The impact of COVID-19 on Placemaking: five future trends for 2021 and beyond
Pre COVID-19, the Commercial Real Estate market was going through a significant evolution: changes in the way we live and work were already underway; Placemaking was undergoing considerable change due to pressure from online retail; and Real Estate as a service was a developing concept.
The immediate impact was clear as offices shut down overnight, shopping malls locked up and communities went into hibernation. During the first half of 2020, the tangible impact on the Commercial Real Estate market became clear. JLL reported global investment falling 29% (-37% Americas, -32% APAC, -13% EMEA). Inter-regional investment dropped by 61% and fundraising by private real estate funds fell by 26%.
These stats might provide a very bleak view for the recovery in the months and conceivably years ahead, but given the evolutions we were already seeing across the CRE market pre-pandemic, and the adaptations our clients have made during it, we have an optimistic view of the future of the Placemaking sector and predict a new world emerging!
Future Trend One: Greater levels of partnerships and trust between stakeholders
Rent disputes and payment holidays have been common during the COVID-19 pandemic, with landlords and tenants having to negotiate to find a middle ground. Whilst operators with turnover leases remained somewhat resilient, tenants on fixed rent models struggled.
As we emerge from this pandemic, (although negotiations are still ongoing for many) we will surely see a greater shift within the Placemaking sector towards turnover leases, increased demand for pop-up opportunities, and shorter lease agreements to increase security and flexibility.
A partnership approach will be essential to find the most fitting arrangement for all parties, and increased collaboration will be crucial in the creation of new concepts and campaigns to drive mutual success.
Future Trend Two: Increasing demand for Outlet Centers and Retail Parks
As lockdowns were imposed, restrictions to everyday life set in, and the majority of us adapted to full-time home working, community and convenience-based retail has seen shown resilience. Outlet Centers and Retail Parks are in close proximity to suburban communities and neighbourhoods offer reduced pricing and convenience offerings. Their open-air nature makes them more appealing still, when considering shoppers’ safety concerns.
Reduced rents at Retail Parks and turnover lease models at Outlets offer a crisis-resilient solution. Combined with consumers’ shift towards convenience and community spending, this has ensured both types of Placemaking destination have remained relatively buoyant throughout the pandemic.
When the world eventually returns to some form of normality, all signs point towards a migration to agile working models, with central offices supported by regional hubs and flexible coworking options. Many companies were already considering this and the desire to work closer to home, whilst getting away from the home-life distractions will strengthen that shift, meaning Outlets and Retail Parks should remain resilient in the Placemaking sector.
Future Trend Three: Greater investment in Data & Analytics
We have seen an ongoing transition to a more data focussed and analytics driven sector in recent years. But this year, it is going to be more important than ever. Customers were looking for a more recreational shopping experience before COVID-19 hit and are not returning to shopping malls in the same way due to health fears and social distancing concerns.
As we emerge from COVID-19, understanding customer behaviour will be vital in successful Placemaking. Landlords and Operators must invest in the technology to gather and understand data on footfall, spending patterns, dwell-time, trading performance, rental sustainability, tenant operations and how spaces can generate further value. In turn, we need to see this data employed to enhance the design and functionality of buildings based on changing customer trends, as well as to support other areas of business management including marketing and communications.
Future Trend Four: More repurposing and re-imagining of existing retail space
With changes in the way we live and work, the immediate impact of COVID-19 on our inner-city districts and neighbourhoods has been significant, meaning they may look quite different in the years to come. If workforces are migrating out to hubs and coworking spaces, and retailers move to out-of-town locations, what will happen in our cities?
A blended mix of commercial, residential, retail and leisure are essential for vibrant city centre districts. It is essential that large inner-city retail assets are revitalised, redesigned and repurposed and we see an accelerated change in the tenant mix and categories of asset within pre-existing spaces.
Could properties that are now trophy shopping malls be repurposed to hold residential and workspace in the future? Perhaps even logistics space and warehousing, as back of house areas are freed up?
Future Trend Five: ‘Green Giants’ will lead the pack
When isolation and lockdowns set in, individuals began to discover their communities. It drove a fresh appreciation for the outdoors and green spaces, combined with an increasing awareness of the environment and sustainability, and a focus on wellness and health.
This has led to an increased focus from consumers, and will in future do so with business owners, seeking sustainable, energy efficient, clean, green and wellness-focussed outlets to invest their time and money.
The pressure from consumers and business owners will drive the focus on environmental and social factors when Investors are making decisions. Developers will create smarter, more environmentally friendly spaces with more public realm, green-spaces and opportunities for social interaction. A redesign of existing assets will be essential for those not wanting to fall behind.
What demands could this place on Developers, Landlords and Operators?
These changes will impact teams at all levels within organisational structure, but the likely increases in talented specialists to support the CRE market’s transformation will come in the following areas:
Placemaking remains a challenged area of the Commercial Real Estate market with recovery dependent on many factors. Whilst a return to work and relaxing of travel restrictions will go some way to supporting this recovery, it would be fair to say the Placemaking sector will never look the same again. Pre-pandemic we were seeing increased levels of ingenuity and creativity to battle the pressures the sector was facing, and deliver new strategies to entice and delight visitors. COVID-19 accelerated that change and it is certain to impact the shape of the industry for years to come – in my opinion, for the better.
What are your thoughts? What adaptations have you made during the COVID-19 pandemic that will stay? Is your business set-up to face these future changes? Does your existing team have the expertise? It would be great to hear your thoughts and feedback, and start a discussion to share ideas.
If you are a client and wish to discuss the market or hiring into your team, please get in touch with me – 0044 7793 242 509 – firstname.lastname@example.org. If you are a candidate and wish to register your interest with us, you can do so here!