The three sectors hardest hit by the COVID-19 crisis are undoubtedly retail, leisure and hospitality. Due to social distancing guidelines, the hospitality and leisure sectors are at a standstill. The effect of this will have significant ramifications for the UK economy but also provides an opportunity for these sectors to accelerate innovation.
For this latest webinar, ULI UK brought together speakers from hospitality space owner and developer Ennismore, asset management company Aviva Investors, and retail and food and beverage design firm Portland Design to discuss how the sector is coping during the lockdown, and how it is planning for the post-Covid reality.
According to panel chair Chris Igwe, of Chris Igwe International and Co-Chair ULI Europe Retail and Entertainment Council, the chief concern for businesses in those sectors is how best to bring customers back once restrictions are lifted.
Retailers, hoteliers, restaurateurs, contract caterers and others in the leisure space will have to ensure safety measures are adhered to while reducing costs to make up for months of inactivity and lost profit.
Ibrahim Ibrahim, Managing Director of Portland Design, believes that we are seeing a quantum leap in innovation with developments that normally would take five years but is now taking place in 5 months. This innovation will also facilitate greater transparency and data driven spaces where we will see polarisation in consumer behaviour between those seeking a fully automated, zero-touch experience, and those desiring a hyper-personalised, by-appointment economy.
For Marine Duchesne, Development Manager at Ennismore, the post-Covid environment is going to require a creative rethinking of how spaces are used. While hotels had been becoming more and more sociable spaces, companies will now find themselves using technology to reduce staff interaction while rooms or floors could be repurposed for co-working or food and beverage experiences as occupancy rates remain low.
But one concerning effect of a more experience-led offering, argued Jonathan Bayfield, Head of UK Real Estate Research at Aviva Investors, will be smaller buildings and smaller rents causing a reduction in asset values, which may lead to the advent of turnover leases where all or some of the rent is determined by the tenant’s profit.
For investors who manage pension and insurance funds which require secure cash flows, shorter leases that are linked to performance are incredibly risky.
Conversely, a re-diversification of assets and repurposing of space towards a more multi-disciplinary, community-focussed approach that engenders security and strength within the market.
Ultimately, the Covid-19 crisis has rapidly accelerated a pre-existing need for a rethinking of retail, hospitality and leisure spaces, trends already identified in the ULI Europe Reshaping Retail Report. As our speakers agreed, adapting the commercial real estate offering to suit the temporary needs of social distancing and the lockdown will help provide long-term resilience to the sector and could recreate these sectors with a stronger sense of community.