Stores are just as important to retailers post-pandemic

Despite the significant growth of online shopping as a result of the pandemic, 80% of the UK’s top 100 retailers say physical stores are just as if not more important to their business than before, according to new research from TLT.

This is on a par with the 82% of retailers who held this view before the pandemic. While 76% of retailers now say they are placing more emphasis on online sales, a mere 1% say they are placing less emphasis on offline sales. 

16% of retailers say they are closing some or all of their stores, while 15% are repurposing existing store space – with recent examples including office, residential and fulfilment space. 

However, while 77% of retailers are working on closer integration of their online and offline businesses, only 13% are rewarding shop staff for sales made online as well as in-store, suggesting that stores are still predominantly seen as purely a sales channel. 

Room for negotiation

The tenant-landlord relationship has been less shielded from the pandemic, with retailers more likely to describe it as “adversarial” today (34%) than in February 2020 (28%). 

Two fifths (40%) of retailers are using the pandemic as a chance to re-negotiate their leases. More than a quarter (27%) are looking for shorter leases, while a fifth (20%) are looking to move to turnover rents – which would deliver economic advantages if trading remains low or unstable.  

Retailers are also calling on the government to help ease financial pressures on the sector. Three quarters (77%) say the government should consider extending business rates relief; 59% want an extension of the moratorium on tenant evictions beyond the end of 2020; and half (50%) want financial support for commercial landlords to help take the pressure off of them. 

Half (49%) of retailers also support the suspension of Sunday trading laws. 

Dan Sweeney, real estate partner at TLT, says: “Consumers have relied upon the convenience of online shopping during the pandemic, but our research shows that there is still an essential need for retailers to have a strong physical presence. The use and location of stores will change; retailers need to think carefully about how they can use their portfolio to support the rest of the business. 

“Renegotiation of leases is frequently taking the form of introducing elements of turnover rent and new pandemic relief clauses as retailers seek to future-proof their business against similar events. 

“Open and honest communication between retailers and landlords has been incredibly important and sometimes challenging throughout this pandemic. Occupiers continue to grapple with changing regulatory regimes across different jurisdictions and balancing the primacy of customer and staff safety with making their business work. Landlords have continuing uncertainty and unprecedented limitations on their ability to recover unpaid rents amidst an environment of great financial risk where they are frequent losers in tenant restructuring. Effective communication remains essential but the window for negotiations is now, not in January when the moratorium is due to have ended.

“The whole industry also needs to reconsider how it measures the value of stores and retail assets generally in the post-pandemic environment. We are likely to see a gradual shift as retailers and landlords juggle various priorities, but it’s important this starts heading in the right direction.” 

Date published

24 November 2020


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