You could be forgiven for thinking that the bottom has fallen out of the retail sector and that corporate office blocks will lie empty for years to come as city workers exodus en masse. Whilst there may be some elements of truth to the more flamboyant opinions, there is also evidence of opportunity and adaptation that will see many successful businesses emerge along with other changes that may improve our communities in the longer term.
To understand more about the changes and issues impacting the retail and commercial property sector, I spoke with John Nicolas, Partner at Gadens, and an expert in property and commercial transactions, shopping centre development and retail leasing.
According to John, whilst some parts of the sector have been very hard hit some businesses have been doing extremely well during the COVID period.
“What we’re more so seeing is a degree of uncertainty about what the future looks like and that’s really where the difficulties are arising at the moment,” said John.
“It’s what the future looks like that everyone is waiting to see, and that’s where potentially we’re going to see a lack of investment or a longer decision-making process on investment and that could mean we don’t see a lot of new businesses emerge, for example, or we may not see a great deal of development for the time being.”
Despite the high level of uncertainty John believes that there is still a degree of optimism in the market.
“Some developments that we’ve been working on for next year are still going ahead and going ahead quite strongly,” assured John.
Retail has been a challenging environment and some retailers have unfortunately been impacted very badly. According to John, there are some that have in fact traded quite well through the COVID period, particularly in regard to online sales.
“I think that online sales piece will continue to charge on with consumers finding that as a new way to buy,” mused John.
It seems that the growth in on-line retail sales will also positively impact the performance of the industrial and logistics property sector which, according to John, will remain strong as people look to bolster their supply chain and network.
For those retailers that look to retain their shop front, John believes that the ‘buy local, live local, shop local’ type mantra will continue. No doubt this will benefit suburban and local shopping areas, perhaps reinvigorating these communities.
From the perspective of shopping centre developments, John expects that shopping centres will need to adapt to a changed environment.
“Some of the shopping centre owners that have not invested in their assets more recently will be forced to invest in their assets to keep them relevant and current,” said John.
“I think that some of the bigger assets around town will perhaps look to move towards more a service-based offering, perhaps a medical one,” he muses.
According to John asset owners are going to have to work their assets hard to get the best benefit out of them.
“There’s not going to be that ”open it and they will come” type of mentality – that won’t work anymore,” he said.
From an office perspective, there is a view that work from home has proven so successful that businesses are going to have to, or will look at, getting rid of some of their office space.
“I’m not convinced that’s right,” said John.
“We saw over the last five years particularly a move towards open plan and a more intense use of office space so that you had people closer together, working in more open environments.”
“What we’re seeing with physical distancing is that that sort of model of fit-out isn’t going to work, and so we’re having to literally de-intensify the use of office space so that people are able to maintain physical separation, particularly in the current environment.”
Although businesses and organisations may continue to need the space that they currently have, there is an argument that business owners may look at alternative or additional locations.
“Rather than necessarily feeling like they need to be in the CBD they may look at CBD fringe type areas or they may look to parts of their business that don’t need to be in the CBD – moving them to other locations that might be cheaper to secure in the way of rental,” outlined John.
With uncertainty and change to set the agenda for many organisations over the coming 18 months, those that can be responsive and adaptive will do well.
“Businesses need to remain nimble and if they are nimble then those opportunities are there and certainly through COVID-19 we’ve seen businesses be nimble, we’ve seen them adapt, we’ve seen them look at new ways of doing things and as long as that spirit of entrepreneurship continues, then there will be opportunities there,” said John.
View the full video interview with John Nicolas below and follow Lawcadia on LinkedIn or subscribe to our newsletters below to stay up to date with our Fireside Chat series.
