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COVID-19 continues to pose significant impacts on retail real estate. Even in places where retail doors have reopened, many customers are not returning to retail halls in the same way – partly due to ongoing fears about the risks in social interaction, but also due to increasing preferences for online shopping.

Recovery for the sector will likely be slow, uneven and erratic. However, there is still significant capital sitting on the sidelines waiting to be deployed, and real estate continues to prove itself a strong, defensive and long-term move.

Take a look below or download the full report to see what KPMG leaders from around the world think about the transformation of retail in the new reality.

Sander Grunewald

Sander Grunewald

Global Head of Real Estate Advisory, KPMG International, Head of Real Estate Advisory
KPMG in the Netherlands


Traditional bricks and mortar retail has been under pressure for years, and the COVID-19 pandemic has only accelerated that trend. With many retail segments now at risk, I expect we will start to see a shift to shorter leases, increased demand for pop-up space, and the emergence of some entirely new concepts and business models in the retail real estate space.

 
Sarah Hayes

Sarah Hayes

Partner, Deal Advisory Real Estate
KPMG in the UK


I am concerned that current rent defaults and lease renegotiations will lead to a fundamental breakdown of trust between landlords and tenants. It’s hard to see how that can be resolved in the short to medium term. I think we’re going to need to see a much greater level of partnership and trust between parties over the next few months and years.

 
 
Régis Chemouny

Régis Chemouny

Partner in Charge,
Real Estate and Hotels sector
KPMG in France


For retailers, the health crisis will widen the gap between the smallest players and those with the financial and human capital to fuel their recovery. I expect we will also see a growing discrepancy between offline retail and those able to deliver a strong online experience. Expect to see significant consolidation in tenants as boutique stores close and chain stores expand.

 
Ask the industry: 1 in 3 executives think it will take more than 5 years for retail real estate valuations to recover, chart
Jacy Li

Jacy Li

Head of Real Estate
KPMG in China


The lack of footfall in commercial properties has forced many landlords and operators to reconsider how they will attract and entertain customers in the future. Commercial operators will need to become adept at predicting customer appetite and behavior, and sharing these insights with tenants. We will also likely see changes to building design and functionality to respond to changing customer trends.

 
Sarah Sipilä

Sarah Sipilä

Director, Global Strategy Group
KPMG in Finland


As retail spaces shift from transactional to experiential, real estate owners will need to gain a much deeper understanding of their tenants’ operations and how the space will generate value for them. Data and analytics will be key to uncovering the insights required. And that may provide an advantage to larger players with greater access to data and capital.

 
 
Ask the industry: Real estate executives are wary of government retail rent subsidies for city centers, chart
Hans Volckens

Hans Volckens

Head of Asset Management and Real Estate,
KPMG in Germany


Think governments are starting to recognize that retail is key to delivering a vibrant and vital inner-city environment. But they also recognize that bricks-and-mortar stores face much more regulation and tax than their online competitors. I suspect we are going to see governments trying to create a more level playing field in order to preserve inner city retail.

 
Andrew Weir

Andrew Weir

Global Head of Asset Management, Global Chair of Real Estate, KPMG International, Regional Senior Partner, Hong Kong (SAR), Vice Chairman
KPMG in China


While there are certainly many risks facing traditional retail real estate going forward, there are also opportunities emerging in the wider market. I expect to see significant growth in areas like industrial supply chain, e-commerce fulfillment and warehousing. But, clearly, the jury is still out on where it will all land as different markets reopen and recover at different speeds.

 
Nigel Virgo

Nigel Virgo

Head of Real Estate
KPMG Australia


COVID-19 has seen an acceleration of online retail and further disruption to the evolution of traditional retail. Ongoing challenges with demand and business continuity are forcing retail groups to rethink business models, sparking a wave of innovation and competition. Retail property owners and operators will need to adapt to these challenges and include concessions to enable a flexible and comfortable shopping space to meet customers’ expectations as they continue to return to shopping centers.

 
Gregory Williams

Gregory Williams

Americas Leader, Asset Management / Building, Construction & Real Estate
KPMG in the US


COVID-19 has certainly hastened some retail transformation, including accelerating the curve of e-commerce adoption. But we continue to see a bright future for the retail experience, as retailers and retail space owners partner to create exciting offerings for an increasingly discerning customer base. Expect to see greater focus on innovation, technological enablement and meeting customer needs across channels, as well as the introduction of more finely targeted retailers.

 
Lorne Burns

Lorne Burns

National Industry Leader, Building, Construction & Real Estate
KPMG in Canada


People are realizing that landlords and tenants need to work together to make those retail operations more effective. At the same time, landlords also need to make sure they are supporting viable retail partners and not just propping up concepts that were already dying. This is about creating mutually beneficial relationships where both landlords and tenants are able to grow.

 
Sidharth Mehta

Sidharth Mehta

Partner and Head of Building, Construction and Real Estate
KPMG in the Lower Gulf region


With most retail malls now open in the UAE, we have seen Emiratis return to the big shopping malls in significant numbers. But no matter how much they spend, they can never make up for the loss of the 16 million tourists that would normally come to Dubai’s malls each year. The short to medium term will be challenging for retailers and mall owners.

 
Jun Okamoto

Jun Okamoto

Partner, Global Strategy Group
KPMG in Japan


Supermarkets that sell fresh food are performing well. On the other hand, restaurants that provide food and drink are suffering from declining revenues. In particular, the business performance of restaurants is not expected to recover soon, and there will be many stores that may not survive without government support. Further activation of home delivery services is the only hope for many restaurant businesses.

 
Chintan Patel

Chintan Patel

Partner and Head of Building, Construction and Real Estate
KPMG in India


India’s retail malls had traditionally been heavily weighted towards fixed rent models. And that is putting incredible pressure on retailers. We are seeing a lot of landlords sitting down with their tenants, their investors and their banks to see how they can find a middle ground. Some are offering rent reductions measures. But most are moving towards some sort of revenue-share rent model that gives tenants a bit of room to breathe.