In the property sector, the retail industry has been one of the most badly hit by the COVID-19 pandemic. In the mere three months since the escalation of cases in the country, it inflicted severe complications to the operations of businesses and profitability of retailers due to the enforced lockdowns and the looming fear among individuals.
With the myriad of uncertainties still present, retail landlords must arm themselves with the right knowledge to properly handle the challenges of implementing new normal measures to their operations while simultaneously acknowledging the problems that their tenants are facing.
As we weather the impact and anticipate the after-effects surrounding the future of businesses, economies, and daily life, it is encouraging to witness a very fertile ground for innovation. There are some points and recommendations to be explored, and we at PRIME Retail Markets have identified the following considerations for landlords in preparation for the eventual recovery of their businesses and further enablement of their property operations.
Retail Operations in the New Normal Way
Recently, the Philippine government made its attempt to reactivate the country’s economy by placing areas either in General Community Quarantine (GCQ) or in Modified General Community Quarantine (MGCQ), resulting in the lift of restrictions in movement. With this, and the strict compliance to the minimum health and safety protocols (i.e. social distancing and sanitation of facilities), more retailers were given the signal to reopen their doors to the market, paving the way for the resumption of operations of some shopping malls and commercial centers.
Alongside these are the relative modifications to retail store layouts due to industry-specific protocols mandated by the Department of Trade and Industry and Department of Health, changing the nature of store operations and requirements for expansion. Such modifications can be in the form of selling or servicing operations, repurposed facilities, to potential downsizing of space requirements for future tenants.
The retail industry may have been adversely affected by the pandemic but it has managed to reach its end-users and, somehow, kept the sector going by engaging in e-commerce or digital channels. This practice, however, may continue even after the pandemic ends as consumers will be more cautious of their safety now more than ever. It is expected, then, to have little changes with how things will work for the retail industry. Physically, this can manifest from take-out and drop off points to converting retail spaces for short term storage use.
These changes may come a bit overwhelming, but our Retail Markets team can provide expert advice on how to harmonize all the varying modifications made by retailers to the overall operations of the property.
Amenability to Rental Concessions
Until a vaccine is produced, many economic aspects will remain paralyzed. Cash is mostly flowing to the expense side with minimal return, inadvertently prompting companies to shift the focus of their corporate resources from growth and investment to ensuring survival.
Rental concessions are ideally recommended for short term financial relief on rent more so during times of economic crises. This should be executed in a manner that is mutually beneficial to the landlord and tenant with the goal of both being able to survive the crisis. Rental concessions may come in the form of deferment, rent reduction, or abatement that should be aligned with the original agreements in the Contract of Lease provided that the tenant presents the necessary financial evidence to back their request.
Resuming with Certainty
While it seems counter intuitive, landlords must also remember their property’s pre-COVID19 conditions, and blueprints, previously laid out for the rest of the year prior to the lockdown. A reevaluation is still recommended to identify which parts of the plan are still worthwhile. Likewise, conducting an overall analysis and creating action plans on occupancy, property performance, tenant mixing, and marketing aligned with industry trends and what works specifically for the property are great courses of action.
While government guidelines provide a baseline response on the implications of the pandemic, the means on how to move forward with a progressive plan is personally derived, and not within the guidelines themselves.
Having a real estate partner to effectively ground all the challenges is the option in adapting to the complications brought by the COVID-19 pandemic. PRIME Philippines’ Business Resumption Service ensures that landlords are well informed and guided in the operations of their property through up to date property market intelligence and expertise in the retail sector.
Talk to any of our associates below for more details on this service:
Sr Manager - Retail Markets
+639178436128 | [email protected]
Advisor - Retail Markets
+639176220280 | [email protected]