Reviving retail: Exploring the global recovery of major shopping destinations in the post pandemic era
The global Covid-19 pandemic, tied with the economic downturn, lockdowns, travel restrictions, supply chain constraints, and a host of other issues that directly impacted retail has proven to be one of the hardest times the retail industry has had to endure.
Even before 2020, industry headlines began to indicate a slow decline, if not eventual death, as with digital transformation, obscuring limits and breaking the impediments presented by blocks and mortar.
But with advancements, physical retail has bounced back.
As per the latest report of Cushman & Wakefield, New York’s Fifth Avenue has reclaimed its position as the world’s most expensive retail street averaging rents of US $ 2,000 per sq. ft. that beat Hong Kong’s US $ 1,436 per sq. ft., and Milan’s via Montenapoleone at US $ 1,380 per sq. ft.
While some markets are recovering at a much slower pace, most locations are seeing rents rebound relative to pandemic lows. In a few prime locations, rents have surpassed even 2019 pre-pandemic levels.
GLOBAL STREETS RANKED
New York’s Fifth Avenue has emerged as the most expensive retail destination in the world, followed by Tsim Sha Tsui in Hong Kong and Milan’s via Montenapoleone. New Bond Street in London and The Avenues des Champs Elysees in Paris round out the top five spots respectively.
RENT GROWTH TRENDS
Rents across global prime retail destinations declined by 13% from pre-pandemic levels to their lowest point on average but rebounded to 6% below pre-pandemic levels.
The United States emerged as the strongest in the region during the downturn with rents on average now sitting at a 15% premium as compared to the pre-Covid-19 levels. Asia-Pacific, on the other hand, was most impacted during the pandemic as rents fell on average by 17%, mainly owing to border closures that affected prime international tourist destinations in the region.
RENT RECOVERY ACROSS GLOBAL MARKETS
Global retail markets have recovered almost 50% of their losses since the pandemic started, with rents on average 6% below pre-Covid-19 levels. Recovery has been strongest in the US, due in part to supportive fiscal policies and domestic migration patterns that have driven population growth and buying power in markets such as Houston and Austin. Rents in luxury retail locations in the US are now at a 25% premium to pre-Covid-19 levels. However, global economic headwinds have negatively impacted markets over the past six months.
On the other hand, within the Asia-Pacific region, rents are at an average of 12% discount compared to pre-pandemic levels. India has rebounded strongly with rents in Bengaluru and Delhi- NCR increasing by more than 15% on average — rents in Bengaluru now sit at a premium to pre-Covid-19 levels.
KEY TRENDS TO WATCH
The mix of bricks and mortar and e – commerce
The pandemic persuaded pent-up demand and high personal savings have driven retail sales to higher levels than expected. In Q2 2022, most Asia-Pacific markets have recorded higher retail sales than pre-pandemic levels, with India, Australia, and South Korea leading major economies. In the Americas, the US recorded a 33% increase in retail sales, thanks to cash stimulus support, while Canada is up 7% and Mexico remains below 2019 levels. South American countries, in general, have experienced slower economic recoveries due to immense trouble containing the virus and less household stimulus.
Consumer confidence is a key
Consumer confidence is a key driving factor to maintaining and growing retail sales in the coming time. According to the Organization for Economic Co-operation and Development (OECD), consumer confidence levels globally are at their lowest levels this century, even lower than those seen at the height of the GFC.
Consumers are more anxious about the uncertainty of inflation coupled with the pressure on household spending. Once there is some indication that inflation is stable and abating, consumer confidence is expected to bounce back.
The impact of global tourism
Tourism is crucial for retailers, particularly those in major cities that attract millions of visitors. Before the pandemic, travel and tourism accounted for 10% of the global GDP and 320 million jobs worldwide. In 2019, 1.5 billion overseas trips were taken, but current tourism levels are far from pre-pandemic levels and aren’t expected to return until mid-2023 at the earliest. Border closings and mobility restrictions impacted tourism during the pandemic, but most countries have now reopened their borders. However, international tourism in Asia-Pacific is still 75% below 2019 levels, while Europe is 16% below.
The strength of luxury
Initially, demand for luxury goods fell during the pandemic, but key players took this opportunity to improve their online presence and customer relations. The luxury goods market has rebounded strongly, with major conglomerates such as Hermes, LVMH, and Richemont reporting over 20% increase in sales per quarter since the end of 2019. The pandemic accelerated the shift towards digital, with many luxury brands now selling their products online.
The most crucial lesson pandemic teaches retailers and brands is that they cannot afford to stay still. You need to deal with difficult times and reposition your business portfolios for the future.
Brands play a more demanding role these days, placing greater emphasis on the quality of the products. They make decisions by utilizing customer data and insights. This will ultimately pave the way to mitigate risk and deliver compelling customer experiences while allowing them to differentiate themselves.