As years go, 2020 turned out to be a bit of a black swan, to say the least. The impacts of the COVID-19 global pandemic have wreaked havoc on the societal norms that we’ve all been so long accustomed to, interrupting everyone’s lives in some of the most drastic of ways. For many businesses and industries, the results have been near-catastrophic, highlighted by hindered markets and trade, representing one of the most turbulent and uncertain economic periods the world has ever collectively experienced. And as government-imposed lockdowns and restrictions on businesses continue in conjunction with a seemingly diminishing availability of abatements and other aids, it’s safe to suggest that the real impacts of the pandemic have not yet been fully realized or understood. In light of the current ambiguity, many are leveraging this time as an opportunity to rethink, reassess, and retool where possible. And, according to industry expert, Stan Boniferro, it’s exactly what shopping centre landlords across the country have planned for 2021 and beyond.
“The last ten months or so have obviously been very difficult for the retail industry as a result of the impacts of COVID-19,” he says. “The severity of these impacts varies from province to province, with Ontario and Quebec being the hardest hit. But lockdowns and restrictions have prevented stores across the country from being open and customers from visiting them. The lack of footfall has drastically reduced, if not removed, impulse purchases, which is one of the pillars of the philosophy around creating a shopping environment like the shopping centre. And when traffic is limited and sales are down, you’ve got to expect a shopping centre experience in the future that is not exactly like the experience that existed pre-pandemic. Landlords and developers will be taking a good look at their mix over the coming year, in combination with the function of their centres within the areas they serve, and will start to innovate to evolve what the shopping centre of tomorrow will look like.”
Shift Toward Non-Traditional Retail
Though he recognizes the significant effects that COVID has had on the retail shopping centre environment and the customer experience, he’s also quick to point out the fact that the changes that are afoot are actually all part of an evolution based on market and consumer shifts that had already started to take hold before the onset of the pandemic. Trends including the consumer’s migration toward making more of their purchases online, their increasing penchant for ease and convenience, and a revaluation on the part of both retailers and shopping centre landlords concerning the way commercial space is used, have all been accelerated by the impacts of COVID rather than directly influenced by them. Nonetheless, Boniferro sees change coming for shopping centres across the country. Though the change that occurs, he suggests, won’t be the same across the board.
“Modifications that are going to take place within shopping centres in the near and immediate term are going to depend on the type of centre,” he asserts. “Major malls like Yorkdale, CF Toronto Eaton Centre, CF Pacific Centre, and CF Chinook Centre, as well as primary malls serving smaller towns and cities, are environments that offer something for everyone. Most of them have significant food offerings and entertainment offerings as well. And given the pre-COVID sales volumes that many of them were experiencing and the strength of their attraction to the shopping public, they’ll survive these trying times. But they’ll certainly look to diversify their offerings which will be represented not only by different retail concepts, but by multi-faceted properties that will include residential, office, entertainment, and institutional spaces. The second tier of shopping centres could very well be converted to completely different uses than what we see today, moving toward a more convenience and personal services-driven use. And the third level of the shopping centre is unfortunately likely destined to disappear.”
Providing Greater Ease and Convenience
A potential shift toward non-traditional retail offerings will help landlords assign spaces that have been vacated by businesses not fortunate enough to have survived the initial impacts of the pandemic. It could also serve as a means to address the consumer’s growing desire for ease and convenience, providing significantly more than the traditional retail offering, becoming something of a hub of the community and attracting a new type of shopping centre visitor to the properties. Another way in which landlords will look to add value and convenience to the shopping centre experience of tomorrow, suggests Boniferro, will be in concerted efforts to enhance the level of services that are provided by their centres, namely through the expansion of availability of curbside pickup options.
“The advent of curbside pickup is one of the few positives that have come out of the entire pandemic situation,” he reflects. “It presents landlords and their tenants with a great opportunity to provide their customers with the convenience they crave while solving challenges that exist in the last mile of delivery, which is the costliest for them. It shifts the burden onto the consumer who is showing a willingness and preference to pick their purchases up at physical locations. It presents a big opportunity, one that the country’s major mall operators realize, resulting in the current development of common curbside pickup services that will be available for all tenants to leverage.”
Repurposing to Meet Evolving Needs
It’s a trend, and a move by retailers and landlords, that reflects the recent acceleration concerning the migration of purchases from bricks-and-mortar locations to the online channel. And, according to Michael Kehoe, Owner and Broker of Calgary-based Fairfield Commercial Real Estate and Lead Ambassador for Canada at the International Council of Shopping Centers, it creates the perfect scenario and a tremendous opportunity for retailers and mall operators to meet the demand of online shopping by way of utilizing their space accordingly.
“Space is currently being recycled in most shopping centres across the country,” he says. “New restaurants and retailers are evolving. Successful retailers are expanding their footprints. But as consumers continue to become more comfortable shopping online, what we’re noticing is a repurposing of space into fulfillment and distribution hubs. Whether consumers are ordering online to have the product delivered to their home, pick it up in the store or by way of curbside pickup, the ease, convenience, and choice that these options provide is increasing in appeal among shoppers. And it represents an opportunity for retailers and shopping centre landlords to support the experiences they offer, making their locations and properties hubs of omnichannel fulfillment.”
Re-Emergence of Tenant-Landlord Relationships
The shift toward rethinking and repurposing traditional shopping centre space is just one of the ways that mall landlords and their tenants will be working with one another to innovate in efforts to ensure success going forward. After all, the prosperity and longevity of each are pinned to the other. But Kehoe, who has nearly 45 years of experience working within the retail and real estate fields and has witnessed firsthand much of the evolution that has taken place within and around the North American shopping centre, believes that the significant events of the past year have brought with them a re-emergence of the importance of the tenant-landlord relationship, and could lead to more favourable terms for retail tenants.
“We’ve been witness to all manners of behaviour from landlords as a result of the pandemic,” he says. “From reactive to proactive, ranging from evasiveness and denial on one extreme to outright empathy and cooperation on the other. Ultimately, events over the past ten months or so have led to a renewed tenant-landlord relationship, wherein the parties realize that rent is more a function of sales and not just a product of the landlord’s pro forma and budget. Landlord property managers and lease administration personnel were overwhelmed in the Spring of 2020 with rent relief and rent deferral requests and bogged down by the related lease amending agreements. As a result, the major mall swagger devolved into a bit of a stumble and, in some cases, a complete falling-down on the tenant relations front. Fortunately, much progress has been made and a correction is well underway that should lead to a more tenant-focused environment in 2021 and beyond.”
Creating a Safe and Engaging Experience
Another way in which the tenant-landlord relationship has recently been galvanized is their collective need to ensure the comfort and safety of their guests. Both Boniferro and Kehoe agree that most shopping centre operators and their tenants have been working as diligently as they’ve been able to in order to put necessary protocols and procedures in place, attentively limiting the occupancy levels within stores and common areas and providing adequate sanitization and cleanliness throughout the properties. It’s all part of critical work that’s currently required to allay the fears and trepidations of today’s consumer. However, each expert is hopeful and anticipating an end to the bleakness of the COVID era, when a vaccine has been administered and the general public feels safe once again to begin returning to storefronts and malls.
“Over time, as people become more amenable to socializing again and entering shopping centres where there are crowds, I think it will reflect a change in their social behaviour that’s been influenced by events of the past year,” says Boniferro. “People will likely be more mindful of keeping their distance. And shopping centres will also place a greater emphasis on the safety of their patrons. They’ll look at their common area furnishings and amenities, making alterations like spacing out seating and providing more common areas for visitors to walk in. These are just a few of the adaptations that will be made. Retailers and shopping centres have always responded to the needs of the consumer. It’s the name of the game. And the innovation and creativity that’s sparked by the need to adapt will only intensify their efforts throughout 2021 and beyond in order to continue appealing to the Canadian consumer.”
Though the timeframe around the world’s return to something resembling normalcy is still relatively hazy, with estimates ranging from this time next year to perhaps not until sometime in 2023, it seems a return is on the horizon, nonetheless. In the meantime, Kehoe also recognizes the innovation and creativity that’s being executed by retailers and shopping centres and suggests that a greater understanding of the roles they play within their communities and the attitudes and preferences of their customers could result.
“Retailers and shopping centres are always looking to engage with their visitors on a deeper level and in more meaningful ways. There’s a big emphasis on shopping local, and it’s a trend and message that’s gaining traction every day. As we move into 2021 and beyond, you’ll see mall landlords and their tenants really take this to heart and leverage the notion to get even closer to their customers, connecting with them in more significant and personal ways, leading to another shopping centre boom that’s driven by an enhanced experience and elevated service.”