Retail is one of the fields which are the most affected by the 2020 pandemic. Malls and shopping centers have been closed, as have the vast majority of street shops or agencies, and other branches of the economy have been effectively blocked. After the end of the state of emergency on May 15, the prospects for improvement are small because the rules for carrying out the commercial activity are still strict.
Public safety is a priority, and consistent investments are needed to ensure ventilation, disinfection and the necessary space for keeping the social distancing. However, many of the businesses that occupied large commercial spaces until the beginning of the pandemic will not return to business, and this means that there will be upgrade opportunities for companies with good cash flow.
The real impact of the COVID-19 pandemic will be felt in the second quarter of 2020. The most affected industries are the HORECA and entertainment sectors, where most closures are expected in the next period. Collection rates for commercial space have dropped dramatically, and affected business owners have been forced to negotiate delays in paying loans or rents.
Large retail space managers will have to apply new security measures in the future to provide buyers with a risk-free shopping experience. The deal is to find solutions for an adequate social distance, without restricting the customers’ feeling of freedom.
Despite all the efforts made by commercial space managers and businesses that involve direct contact with the public (such as Casino & Betting), we cannot ignore the changes coming from the customers themselves. The focus will be more on caution and avoiding extremely crowded spaces, which means a recalibration of the entire consumer experience. It is worth taking into account a long-term change, which will involve the transformation of services and business models, by adapting them to rapid changes in customer preferences” says Costina Petrescu, CEO of the Titirez.ro real estate portal.
The casinos could resume their activity starting June 15, but this reopening will only be possible with quite serious investments. WHO sets out a number of recommendations for the Horeca and Casino & Betting areas, including: hiring a “cleaning manager”, developing a detailed cleaning and disinfection plan, measuring customers and employees temperature, isolating contact between employees and customers through Plexiglas walls, improving food safety, using state-of-the-art cleaning and disinfection technologies, limiting the number of chairs at the game tables and increasing the relaxation spaces surface so that the social distance can be kept.
“All these recommendations, some of them defined as a legal obligation, will involve not only additional expenses, but also a radical transformation of the business model and the space in which the activity can take place. Larger commercial spaces will be needed in order to compensate the limitation on the number of persons who can sit at the same table and the need for social distancing in the transit areas “, adds Costina Petrescu.
In the case of the gambling industry, the COVID-19 pandemic has hit with full force, both by closing all spaces and by stopping sports competitions. In Romania, starting with March 17, over 11,380 betting agencies and over 2000 gambling halls were closed by Emergency Ordinance. For both types of business there is the possibility of online orientation, but only with a partial compensation of income.
In this context, we must also take into account certain legislative tricks that were offered to the retail area during this period. Thus, the owners of commercial spaces affected by the forced closure after March 17 can benefit from 50% reductions in the property tax. This reduction is conditioned by the 50% decrease of the rent charged for the leased spaces – a situation that was very rarely possible. Another facility offered by the government was the postponement of the rent payment for closed commercial spaces during the pandemic – an unnecessary measure for the companies that will have to pay later the same amount of money, for a period when the spaces have not been used.
By direct negotiation with the owners, it was possible to obtain, in some cases, suspensions from the payment of rent or discounts for the pandemic period. The biggest difficulties were encountered in the case of leases for malls, which have much harsher terms of termination or suspension. However, the negotiation and the agreement between parties are essential, the interest of the owners during this period being closely lined up with that of the companies that rent spaces: the resumption of the suspended activity as quickly as possible and the survival of business during the deadlock period.
“Even if there are still no well-defined legislative regulations, it is clear that many of the operating rules of casinos and bookmakers will change in the future – largely to adapt to the new consumer principles of customers. New waves of the pandemic are expected, which means that the effects will be felt directly, at least, in the following year. Certainly, the main need will be related to the expansion of the commercial area, in order to adapt to social distance rules, taking into account the possible decrease of the number of customers who will frequent the physical casinos “, affirms Costina Petrescu, CEO Titirez.ro.
Now is the ideal time to renegotiate leases, with the possibility of obtaining serious discounts on long-term commitments. Given the low demand, landlords are looking to keep their good payer tenants. Also, new opportunities may arise by releasing large and extremely well-located spaces that had until recently been occupied by restaurants or event venues. Regarding the malls, the situation is uncertain, because at the moment we are in a total deadlock. There will certainly be a number of negotiations to keep the important tenants. One of the areas of negotiation is represented by the possibility to expand the space without increasing the rent or reducing the maintenance costs.
At a quick analysis of the Titirez.ro audience – one of the largest real estate portals in Romania – we immediately find that the interest in renting commercial space is practically non-existent during this period. There is a complete collapse of real estate ads efficiency in this segment, even before the state of emergency was established. Also, organic searches on search engines like Google have dropped significantly. Price reductions have not been registered at the moment, this being explained by the effective blockage of the market. All parties are negotiating and waiting to see what will happen in the next period. In the absence of relevant data, we cannot comment on a possible price reduction for commercial space in the future.
Titirez.ro is one of the most famous real estate portals in Romania and has been in the market for 10 years. Over time, the portal has expanded its capacity encompassing several niche sites on real estate, and is currently complemented by a real estate CRM – ImobManager, a niche marketing and advertising agency on real estate – imoPR and, more recently, by an e-commerce platform for “turnkey” sites – ShopSell.ro.