10% of retail tenants are working on plans to permanently close their businesses
Additional data on office recovery reveals that nearly half of office tenants said they will need less office space moving forward
VANCOUVER, British Columbia, June 24, 2020 (GLOBE NEWSWIRE) -- As COVID-19 continues to impact the Canadian commercial real estate industry, Colliers Canada has today issued two new reports that dig into how the pandemic is affecting retail and office tenants. The data shows that while retail tenants anticipate their revenue will rebound as the economy reopens, they’ll only reach 45% of last year’s June-to-August sales revenue. Nearly half of office tenants surveyed said they expect a decrease in need for office space, during a time where the vast majority have been able to buffer the impact of the pandemic with work-from-home measures.
The data, collected from May 26 to June 2 of this year, surveyed 445 tenants of all sizes, risk classes and geographies across Canada. The sample size included 148 retail tenants and 163 office tenants, with a 95% confidence in the data.
Retailers must adapt to evolving industry
The Retail Recovery: Regulations, Cost Increases and Adaption report looks at how retailers are responding to the easing of provincial lockdowns, the reopening of their physical stores and new government regulations and associated costs. Here are the highlights:
- 93% of retail tenants believe that adhering to government regulations for reopening will increase overhead costs – of those tenants who have a plan to offset these costs, 47% plan to reduce expenses and 17% indicated they would raise prices
- 10% of retail tenants said they have plans to permanently close their businesses
- 37% of retailers believe more than 75% of their workforce will return to work by the end of the summer, 26% think they will rehire 51-75% of their workforce
- 74% of retailers are exploring new sales avenues with 41% looking at online sales
“COVID-19 is forcing retailers to do business differently. Thankfully, retail is practiced at constant evolution, and retailers have been widely adaptive,” says Jane Domenico, Senior Vice President & National Lead of Retail Services for Real Estate Management Services at Colliers Canada. “However, we expect the trend around permanent closures to increase given the slow recovery in consumer demand and limitations created by physical distancing. Tenant retention is more important than ever – we may see landlords spending money where they previously didn’t to drive traffic for their retailers. Providing positive guest experiences and communicating COVID-19 readiness will become a major advantage for well-managed malls and shopping centres.”
COVID-19 has shifted the business relationship to the office
The Office Recovery: Productivity, Working from Home and Space Demand report focuses on the increased reliance on technology, the impact of remote working on office space needs, and on new government regulations and associated costs. Here are the highlights:
- 47% of office tenants believe their office space needs will decrease – of those tenants, 56% indicated they are doing so because of a reduction in employee numbers, and 44% attributed this change to employees working from home
- Colliers anticipates that an ongoing work-from-home approach could result in a potential reduction in tenant office space needs by an average of 8.5% over the next eight years, with all other factors being equal
- Respondents feel employees’ productivity decreased by 22.6% when working from home
- 64% said they are modifying their business, with 41% of them investing in technology
“There is a lack of consensus among office tenants about the future of space usage as the COVID pandemic continues,” says John Duda, President of Real Estate Management Services at Colliers Canada. “The return-to-office experience will be a key factor for the long-term success of the commercial real estate market. It is in the best interest of landlords to ensure returning tenants have a positive experience by supporting their productivity and safety. These initial return-to-office experiences have to make tenants feel comfortable bringing back more employees when it becomes possible to do so as that will likely influence longer-term lease decisions.”
More specific government regulations are required
Although most retail and office tenants believe the new restrictions and government regulations put in place to control the spread of COVID-19 are reasonable, respondents largely agree that regulations need to be better tailored to their business needs – especially given the significant implementation costs.
“Many tenants are struggling to get clarity around regulations. They need clear directions to maintain public safety, but also flexibility to determine what makes sense for them. Given the cost-impact of complying, we want to make sure that retail businesses, who are already under financial stress, know exactly where and what they should be spending on to be compliant,” says Domenico.
Colliers Canada’s Real Estate Management Services continues to release regular reports to analyze how the pandemic is impacting tenants, clients, and the broader commercial real estate industry. Their report on the impact of COVID-19 on industrial tenants will be released in late June.
About Colliers International
Colliers International is a leading real estate professional services and investment management company. With operations in 68 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to maximize the value of property for real estate occupiers, owners and investors. Learn more about how we accelerate success at collierscanada.com, Twitter and LinkedIn.
For further information, please contact:
Pamela L. Smith
Director, Corporate Communications, Colliers Canada
Phone: 604-692-1461 / 604-787-8872
Email: [email protected]
Email: [email protected]