There is no doubt at this point that one of the most shaken industries in these times of crisis is the commercial real estate industry. The more the pandemic is expanding, governments all over the world tend to impose stricter measures that imply more and more shutting downs. As numbers show commercial real estate is one of the top 10 most affected industries as since February 21 commercial real estate’s values have declined by 29% and probably the numbers will continue to decline as the crisis continues. 
How coronavirus hit commercial real estate
How coronavirus hit commercial real estate – Source: Green Street Advisors

 Nobody knows how long it will take but everybody knows that this crisis won’t last forever and the question that commercial real estate needs to answer right now is what can be the lesson that the current situation is teaching? How can this sector prepare better for the future? 

Collaboration

The 1st lesson that the crisis is teaching is that collaboration is the key to success. The master and slave relationship between shopping centers and tenants must be rewritten as there can’t be one without the other. The two entities now need each other more than ever, they must gather at the round table and start talking to decide what are the best solutions for both to survive and enjoy the success they used to have. There is no more place for flexing muscles as both parties must understand that acting as partners serves both interests. As Greg Maloney, the CEO of JLL  recently said about the tenants that are currently demanding lower to no rent payments “ they are our friends, they are our partners”  and the solution is “to think what is best for everyone”.(Lauren Thomas, Do we still have to pay rent?Retailers grapple with closed stores and coronavirus, cnbc.com, March 20,2020) 

Empathy

Another lesson that the crisis is teaching us is that the businesses that are involved in their communities, that are taking care of their employees and that are not focused on financial growth on all costs are more sustainable in the future than those businesses that prove no empathy at all. The shoppers will remember that brands like Levi’s, Lush, Apple, Macy’s, GAP despite having closed stores globally have quickly reassured their employees that they will be paid despite all. (Seren Morris, Here’s a list of companies paying their employees during coronavirus closures, newsweek.com, March 23, 2020)

On the other side, Virgin Atlantic has sent its 8,500 employees to take eight weeks of unpaid leave, a decision that will not be easily forgotten by the company’s clients.(Peter Lazenby, Virgin ask staff to take eight weeks’ unpaid leave, morningstaronline.co.uk, March 16, 2020). 

A great example of empathy in the mall and tenant relationship is currently given by various Chinese landlords that are currently offering rent-free periods to their tenants as footfall has decreased dramatically in Wuhan’s shopping centers. (Iris Ouyang, Chinese mall landlords offer rent-free periods to merchants as footfall decreases amid Wuhan coronavirus outbreak, scmp.com, Jan 30, 2020). 

Reliability  

The one thing that our societies need right now is a constant reassurance of reliability, meaning that we have to know who to count on. As a shopping center you can ask yourself what you should do, your job isn’t to be a pillar when hard times occur and that is partially true, though that doesn’t mean that when hard times pass, you must forget and move on. Lots of things can be done in collaboration with tenants so to reassure your shoppers that you are reliable for your community, even if you are a shopping center: from hosting NGO’s with lease free contracts to offering the cinema spaces to hold medical conferences, a lot of things can be done.

Even from 2015 the world’s first sustainable shopping center has been opened in Sweden. The mall is located right next to a recycling centre, where the shoppers can drop off their unwanted items. This also means that the objects left in this centre are then given new life by first being fixed, and next distributed to the shops in the mall. Besides being sustainable the shopping center is also a public educator as it often organizes events, workshops, lectures and theme days focused on sustainability or it offers education lessons on design-based recycling. (Berenika Balcer, The World’s First Shopping Mall Where Everything Is Recycled, Popupcity.net, January 14, 2020)

As for numbers, the company’s turnover was $1.7 million in 2019 with a 43% increase of recycled products as compared with 2018.(Belinda Daly, World’s first recycling mall in Sweden, shoppingcentrenews.com, May 16, 2018) 

Technology

As the quarantine measures are eased, the Chinese market opens up again and a  glimmer of a light may be seen at the end of the tunnel where the Chinese that stood in quarantine for so many months went into revenge spending. But Revenge spending won’t become a mainstream phenomenon […] as brands are facing a bigger challenge in addressing the cut-back on spending, and they ought to learn how to build relationships with consumers in the post-virus era.” (Ruonan Zheng, Can revenge shopping save luxury in China? Jingdaily.com, March 24, 2020)

As measures will be eased on the European market it is more than obvious that malls will be opening their doors to invite as many shoppers as possible and competition will be fierce. Shoppers will probably be exposed to some many “come here” marketing that they will be exhausted.

So, what should shopping centers have to do to be relevant for its shoppers? The answer is investing in technology – investing in shopper centric technology that can help both the shopping center and the tenants understand what their shoppers want, when they want it and how they want to get it. Being relevant for shoppers, understanding their behavior, their needs inside the shopping center so to provide and adapt to these needs is the surest way that guarantees that your shoppers will come back and spend. Otherwise, without making any difference, offering the same thing as everybody is not something that many shopping centers can afford as the second time they may not be that lucky.

Moreover, a recent article published by Insider Trends regarding the steps that retailers can do about coronavirus indicates the need of retailers to start using data to understand how customer habits are coming about as a result of the current crisis.  Data is there to help retailers identify trends which will carry on long-term and need preparing for. (Cate Trotter, Coronavirus and retail: 11 actions to mitigate COVID-19’s impact, insider-trends.com, March 18, 2020). 

As the quarantine is extending more and more people will make the shift from offline to online which means that, besides the ecommerce growth, customer behaviors will change and new habits will develop. As the numbers already show over a quarter (28%) of US internet users are already avoiding public areas or travel and 58% plan to if the situation worsens — and it already has since this survey was conducted — per Coresight Research data. This avoidance is trickling down into shopping: Three-quarters (74.6%) of US internet users said they’d be likely to avoid shopping centers and malls if the coronavirus outbreak in the country worsens, and over half would avoid shops in general. A decline in brick-and-mortar retail, which comprises over 85% of US retail sales, could shift day-to-day shopping to digital channels, like Amazon or other e-tailers, and boost sales — effects already seen by providers like RedMart in Singapore, per CNBC. ( Business Insider Intelligence, Here’s what Business Insider Intelligence analysts think will be the biggest business impacts of the coronavirus pandemic, www.businessinsider.com, March 13, 2020)

Shoppers in China during coronavirus outbreak - Source Cheng Feng Unsplash
Shoppers in China during coronavirus outbreak – Source Cheng Feng Unsplash

Even before coronavirus hit the industry McKinsey argued very strongly that commercial real estate will survive in this new environment only if they reinvent their business—for example, by tapping into new technologies and modern analytical capabilities and to succeed in the digital age, mall operators will need to instill a culture of fact-based decision making throughout the organization. In addition to implementing advanced-analytics tools, they should invest in collecting more of the valuable data that will inform their business decisions. For instance, they can deploy new technologies (such as beacons, granular Wi-Fi, and facial-recognition cameras) to capture behavioral data. (Pranay Agarwal, Raffaele Breschi Sandrine Devillard, How the mall business can reinvent itself for the digital age, mckinsey.com)

 As the crisis unfolds we learn from everything that is going on, from the past mistakes, from postponed or untaken decisions, from our competitors and clients but one thing is clear that we must be wise and learn our lessons as we cannot find a better teacher than the times we are living.