Covid-19 – Dystopian nightmare?
The Covid-19 crisis is a tragedy for our society. A year on from the first outbreaks in Wuhan, the virus continues to present an unsolvable challenge for our politicians and their advisors.
Those city centres which once attracted enormous sums of investment are amongst the hardest hit by the Covid-19 counter measures, leaving shopping centre managers helpless and seemingly caught in a dystopian nightmare.
However, while times are at their most challenging, not all retailing has buckled under the reaction to Covid-19. The crisis has been a boon for ecommerce, while supermarkets and convenience stores have benefitted as people shop locally for essentials.
Evidence from across Europe also points to sales and footfall at outlet centres recovering much faster than at shopping centres. Outdoor environments, leisure like usage, value for money, low density footfall and effective Covid-19 protocols are important drivers but the strong partnership between landlords and brands has been critical in maintaining high occupancy. This partnership saw rental discounts quickly agreed with brands and consequently c90% of stores reopened after lockdown.
“This has always been a partnership. We hope that by providing this significant economic support to our brands, we can contribute to a faster recovery of our mutual business.”
Joey W. Kaempfer, Chairman McArthurGlen
While the response of traditional shopping malls to the crisis has been hampered by financial problems, adversarial relationships and rising vacancy, outlet centres have seen positive management and strong sales growth. The loss of international tourists which was widely reported last February has largely been offset by an increase in domestic visitors and higher spend per visit. All across Europe, outlet centre managers are reporting encouraging performance, with turnover at some sites dramatically outperforming last year.
Reported Year on Year Sales Uplifts Post Covid-19 Confinement
“The shops in Soltau have been open again for 14 days. It is now 90% of the frequencies compared to the previous year.”
Thomas Reichenauer, Managing Director, Retail Outlet Shopping
“In addition to the open-air effect of our brand centre The Village, near Lyon, customers are attracted to good deals. We made figures 10 to 30% higher than the same period of the previous year.”
Philippe Journo, President, Compagnie de Phalsbourg
“We are delighted to see that the appetite for physical, outlet shopping in a safe environment is stronger than ever – and with both sales and footfall figures surpassing last year’s numbers in several centres, it is a clear sign that shoppers have truly missed the experience of visiting our centres and the brands in our portfolio.”
Otto Ambagtsheer, Chief Executive Officer, VIA Outlets
Outlet leases are characterised by short lengths, performance breaks and turnover linkages. While these are the antithesis of the stable idyll sought by shopping centre investors, they have enabled outlet centres to adapt more quickly to changing consumer demand and have encouraged decisions which improve turnover. With brands seeking to dispose of their excess stock profitably, it is therefore no surprise that there has been a surge of new leases and this has presented an opportunity for outlet centres to enhance their propositions and attract new customers.
Reported Lease Transactions - Extract
“It’s incredibly encouraging that considerable leasing progress has been made throughout lockdown. It’s extremely positive to see how well the centre has performed since the retail offer reopened in mid-June, reflecting the ongoing resilience of the outlet sector and the appeal of Wembley Park as a destination for shopping and dining”
Matt Slade, Retail Director, Quintain
“Outlet will continue to be the disposal channel for unsold goods. As traditional sales continue to shrink, many brands will rely more heavily on this genre to maintain cash flow ”
Csaba Imre, Centre Director, Premier Outlets Center Budapest
“Leasing momentum across the Affinity Outlets has proven strong throughout lockdown, demonstrating confidence in outlet retailing. As customers emerge, the accessibility and openness of our centres has contributed to encouraging footfall levels. Brands can bring their products directly to consumers and benefit from a flexible operational model, quality locations and being part of a well-rounded, family-friendly retail offer."
Nicky Lovell, Head of Outlets and Brand Development, Affinity Outlets
For many within the outlet community, such positivity and growth is nothing new. Indeed over the last 30 years, outlet centres have earned a reputation amongst savvy investors as recession proof and responsive assets. However, for those brands which have until now, never experienced major stock surpluses or for those investors looking for an alternative to declining mall assets, the outlet community is one of the few remaining places where genuine sales and income growth can still be found. While clearly not utopia, outlet centres continue to offer good practice and potential solutions for those seeking an end to their retail nightmares.