9 of 10 nonfood retailers expect turnovers to be affected by the Covid-19 epidemics

Cristian Hatis 5 Min Read

Nonfood retailers in Romania are among the most affected by measures taken during the state of emergency to prevent the spread of Covid-19.

45% of retail tenants expect over 30% decrease of their turnover in 2020 and another 39% foresee up to 30% declines as a result of these at least 2 months of no trading, with slow recovery expected in the second half of this year, according to a study conducted by Colliers International’s Retail Division among 84 tenants and 21 landlords from the retail sector in Romania.

Medium to long-term effects are still difficult to evaluate, especially considering uncertainties regarding possible further measures that could be applied by authorities after May 15th. However, retail landlords already have support measures in place for tenants that are affected by the emergency state, like suspending rent payments for the no trading period, potentially with later means of compensation, or closing part of the centers in order to reduce the value of the service charge that is supported by tenants. Colliers International’s study is part of a broader analysis of the overall real estate market outlook, based on relevant insights from all market segments, which is presented in this period with the objective of bringing some clarity about the market.

88% of the retailers applied for technical unemployment measure

Retailers’ reaction to the government’s decision to close non-essential stores was immediate and in order to minimize impact of the current context. As a result, 62% of tenants suspended or delayed rental and utilities payments and 52% applied for rent reductions when stores will be reopened, according to Colliers International’s study among retail tenants active mainly in fashion, food and beverage, cosmetics, services, entertainment, services or beauty.

In addition, to support business recovery, 88% applied for the technical unemployment facility, 48% will use the tax payment delay offered by the state and 33% will suspend the financing payments until the end of year.

On the other hand, 67% of retailers are concentrating to compensate for the loss from the brick and mortar presence with alternative sale channels, but only part of the loss is expected to be recovered though this channel. About 36% expect online sales to grow this year, of which half count on at least 20% increase. However, 22% of retailers believe sales will decline even on this channel, due to low consumption appetite.

62% of retail landlords suspended rent payment for non-trading retailers

Landlords of retail spaces also reacted rapidly in the current context, closing part of the shopping centers, where it was physically possible (67%), renegotiating terms with third party suppliers (45%) and even with banks (29%).

Almost all of them have also used some available state benefits, such as delay of tax payment (52%), technical unemployment (48%) and delayed bank payments (24%).

To support their tenants during the Covid-19 crisis, 62% of landlords have chosen to charge only service charges from retailers, in order to keep the retail centers clean, safe and the technical equipment in good order while trading is partially closed.

In this context, landlords are also expecting to see declines in net operating income in 2020, with 67% estimating a decline of up to 30% and another 24% considering more pronounced declines this year.

The retail market is expected to recover starting Q4 of 2020

First signs of recovery in the retail market are expected starting with Q4 2020, but with more consistent results in 2021, which shows that both retailers and landlords are confident in a relatively fast recovery.

More exactly, 67% of landlords and 51% of tenants expect to return to satisfactory business levels compared to levels before the Covid-19 epidemics by the end of 2021.

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