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U.S Retail: Coronavirus Repricing vs E-Commerce Diversification

6 MIN READJune 26, 2020
C-Level GRI Club USA real estate investors, owners, lenders and developers met online to discuss the impacts, perspectives and future visions of US retail real estate.

The online meeting raised important points, among them the future of shopping centers and retail in the country; How long will we see the quarantine extension and social isolation? What measures are being taken by shopping centers managers and retailers? What are future plans for E-commerce? Now with the upset of Coronavirus, prices and assets are set to drop; but will this present majoy buying opportunities or drag to portfolios? 

These and several other issues were discussed in an e-meeting, monday morning (06/22), which brought together more than 50 names from the sector to share perceptions and experiences. Check out the main points discussed below.

Summary

Pricing Impacts 

Price points are under stress and most speculate they are set to further drop, yet still there is uncertainty on what the bottom will look like. With no price discovery right now, but knowing that they will go down, big players are preparing themselves to start transacting in the next few months. A lot of liquidity can be seen on the equity side, with some investors having a tremendous size of dry powder. Although facing many challenges, we expect major buying opportunities and  investors are questioning what they should be doing with their properties. It's just a matter of pricing, not availability of capital. 

Asset Repurposing

Global investors are looking for opportunities with higher returns in the market and are seeking property performance and new trends in portfolios. Many assets losing value will be closed and repurposed .

With companies shrinking  some of their products, new strategies will need to be added to locations that have relevant assets. Relevant tenants and new strategies to structure leases will be needed to take over the cashflow issue over the next 12-18 months  and it looks like that open air community shopping developments, that were growing on most part of developer's pipeline pre-Coronavirus, are going to be accelerated through this time and will continue to thrive with more people looking for great experiences to enjoy their day, moving away from traditional shopping environments. 

Retail and E-commerce

Winning retailers need winning e-commerce strategies and location is king. The biggest job right now is navigating through these assets and master planning the evolution of properties. ‘De-densification’ and repositioning will be important factors and can present valuable opportunities to tenants looking at spaces with a mix of health and wellness over the next couple of years. New consumer trends emerging will be accelerated by the Coronavirus impacts on social distancing and online growth and retailers need to innovate to survive. 

Retail asset classes will face a mass change due to e-commerce consumption. With the social distancing, many companies have seen the demand for online commerce increase. It can represent a permanent change in people's online consumption habits. If such a change takes place, restructuring will be necessary to increasingly serve customers differently. The main restructuring to be carried out is the increase in digitization, an opportunity that brings more and more companies and consumers that have never had the experience of online shopping. Almost 70% of the players present on the call agree that e-commerce is firstly a major opportunity to reposition assets than a major disruptor. 

Conclusions

Unlike other real estate sectors, the Coronavirus pandemic has been most alarming in retail. Undoubtedly the prolongation of the quarantine, the fear of a second wave and its effects on a possible market reopening  generate uncertainty regarding the future. Covid-19 has accelerated us ten years into the future and structural impacts regarding asset pricing, tenant demand have created new opportunities. Question is, who will survive this new game when the rules are constantly changing?

Grafico


The debate was moderated by Naveen Jaggi (JLL) and attended by Adam Ifshin (DLC Management Corporation), Kenton McKeehan (Hines), Lee Schaffler (JP Asset Morgan Asset Management), Manuel Martin (Nuveen), Steve Plenge (Pacific Retail Capital Partners), Tim Perry (North American Properties), among others.
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