contracting the Corona virus grow. The current government directives aimed at helping containment of the spread of the virus are affecting and driving business away from an already stressed retail environment. Hence, another reason why rentals will need to be re-structured to represent a fair proportion of gross turnover.

All in all, we have challenging times ahead of us in the retail world. We believe that understanding & realistic property owners will be able to maintain occupancy rates and cash flow, if they listen to their tenants and try to understand their individual predicaments.

Gregory May

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