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COVID-19 Impacts on EMEA Retail

Jean Baheux • 16/04/2020

Lockdown and shop closures remain in most EMEA countries. There is some pressure to reconsider a slow opening under very strict conditions (e.g. x m2 per visitor). 

There is still a big fight between retailers and landlords regarding rental payments. The position that groups such as H&M, C&A and Inditex are taking is considered shocking by many landlords, as some of them make huge profits. The impression is that they are trying to take advantage of the situation and put maximum pressure on their landlords by refusing to pay the rents. Primark seem to be taking a different approach which is much more based on ‘sharing the risk’, but this needs to be confirmed.  

Recently, Adidas had announced they would stop paying their rent but was forced to honour its payments after a social media backlash. 

Post COVID-19 we will likely see a significant number of court cases; national laws are often challenged in unprecedented situations. The longer the crisis lasts, the more urgent it becomes for investors and retailers to find an acceptable solution which may be a ‘lose-lose’ but always better than the uncertainty of a court case. 

Retailers are trying to team up in their negotiations with landlords or to protect themselves against insolvency, as many of them are facing acute cash-flow problems. Even a strong business, like H&M has just secured a €980m revolving credit facility in view of the current situation. 

The investment market for retail properties is almost dead, apart from smaller deals involving private individuals. The values of retail REITs have dropped dramatically as the market has lost its faith in retail as a solid investment product. Initially it seems that the market has overreacted, but with most retailers likely to renegotiate their rents post COVID-19, we need to see how major retail deals will yield in this new environment. 


9 April

It is unnecessary to state that the retail market in EMEA is suffering massively from the COVID-19 crisis; almost all countries have now closed their stores, except food stores and pharmacies.  

This has put a lot of pressure on retailers as their warehouses are full of products and all their fixed costs continue.

In some of the countries there are governmental measures allowing for temporary unemployment; at the same time there is huge tension between retailers and their landlords regarding the rental payments for April (and most likely May). As it is not clear how long this situation is going to last, most landlords are keeping their options open, but for sure they are also challenged by their banks.  

People who were not used to e-commerce are now quickly learning how to shop online, which led initially to major spikes in demand for most of the online operators. 

There is no or little demand from retailers for expansion right now. 

As a lot of traditional retailers were facing decreased margins over the last couple of years, the current crisis may be ‘one too far’. We expect an increased offer of quality retail space coming to the market post-crisis which could have a negative effect on rents.

Retailers will try even harder to negotiate ‘turnover only’ deals which is unacceptable for most landlords as they do not want to share the entrepreneurial risk. Time will tell how this will evolve.


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