Retail & Real Estate space - The Next 3 years

The pandemic has evolved the way we shop. This consequently has altered how retailers advertise and sell their products. This ripple effect of changes has impacted the retail real estate sector and caused major transformations. With the flourishing of a remote workforce, e-commerce advancements, and the prevalence of home delivery, the new normal will be much different than the past.

More employers and businesses are likely to observe the hybrid business model ubiquitously and shared workspaces are going to be more popular than ever before. But what does this redefinition mean for retail real estate and its future?

Some sectors of commercial real estate were less severely hit by the pandemic than the rest. While others are now getting better and thriving by adjusting to the new normal. The corporate world has seen enhancement in connectivity and is expecting lucrative economic growth and this has led to them putting across hope for increasing operations.? With vaccination drives being fulfilled , international travel resuming, and customers returning to their comfort of shopping, the future of retail and subsequently commercial real estate seems sanguine. Hence, retail will bounce back faster than ever in 2022.

Even with the return of the customer in 2022 something that will still be extant, as the remnant of the pandemic, is the attitude towards the environment and health. Customer and retail industries will take into account these two aspects now more than ever.?

Sustainability is also another major factor being taken into account in the Indian real estate industry. Emphasis is being given towards IGBC, LEED, GRIHA & BEE certifications in construction by developers for a deduction in their carbon footprint.?

Properties that are suitable to the tenant’s exigency and provide a better experience will be preferred. The customer has now been placed on the pedestal. Amenity, diversity, equity, and precedence towards social issues like climate change should be the prime concerns by CRE leaders in 2022.

There will also be an up-swing of the co-working environment in the office. We have all understood and felt? the exorbitant effect of social isolation on ourselves during the pandemic. Humans are social beings who would want to touch and feel things in order to experience the world. With the number of cases dwindling and businesses reinstating on-site work, co-working spaces will offer people the flexibility and social interaction that they need.?

Businesses are also looking to reduce their large spaces by adopting a hybrid business model that won’t require everyone to work from the office. In this case also, the use of co-working spaces will be conducive . Flexible working will be the demand that will be asked of commercial buildings. Instead of escritoire , a collaborative space will enhance the experience of the tenant.

The capricious times of the pandemic have still not left our minds. Now, businesses will have a primary goal as well as a plan B. No matter how hopeful the future looks, retailers will remember the early 2020 pandemic days and the lessons imbibed. Many retail businesses had to make quick changes to keep their business afloat. To make sure they avoid a curveball like this in the future, a plan b will be in the envisage of an umpteen amount of people.

Commercial real estate landlords experienced a similar scalding effect from the pandemic. The retail stores and entertainment centers were the first to be shut down during Covid-19. Many shops had to be defunct or emptied. To avoid any future dilemma like this, landlords are also leaning towards a plan B of variegation.? Landlords are diversifying. Landlords with portfolios of F&B, clothing, and electronics are diversifying their risks by investing in delivery hubs.?

With the increase in online retail shops, there has also been a proliferation in the need for warehousing. The furor of online shopping is not likely to depart anywhere, therefore landlords have changed their empty office spaces into delivery repository hubs too ion a few cases.

Customer behavior has advanced after the pandemic. Customers are now fully adapted to technology. Online retail stores still have a high stipulation and a gleaming future ahead. However, this doesn't mean that the brick and mortar retail stores won't be prevalent.?

Customers will be culling the more off-price retailers because of the parsimonious lesson that the pandemic has taught us. It will be strenuous to maintain the same relationship with your clients as they will always be on the lookout for a plan B that is more affordable. In this climate, discount retailers will burgeon. Fresh inventory and low prices will attract customers to their physical stores.

What Lies Ahead?

In 2022 and the years ahead, the outbreak of different variants will still be seen but they will be short-lived. The threat of Covid-19 still emanates over the global economy. However, ameliorated vaccination rates and natural immunity from prior infections will prove to be helpful in containing grievous risk. The workforce is ready to return to the office. Flexible work-from-home models will give employees the opportunity to have more days away from the office.

For Brick-and-mortar retail stores the vacancy rates will reduce with new tenants coming. The in-store experience of shopping and seeing how the items fit, their size, and their overall appearance have caused a rebound in sales. The consumer is not choosing one between online or physical stores but rather saying why not both? Sales for both online and offline stores have risen.

The digital real estate territory of communication towers, industrial REITs, and data centers will continue to experience strong growth in 2022. Digital transformation experienced during the pandemic like e-commerce, online conference meetings, and the rise of streaming platforms are not going to disappear even after the situation becomes stable. The demand for these digital conveniences will remain strong and hence these real estate sectors will be in demand.

The travel restrictions are being lifted in most countries and because of this business travel will accelerate. Negotiating deals, launching new product lines, or setting up new locations are more successfully done with face-to-face meetings. Restaurants, hotels, and entertainment aimed at business travellers shall also have a surge.

Srini