December 14, 2020
According to Laurent Delautre, co-founder of Mata Capital, retail real estate remains a sector likely to generate attractive investment opportunities, despite the health crisis.
Retail on Investors' Radar
By shutting down the economy for many months, the COVID-19 pandemic spared no sector of activity. Retail was not immune to this sweeping trend and paid a heavy price for this health and economic crisis. Nevertheless, certain commercial assets, such as 'retail parks', should continue to perform well.
The establishment of new brands in strategic locations, with the aim of creating a strong local connection with the end consumer, should also accelerate the developments and changes already underway in the commercial real estate landscape.
While the closure of many stores for several weeks meant thousands of euros in lost revenue, some stores, as soon as lockdown ended, managed within a few weeks to minimize the delay incurred during the two months of confinement, or even almost reached their 2019 sales figures. These were notably brands in the furniture, home improvement, DIY and gardening, and sports sectors, which saw their footfall increase from mid-May. Local food retailers, such as supermarkets, saw their footfall explode since the beginning of the lockdown, unlike hypermarkets which were abandoned by consumers, consequently leading to a desertion of shopping malls.
So, is this enough to put retail back on investors' radar?
The question is worth asking, given the significant distrust towards commercial real estate for several years. It is true that this investment segment can be complex. Because, like the office real estate market, commercial real estate brings together assets with very different and diverse typologies, sectors, and geographical situations.
Therefore, it's not one market that needs to be analyzed, but rather multiple markets!
Prioritize Selecting Retail Parks
Looking ahead to the post-lockdown period, 'retail parks' are expected to experience high peaks in footfall. As such, they represent real estate assets to prioritize for any investor. Indeed, 'retail parks' allow consumers easy access, within a few steps, to numerous brands, from home furnishings to ready-to-wear fashion, while also offering the possibility to eat on-site.
Unlike stores located in city centers, access to brands is simplified. This is because 'retail parks' are often situated on the outskirts of cities and are in open-air settings. Thus, consumers will prefer open-air spaces for their shopping rather than confined areas, especially to protect themselves from the virus. Another advantage of 'retail parks' is that there have always been peaks in footfall on Wednesday and Saturday afternoons, as many consumers go there to shop and relax. Consumers generally enjoy visiting these open-air commercial areas and strolling around. This explains the consistently growing interest from consumers who are not ready to give up this weekend outing.
Provided one is selective and prioritizes 'retail parks', this investment can prove very attractive. However, it is necessary to take the time to analyze the markets, geographical locations, activity typology, and financial elements.
Furthermore, the considerable savings accumulated by the French during lockdown could well allow retail to quickly regain momentum. Thus, it is to be expected that economic recovery will inevitably involve a strong rebound in consumption.